UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

__________________

FORM 10-Q

__________________



ý☒			Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period Ended June 30, ~~2018~~2021



o☐			Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from _____ to _____

Commission file number 001-38600

__________________

TENABLE HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

__________________



Delaware						47-5580846
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

~~7021 Columbia Gateway~~6100 Merriweather Drive, ~~Suite 500,~~ Columbia, Maryland ~~21046~~21044

(Address of principal executive offices, including zip code)

(410) 872-0555

(Registrant’s telephone number, including area code)

__________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.01 per share	TENB	The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ¨☒ No ý☐

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes ý☒ No ¨☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer

o☒

Accelerated filer

o☐

Non-accelerated filer

ý☐

~~(Do not check if a smaller reporting company)~~

Emerging growth company

ý☐

Smaller reporting company

o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ý☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨☐ No ý☒

The number of shares of the Registrant's common stock outstanding as of ~~August 31, 2018~~July 26, 2021 was ~~93,033,759.~~106,578,737.

TENABLE HOLDINGS, INC.

TABLE OF CONTENTS



	Page
PART I – FINANCIAL INFORMATION
Item 1.		Financial Statements
		Consolidated Balance Sheets	3
		Consolidated Statements of Operations ~~and Comprehensive Loss~~	4
		Consolidated Statements of ~~Redeemable Convertible Preferred Stock and Stockholders' Deficit~~Comprehensive Loss	5
		Consolidated Statements of Stockholders' Equity	6
		Consolidated Statements of Cash Flows	67
		Notes to Consolidated Financial Statements	78
		1. Business and Summary of Significant Accounting Policies	78
		2. Revenue	2.9
		3. Cash Equivalents and Short-Term Investments	10
		4. Fair Value Measurements	11
		5. Property and Equipment, Net	1112
		~~3. Debt~~6. Acquisition, Goodwill and Acquired Intangible Assets	1112
		~~4. Commitments and Contingencies~~7. Leases	1114
		~~5. Redeemable Convertible Preferred Stock and Common Stock~~8. Debt	1215
		6.9. Stock-Based Compensation	1315
		7.10. Net Loss Per Share ~~Attributable to Common Stockholders~~	1417
		8.11. Income Taxes	1517
		9.12. Geographic Information	1517
		~~10.~~13. Subsequent Events	1518

Item 2.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	1719
Item 3.		Quantitative and Qualitative Disclosures About Market Risk	3235
Item 4.		Controls and Procedures	3236
PART II – OTHER INFORMATION
Item 1.		Legal Proceedings	3437
Item 1A.		Risk Factors	3437
Item 2.		Unregistered Sales of Equity Securities and Use of Proceeds	5764
Item 6.		Exhibits	5965
		Signatures	6066

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TENABLE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS


								June 30, 2021		December 31, 2020
	June 30, 2018			December 31, 2017
(in thousands, except share and per share data)	(unaudited)
(in thousands, except per share data)							(in thousands, except per share data)	(unaudited)
Assets							Assets
Current assets:							Current assets:
Cash and cash equivalents	$	23,655		$	27,210		Cash and cash equivalents	$	135,927	$	178,223
Accounts receivable (net of allowance for doubtful accounts of $261 and $160 at June 30, 2018 and December 31, 2017, respectively)	49,930			50,881
Short-term investments							Short-term investments	125,111		113,623
Accounts receivable (net of allowance for doubtful accounts of $240 and $261 at June 30, 2021 and December 31, 2020, respectively)							Accounts receivable (net of allowance for doubtful accounts of $240 and $261 at June 30, 2021 and December 31, 2020, respectively)	100,483		115,342
Deferred commissions	19,078			17,170			Deferred commissions	32,686		32,143
Prepaid expenses and other current assets	13,324			15,994			Prepaid expenses and other current assets	42,255		44,462
Total current assets	105,987			111,255			Total current assets	436,462		483,793
Property and equipment, net	11,240			10,754			Property and equipment, net	37,407		38,920
Construction in progress	12,253			2,252
Deferred commissions (net of current portion)	31,727			33,006			Deferred commissions (net of current portion)	45,811		46,733
Intangible assets, net	729			1,031
Operating lease right-of-use assets							Operating lease right-of-use assets	37,299		39,426
Acquired intangible assets, net							Acquired intangible assets, net	42,610		13,193
Goodwill	265			265			Goodwill	126,705		54,414
Other assets	7,157			5,774			Other assets	18,473		14,110
Total assets	$	169,358		$	164,337		Total assets	$	744,767	$	690,589
Liabilities, Redeemable Convertible Preferred Stock and Stockholders’ Deficit

Liabilities and Stockholders’ Equity							Liabilities and Stockholders’ Equity
Current liabilities:							Current liabilities:
Accounts payable	$	1,457		$	338
Accrued expenses	7,462			4,878
Accounts payable and accrued expenses							Accounts payable and accrued expenses	$	11,992	$	5,731
Accrued compensation	15,862			18,482			Accrued compensation	35,901		35,509
Deferred revenue	174,277			154,898			Deferred revenue	334,106		328,819
Operating lease liabilities							Operating lease liabilities	5,355		3,815
Other current liabilities	1,932			1,750			Other current liabilities	274		1,028
Total current liabilities	200,990			180,346			Total current liabilities	387,628		374,902
Deferred revenue (net of current portion)	72,860			70,920			Deferred revenue (net of current portion)	110,768		105,691
Financing obligation	11,803			1,802
Operating lease liabilities (net of current portion)							Operating lease liabilities (net of current portion)	52,028		54,529
Other liabilities	4,315			5,199			Other liabilities	8,888		4,802
Total liabilities	289,968			258,267			Total liabilities	559,312		539,924
Commitments and contingencies (Note 4)
Redeemable convertible Series A preferred stock (par value: $0.01; 15,848 shares authorized, issued, and outstanding with liquidation preference of $50,000 at June 30, 2018 and December 31, 2017)	49,946			49,935
Redeemable convertible Series B preferred stock (par value: $0.01; 42,000 shares authorized, 39,538 issued and outstanding with liquidation preference of $230,008 at June 30, 2018 and December 31, 2017)	228,168			227,800
Stockholders’ deficit:
Common stock (par value: $0.01; 93,848 and 93,855 shares authorized at June 30, 2018 and December 31, 2017; 24,951 and 24,472 shares issued and outstanding at June 30, 2018 and December 31, 2017)	250			246

Stockholders’ equity:							Stockholders’ equity:
Common stock (par value: $0.01; 500,000 shares authorized; 106,510 and 103,715 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively)							Common stock (par value: $0.01; 500,000 shares authorized; 106,510 and 103,715 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively)	1,065		1,037
Additional paid-in capital	26,651			20,676			Additional paid-in capital	811,644		757,470
Accumulated other comprehensive (loss) income							Accumulated other comprehensive (loss) income	(16)		10
Accumulated deficit	(425,625		)	(392,587		)	Accumulated deficit	(627,238)		(607,852)
Total stockholders’ deficit	(398,724		)	(371,665		)
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit	$	169,358		$	164,337
Total stockholders’ equity							Total stockholders’ equity	185,455		150,665
Total liabilities and stockholders’ equity							Total liabilities and stockholders’ equity	$	744,767	$	690,589

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

TENABLE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS ~~AND COMPREHENSIVE LOSS~~

(Unaudited)


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2018			2017			2018			2017			(in thousands, except per share data)	2021		2020		2021		2020
Revenue	$	63,592		$	44,149		$	122,699		$	84,630		Revenue	$	130,259	$	107,209	$	253,448	$	209,857
Cost of revenue	9,879			5,348			18,607			9,786			Cost of revenue	26,425		19,142		48,498		37,843
Gross profit	53,713			38,801			104,092			74,844			Gross profit	103,834		88,067		204,950		172,014
Operating expenses:													Operating expenses:
Sales and marketing	41,826			27,773			81,414			53,941			Sales and marketing	65,678		55,443		124,313		115,298
Research and development	17,791			13,713			34,976			26,171			Research and development	28,201		25,310		55,039		52,141
General and administrative	10,541			6,544			19,596			12,707			General and administrative	21,836		17,879		43,281		36,812
Total operating expenses	70,158			48,030			135,986			92,819			Total operating expenses	115,715		98,632		222,633		204,251
Loss from operations	(16,445		)	(9,229		)	(31,894		)	(17,975		)	Loss from operations	(11,881)		(10,565)		(17,683)		(32,237)
Other (expense) income, net	(461		)	56			(469		)	27
Interest (expense) income, net													Interest (expense) income, net	(42)		455		(70)		1,189
Other expense, net													Other expense, net	(471)		(298)		(537)		(1,258)
Loss before income taxes	(16,906		)	(9,173		)	(32,363		)	(17,948		)	Loss before income taxes	(12,394)		(10,408)		(18,290)		(32,306)
Provision for income taxes	244			41			675			92
Net loss and comprehensive loss	(17,150		)	(9,214		)	(33,038		)	(18,040		)
Accretion of Series A and B redeemable convertible preferred stock	(191		)	(191		)	(379		)	(378		)
Net loss attributable to common stockholders	$	(17,341	)	$	(9,405	)	$	(33,417	)	$	(18,418	)
(Benefit) provision for income taxes													(Benefit) provision for income taxes	(756)		1,552		1,096		2,631
Net loss													Net loss	$	(11,638)	$	(11,960)	$	(19,386)	$	(34,937)

Net loss per share attributable to common stockholders, basic and diluted	$	(0.73	)	$	(0.43	)	$	(1.41	)	$	(0.85	)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted	23,750			22,060			23,623			21,661
Net loss per share, basic and diluted													Net loss per share, basic and diluted	$	(0.11)	$	(0.12)	$	(0.18)	$	(0.35)
Weighted-average shares used to compute net loss per share, basic and diluted													Weighted-average shares used to compute net loss per share, basic and diluted	105,869		100,209		105,203		99,532

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

TENABLE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF ~~REDEEMABLE CONVERTIBLE~~

~~PREFERRED STOCK AND STOCKHOLDERS' DEFICIT~~COMPREHENSIVE LOSS

(Unaudited)

Redeemable Convertible Preferred Stock Additional Total
Series A Series B Common Stock Paid-in Accumulated Stockholders’
(in thousands) Shares Amount Shares Amount Shares Amount Capital Deficit Deficit
Balance at December 31, 2017 15,848 $ 49,935
39,538 $ 227,800
24,472 $ 246
$ 20,676
$ (392,587 ) $ (371,665 )
Accretion of Series A and B redeemable convertible preferred stock —
11
—
368
—
—
(379 ) —
(379 )
Exercise of stock options —
—
—
—
486
5
1,005
—
1,010
Repurchase of common stock —
—
—
—
(7 ) (1 ) (74 ) —
(75 )
Stock-based compensation —
—
—
—
—
—
5,423
—
5,423
Net loss —
—
—
—
—
—
—
(33,038 ) (33,038 )
Balance at June 30, 2018 15,848
$ 49,946
39,538
$ 228,168
24,951
$ 250
$ 26,651
$ (425,625 ) $ (398,724 )


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Net loss	$	(11,638)	$	(11,960)	$	(19,386)	$	(34,937)
Other comprehensive (loss) income, net of tax:
Unrealized (losses) gains on available-for-sale securities	(24)		(14)		(26)		99
Other comprehensive (loss) income	(24)		(14)		(26)		99
Comprehensive loss	$	(11,662)	$	(11,974)	$	(19,412)	$	(34,838)

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

TENABLE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF ~~CASH FLOWS~~STOCKHOLDERS' EQUITY

(Unaudited)

Six Months Ended June 30,
(in thousands) 2018 2017
Cash flows from operating activities:
Net loss $ (33,038 ) $ (18,040 )
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization 2,994
2,121
Stock-based compensation 5,423
3,475
Deferred income taxes —
318
Other 664
(39 )
Changes in operating assets and liabilities:
Accounts receivable 850
(1,205 )
Prepaid expenses and other current assets 2,625
(205 )
Deferred commissions (629 ) (6,134 )
Other assets 1,260
219
Accounts payable and accrued expenses 2,326
1,846
Accrued compensation (2,620 ) (878 )
Deferred revenue 21,319
19,468
Other current liabilities (3 ) (517 )
Other liabilities (425 ) (261 )
Net cash provided by operating activities 746
168

Cash flows from investing activities:
Purchases of property and equipment (2,978 ) (681 )
Net cash used in investing activities (2,978 ) (681 )

Cash flows from financing activities:
Principal payments under capital lease obligations (252 ) (90 )
Credit facility issuance costs —
(238 )
Payments of deferred offering costs (1,515 ) —
Proceeds from the exercise of stock options 1,010
2,467
Repurchases of common stock (75 ) (385 )
Net cash (used in) provided by financing activities (832 ) 1,754
Effect of exchange rate changes on cash and cash equivalents and restricted cash (491 ) 45
Net (decrease) increase in cash and cash equivalents and restricted cash (3,555 ) 1,286
Cash and cash equivalents and restricted cash at beginning of period 27,472
34,470
Cash and cash equivalents and restricted cash at end of period $ 23,917
$ 35,756

Supplemental disclosure of cash flow information:
Cash paid for interest $ 56
$ 20
Cash paid for income taxes $ 418
$ 215
Supplemental disclosure of non-cash investing and financing activities:
Assets acquired under capital leases $ 9
$ 602
Asset retirement obligations $ —
$ 624
Construction in progress $ 10,001
$ —


				Additional Paid-in Capital		Accumulated Other Comprehensive Income (Loss)				Total Stockholders’ Equity
	Common Stock							Accumulated Deficit
(in thousands)	Shares	Amount
Balance at March 31, 2021	105,513	$	1,055	$	786,476	$	8	$	(615,600)	$	171,939
Exercise of stock options	605	6		4,683		—		—		4,689
Vesting of restricted stock units	392	4		(4)		—		—		0

Stock-based compensation	—	—		20,489		—		—		20,489
Other comprehensive loss	—	—		—		(24)		—		(24)
Net loss	—	—		—		—		(11,638)		(11,638)
Balance at June 30, 2021	106,510	$	1,065	$	811,644	$	(16)	$	(627,238)	$	185,455

Balance at December 31, 2020	103,715	$	1,037	$	757,470	$	10	$	(607,852)	$	150,665
Exercise of stock options	1,212	12		8,692		—		—		8,704
Vesting of restricted stock units	1,184	12		(12)		—		—		0
Issuance of common stock under employee stock purchase plan	399	4		8,042		—		—		8,046
Stock-based compensation	—	—		37,452		—		—		37,452
Other comprehensive loss	—	—		—		(26)		—		(26)
Net loss	—	—		—		—		(19,386)		(19,386)
Balance at June 30, 2021	106,510	$	1,065	$	811,644	$	(16)	$	(627,238)	$	185,455

Balance at March 31, 2020	100,003	$	1,000	$	687,311	$	163	$	(588,098)	$	100,376
Exercise of stock options	959	10		6,986		—		—		6,996
Vesting of restricted stock units	165	1		(1)		—		—		0

Stock-based compensation	—	—		15,770		—		—		15,770
Other comprehensive loss	—	—		—		(14)		—		(14)
Net loss	—	—		—		—		(11,960)		(11,960)
Balance at June 30, 2020	101,127	$	1,011	$	710,066	$	149	$	(600,058)	$	111,168

Balance at December 31, 2019	98,587	$	986	$	662,990	$	50	$	(565,121)	$	98,905
Exercise of stock options	1,594	16		10,958		—		—		10,974
Vesting of restricted stock units	568	5		(5)		—		—		0
Issuance of common stock under employee stock purchase plan	378	4		7,303		—		—		7,307
Stock-based compensation	—	—		28,820		—		—		28,820
Other comprehensive income	—	—		—		99		—		99
Net loss	—	—		—		—		(34,937)		(34,937)
Balance at June 30, 2020	101,127	$	1,011	$	710,066	$	149	$	(600,058)	$	111,168

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

TENABLE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Six Months Ended June 30,
(in thousands)	2021		2020
Cash flows from operating activities:
Net loss	$	(19,386)	$	(34,937)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	6,807		5,268
Stock-based compensation	37,421		28,701
Other	(268)		606
Changes in operating assets and liabilities:
Accounts receivable	18,985		13,512
Prepaid expenses and other assets	5,077		7,173
Accounts payable, accrued expenses and accrued compensation	985		(8,297)
Deferred revenue	6,665		2,182
Other current and noncurrent liabilities	(1,126)		7,283
Net cash provided by operating activities	55,160		21,491

Cash flows from investing activities:
Purchases of property and equipment	(2,595)		(11,004)
Purchases of short-term investments	(87,624)		(91,908)
Sales and maturities of short-term investments	76,000		124,675
Business combination, net of cash acquired	(98,489)		0
Net cash (used in) provided by investing activities	(112,708)		21,763

Cash flows from financing activities:
Proceeds from loan agreement	0		2,000
Proceeds from stock issued in connection with the employee stock purchase plan	8,046		7,307
Proceeds from the exercise of stock options	8,704		10,974
Other financing activities	(5)		(8)
Net cash provided by financing activities	16,745		20,273
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(1,463)		(1,463)
Net (decrease) increase in cash and cash equivalents and restricted cash	(42,266)		62,064
Cash and cash equivalents and restricted cash at beginning of period	178,463		74,665
Cash and cash equivalents and restricted cash at end of period	$	136,197	$	136,729

Supplemental disclosure of cash flow information:
Cash paid for interest	$	150	$	16
Cash paid for income taxes, net of refunds	3,553		2,728
Supplemental cash flow information related to leases:
Cash payments for operating leases	$	2,555	$	2,595

The accompanying notes are an integral part of these consolidated financial statements.

Table of Contents

TENABLE HOLDINGS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Business and Summary of Significant Accounting Policies

Business Description

Tenable Holdings, Inc. (the “Company,” “we,” "us," or “our”) is a provider of Cyber Exposure solutions, which is a discipline for managing, measuring and ~~measuring~~comparing cybersecurity risk in the digital era. Our ~~enterprise software~~ platform ~~enables~~offerings provide broad visibility into security issues such as vulnerabilities, misconfigurations, internal and regulatory compliance violations and other indicators of the state of an organization’s ~~cyber exposure~~security across ~~the modern attack surface~~IT infrastructure and ~~deep insights that help organizations translate technical data into business insights to understand~~applications, cloud environments and ~~reduce their cybersecurity risk.~~industrial internet of things and operational technology environments.

Basis of Presentation

The accompanying consolidated financial statements include the accounts of Tenable Holdings, Inc. and our wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

The consolidated financial statements have been prepared in conformity with United States generally accepted accounting principles (“GAAP”) for interim financial information. The consolidated statements are unaudited and should be read in conjunction with the consolidated financial statements and related notes included in our ~~final prospectus for our initial public offering~~2020 Annual Report on Form 10-K ("~~IPO"~~10-K") ~~dated as of July 25, 2018 and~~ filed with the Securities and Exchange Commission ~~pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended,~~ on ~~July 26, 2018~~ ~~("Prospectus").~~

February 23, 2021. The consolidated financial statements have been prepared on a basis consistent with the audited annual consolidated financial statements included in the ~~Prospectus~~10-K and, in the opinion of management, include all adjustments of a normal recurring nature necessary to fairly state our financial position, our results of operations, and cash flows.

The results for the six months ended June 30, ~~2018~~2021 are not necessarily indicative of the operating results expected for the year ~~ended~~ending December 31, ~~2018.~~

~~Initial Public Offering~~

~~Our IPO closed on~~ ~~July 30, 2018~~, after quarter end. As a result, our consolidated financial statements as of June 30, 2018 and for the periods then ended do not reflect the sale of 12,535,000 shares of common stock at the IPO price of $23.00 for net proceeds of $265 million, after underwriting discounts and commissions and offering expenses,2021 or ~~the conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 55,385,854 shares of common stock.~~any other future period.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates include, but are not limited to, the determination of the estimated economic life of perpetual licenses for revenue recognition, the estimated period of benefit for deferred commissions, the useful lives of long-lived assets, the fair value of acquired intangible assets and deferred revenue, the valuation of stock-based compensation, including the estimated underlying fair value of our common stock prior to our IPO, the incremental borrowing rate for operating leases, and the valuation of deferred tax assets. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable. Actual results could differ significantly from these estimates.

Significant Accounting Policies

Our significant accounting policies are described in our 10-K. During the six months ended June 30, 2021, there were no material changes to our significant accounting policies other than those described below.

Revenue Recognition

~~We early adopted Accounting Standards Codification (“ASC”) Topic 606,~~ ~~Revenue From Contracts With Customers~~ (“ASC 606”), on January 1, 2017 using the modified retrospective method and applying the guidance to all contracts as of January 1, 2017. The most significant impact of adopting ASC 606 was the deferral of perpetual license revenue over an estimated economic life, including estimated maintenance renewal periods, whereas under the previous

guidance we recognized perpetual license revenue upon delivery of the perpetual license. Additionally, the incremental costs of obtaining a contract with a customer are deferred, and will be amortized over a longer estimated period of benefit, whereas under previous guidance we amortized such costs over the contract term.

The core principle of ASC 606 is that revenue should be recognized to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. To achieve the core principle of ASC 606, we apply the following steps:

•~~Identify the contract with a customer~~

•~~Identify the performance obligations in the contract~~

•~~Determine the transaction price~~

•~~Allocate the transaction price to the performance obligations in the contract~~

•~~Recognize revenue when or as performance obligations are satisfied~~

We generate revenue from subscription arrangements for software and cloud-based solutions, perpetual licenses, maintenance associated with perpetual licenses, and professional services and other revenue. We begin to recognize revenue when control of our software or services is transferred to the customer, which for sales made through distributors is concurrent with the transfer to the end user.

~~The following table presents a summary of revenue:~~

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2018 2017 2018 2017
Subscription revenue $ 48,725
$ 30,844
$ 93,057
$ 58,546
Perpetual license and maintenance revenue 13,412
12,283
26,889
24,272
Professional services and other revenue 1,455
1,022
2,753
1,812
Revenue $ 63,592
$ 44,149
$ 122,699
$ 84,630

Subscription Revenue

Subscription arrangements generally have annual or multi-year contractual terms and allow customers to use our software or cloud ~~solutions, including~~solutions. For our software subscriptions that are dependent on ongoing software updates and the ability to identify the latest cybersecurity ~~vulnerabilities. Revenue~~vulnerabilities, revenue is recognized ratably over the subscription term given the critical utility provided by the ongoing updates that are released ~~throughout~~through the contract period. For our software where the critical utility does not depend on ongoing updates, we separate the software license from the maintenance and support. We

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recognize revenue attributable to the license at the time of delivery and the revenue attributable to the maintenance and support ratably over the contract period.

~~Perpetual License~~

Investments

We classify investments with original maturities of less than 90 days as cash and ~~Maintenance Revenue~~cash equivalents. Investments with original maturities greater than 90 days, including those we do not currently intend on selling within the next twelve months, are classified as short-term investments as they are available for use in our operations.

~~Our perpetual licenses are generally sold with one or more years~~Recently Adopted Accounting Pronouncements

We adopted Accounting Standards Update ("ASU") No. 2019-12 - Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, effective January 1, 2021. The adoption of maintenance, which include ongoing software updates and the ongoing ability to identify the latest cybersecurity vulnerabilities. Given the critical utility provided by the ongoing software updates and updated ability to identify network vulnerabilities included in maintenance, we combine the perpetual license and the maintenance into a single performance obligation. Perpetual license arrangements generally containthis guidance did not have a material right related to the customer’s ability to renew maintenance at a price that is less than the initial license fee. We apply a practical alternative to allocating a portion of the transaction price to the material right performance obligationimpact on our condensed consolidated financial statements. This ASU eliminated previously allowed exceptions and estimate a hypothetical transaction price which includes fees for expected maintenance renewals based on the estimated economic life of the perpetual license contracts. We allocate the transaction price between the cybersecurity subscription providedclarified existing guidance in the ~~initial contract~~accounting for income taxes, including in the areas of franchise taxes, the tax basis of goodwill and the material right related to expected contract renewals based on the hypothetical transaction price. We recognize the amount allocated to the combined license and maintenance performance obligation over the initial contractualinterim period ~~which is generally one year. We recognize the amount allocated to the material right over the expected maintenance renewal period, which begins at the end~~effects of the initial contractual term and is generally four years. We have estimated the five-year economic life of perpetual license contracts based on historical contract attrition, expected renewal periods, the lifecycle of the our technology and other factors. While we

~~believe that the estimates we have made are reasonable and appropriate, different assumptions and estimates could materially impact our reported financial results.~~

~~Professional Services and Other Revenue~~changes in tax laws.

~~Professional services~~

2. Revenue

Disaggregation of Revenue

The following table presents a summary of revenue:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Subscription revenue	$	114,167	$	92,010	$	221,569	$	178,400
Perpetual license and maintenance revenue	12,567		12,179		24,972		25,598
Professional services and other revenue	3,525		3,020		6,907		5,859
Revenue	$	130,259	$	107,209	$	253,448	$	209,857

Concentrations

We sell and other revenue is primarily comprised of advisory services and training related to the deployment and optimization of our products. These services do not result in significant customization of our products. Professional services and other revenue is recognized as the services are performed.

~~Contracts with Multiple Performance Obligations~~

In cases where our contracts with customers contain multiple performance obligations, the contract transaction price is allocated on a relative standalone selling price basis. We typically determine standalone selling price based on observable selling prices ofmarket our products and ~~services.~~

~~Variable Consideration~~

We record revenue from sales at the net sales price, which is the transaction price, including estimates of variable consideration when applicable. Certain of our customers may be entitled to receive credits and in certain circumstances, refunds, if service level commitments are not met. We have not historically experienced significant incidents affecting the ability to meet these service level commitments and any estimated refunds related to these agreements have not been material.

~~Sales~~services through our field sales force that works closely with our channel partners, which includes a network of distributors and resellers, ~~are generally discounted as compared to the price that~~in developing sales opportunities. We use a two-tiered channel model whereby we ~~would sell to an end user. Revenue for sales through our channel network is recorded net of any distributor or reseller margin.~~

~~Concentrations~~

We sell our products and services ~~through a channel network of~~to our distributors, ~~and~~which in turn sell to resellers, ~~along with our own sales teams.~~which then sell to end-users. We derived ~~87%~~92% of revenue through our channel network in ~~each of~~ the three and six months ended June 30, ~~2018,~~2021 and ~~82% and 81%~~91% of revenue in the three and six months ended June 30, ~~2017, respectively.~~2020. One of our distributors accounted for ~~46%~~40% of revenue in ~~each of~~ the three and six months ended June 30, ~~2018, compared with 42%~~2021 and 43% of revenue in ~~each of~~ the three and six months ended June 30, ~~2017.~~2020. That same distributor accounted for ~~48%~~37% and 41% of accounts receivable at June 30, ~~2018.~~2021 and December 31, 2020, respectively.

Contract Balances

We generally bill our customers in advance and accounts receivable are recorded when we have the right to invoice the customer. Contract liabilities consist of deferred revenue and include customer billings and payments received in advance of performance under the contract. In the three months ended June 30, 2021 and 2020 and the six months ended June 30, ~~2018~~2021 and ~~2017,~~2020, we recognized revenue of ~~$51.7~~$119.0 million, ~~$99.2~~$99.5 million, ~~$39.6~~$210.5 million and ~~$68.3~~$175.0 million, respectively, that was included in the deferred revenue balance at the beginning of each of the respective periods.

Remaining Performance Obligations

At June 30, ~~2018,~~2021, the future estimated revenue related to unsatisfied performance obligations was ~~$252.0~~$461.6 million, ~~with 71%~~of which approximately 75% is expected to be recognized as revenue over the succeeding twelve months, and the remainder is expected to be recognized over the four years thereafter.

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Deferred Commissions

Sales commissions, including related incremental fringe benefit costs, are considered to be incremental costs of obtaining a contract. Sales commissions on initial sales are not commensurate with sales commissions on contract renewals and therefore are recognized over an estimated period of benefit, which ranges between three and four years for

subscription arrangements and five years for perpetual license arrangements. We estimated the period of benefit based on the expected contract term including renewal periods, the lifecycle of our technology, and other factors. Sales commissions on contract renewals are capitalized and amortized ratably over the contract term, with the exception of contracts with renewal periods that are one year or less, in which case the incremental costs are expensed as incurred.

The following summarizes the activity of deferred incremental costs of obtaining a ~~contract in~~contract:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Beginning balance	$	77,300	$	70,742	$	78,876	$	72,265
Capitalization of contract acquisition costs	10,222		8,892		17,446		15,013
Amortization of deferred contract acquisition costs	(9,025)		(7,866)		(17,825)		(15,510)
Ending balance	$	78,497	$	71,768	$	78,497	$	71,768

3. Cash Equivalents and Short-Term Investments

The following tables summarize the ~~periods presented:~~amortized cost, unrealized gain and loss and estimated fair value of cash equivalents and short-term investments:


	June 30, 2021
(in thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Cash equivalents
Money market funds	$	47,682	$	—	$	—	$	47,682

Total cash equivalents	$	47,682	$	—	$	—	$	47,682

Short-term investments

Commercial paper	$	79,725	$	0	$	0	$	79,725
Corporate bonds	12,682		1		(1)		12,682
Supranational bonds	13,198		0		(11)		13,187
U.S. Treasury and agency obligations	19,522		2		(7)		19,517
Total short-term investments	$	125,127	$	3	$	(19)	$	125,111


	December 31, 2020
(in thousands)	Amortized Cost		Unrealized Gain		Unrealized Loss		Estimated Fair Value
Cash equivalents
Money market funds	$	44,153	$	—	$	—	$	44,153
Commercial paper	4,500		—		—		4,500
Total cash equivalents	$	48,653	$	—	$	—	$	48,653

Short-term investments
Commercial paper	$	71,425	$	0	$	0	$	71,425
Corporate bonds	4,502		3		0		4,505
U.S. Treasury and agency obligations	37,686		7		0		37,693
Total short-term investments	$	113,613	$	10	$	0	$	113,623

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2018 2017 2018 2017
Beginning balance $ 50,451
$ 31,906
$ 50,176
$ 30,118
Capitalization of contract acquisition costs 4,700
7,558
9,847
12,162
Amortization of deferred contract acquisition costs (4,346 ) (3,212 ) (9,218 ) (6,028 )
Ending balance $ 50,805
$ 36,252
$ 50,805
$ 36,252

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~~Amortization~~The contractual maturities of ~~deferred contract acquisition costs~~our short-term investments are as follows:


	June 30, 2021
(in thousands)	Amortized Cost		Estimated Fair Value
Due within one year	$	102,583	$	102,584
Due between one and two years	22,544		22,527
Total short-term investments	$	125,127	$	125,111

At June 30, 2021, cash and cash equivalents included $5.8 million of restricted cash primarily related to collateral for our outstanding letters of credit. At December 31, 2020, cash and cash equivalents included $0.4 million of restricted cash related to collateral for a lease and credit card deposits. At June 30, 2021 and December 31, 2020, cash and cash equivalents excluded $0.3 million and $0.2 million, respectively, of restricted cash related to an account established as collateral for a lease arrangement, which is included in ~~sales and marketing expense in the consolidated statements of operations and comprehensive loss.~~

~~Construction in Progress~~

In October 2017, we entered into a lease for our new corporate headquarters, which is currently being constructed in Columbia, Maryland. The lease has an anticipated start date in the third quarter of 2019 with a 12-year initial term and $68.2 million of lease payments. Under current accounting guidance for build-to-suit lease arrangements, we concluded that we are the deemed owner of the building during the construction period. Accordingly, we recorded a construction-in-progress asset of $12.3 million and $2.3 million, for which there is a corresponding construction financing obligation of $11.8 million and $1.8 million, in each case net of a $0.5 million deposit, recorded inother assets on the consolidated balance ~~sheets~~sheets.

4. Fair Value Measurements

We measure certain financial instruments at fair value using a fair value hierarchy. In the hierarchy, assets are classified based on the lowest level inputs used in valuation into the following categories:

•Level 1 — Quoted prices in active markets for identical assets and liabilities;

•Level 2 — Observable inputs including quoted market prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in inactive markets, or inputs that are corroborated by observable market data; and

•Level 3 — Unobservable inputs.

The following tables summarize assets that are measured at fair value on a recurring basis:


	June 30, 2021
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	47,682	$	0	$	0	$	47,682

Total cash equivalents	$	47,682	$	0	$	0	$	47,682

Short-term investments

Commercial paper	$	0	$	79,725	$	0	$	79,725
Corporate bonds	0		12,682		0		12,682
Supranational bonds	0		13,187		0		13,187
U.S. Treasury and agency obligations	0		19,517		0		19,517
Total short-term investments	$	0	$	125,111	$	0	$	125,111

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	December 31, 2020
(in thousands)	Level 1		Level 2		Level 3		Total
Cash equivalents
Money market funds	$	44,153	$	0	$	0	$	44,153
Commercial paper	0		4,500		0		4,500
Total cash equivalents	$	44,153	$	4,500	$	0	$	48,653

Short-term investments
Commercial paper	$	0	$	71,425	$	0	$	71,425
Corporate bonds	0		4,505		0		4,505
U.S. Treasury and agency obligations	0		37,693		0		37,693
Total short-term investments	$	0	$	113,623	$	0	$	113,623

We did not have any liabilities measured and recorded at fair value at June 30, ~~2018 and~~2021 or December 31, 2017, respectively. We will continue to increase the construction-in-progress asset and corresponding long-term liability as additional building costs are incurred by the landlord during the construction period. Upon completion of the construction, we will evaluate whether or not this arrangement meets the criteria for sale-leaseback accounting treatment.2020.

~~Deferred Offering Costs~~

Our deferred offering costs consist of legal, accounting and other fees incurred in connection with our IPO. These costs have been deferred and are included in "Other assets" in the consolidated balance sheet and will be offset against the IPO proceeds. We deferred $2.7 million of offering costs as of June 30, 2018. No amounts were deferred as of December 31, 2017.

~~Recent Accounting Pronouncements Not Yet Adopted~~

~~In February 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2016-02 -~~ ~~Leases (Topic 842)~~, which will require, among other items, lessees to recognize a right-of-use asset and a lease liability for most leases. ASU 2016-02 will be effective for us beginning January 1, 2019, with early adoption permitted. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842), ~~Targeted Improvements~~, which provides an adoption method that would allow companies to apply the new guidance to the financial statements in the period of adoption and thereafter, and not apply the new guidance to comparative periods presented. We are evaluating the impact of this standard, including the adoption methodology, to determine the impact on our consolidated financial statements.

2.5. Property and Equipment, Net

Property and equipment, net consisted of the following:

(in thousands) June 30, 2018 December 31, 2017
Computer software and equipment $ 11,051
$ 9,089
Furniture and fixtures 2,299
2,102
Leasehold improvements 6,928
6,452
Equipment under capital leases 1,831
1,839
Total 22,109
19,482
Less: accumulated depreciation and amortization (10,869 ) (8,728 )
Property and equipment, net $ 11,240
$ 10,754


(in thousands)	June 30, 2021		December 31, 2020
Computer software and equipment	$	24,677	$	22,930
Furniture and fixtures	6,033		6,011
Leasehold improvements	27,229		26,210
Right-of-use assets under finance leases	1,344		1,571
Total	59,283		56,722
Less: accumulated depreciation and amortization	(21,876)		(17,802)
Property and equipment, net	$	37,407	$	38,920

Depreciation and amortization related to property and equipment was ~~$1.4~~$2.5 million, $2.0 million, $4.7 million and $4.0 million in the three months ended June 30, 2021 and 2020 and the six months ended June 30, 2021 and 2020, respectively.

6. Acquisition, Goodwill and Acquired Intangible Assets

Business Combination

In April 2021, we acquired Alsid SAS ("Alsid"), ~~$2.7 million,$0.9 million~~which expanded our product offerings to include active directory security. Active directory is the basis for managing user permissions across on-premises and ~~$1.8~~hybrid cloud deployments and is foundational to the security of cloud workloads, security remote work, and adopting zero trust architectures. Through a share purchase agreement, we acquired 100% of Alsid's equity in exchange for cash consideration of $98.5 million, net of cash acquired of $3.3 million.

When determining the fair value of assets acquired and liabilities assumed, a non-recurring level 3 fair value measurement, we make estimates and assumptions, especially with respect to intangible assets such as our identified acquired technology and trade name intangible assets. We determined the fair value of our acquired technology using the multi-period excess earnings method, a form of the income approach. Estimates in valuing identifiable intangible assets include, but are not limited to, projected revenue growth rates, future expected operating expenses, obsolescence projections and an appropriate discount rate. Our estimate of fair value is based upon assumptions we believe to be reasonable, but which are inherently uncertain and, as a result, actual results may differ from estimates. During the

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measurement period, we may make adjustments to the fair value of assets acquired and liabilities assumed, with offsetting adjustments to goodwill. Any adjustments made after the measurement period will be reflected in the consolidated statements of operations. We are still finalizing the allocation of the purchase price, which may change as additional information becomes available related to acquired intangible assets, deferred revenue, income taxes and any working capital adjustments.

The cash consideration, net of cash acquired, was preliminarily allocated as follows:


(in thousands)
Accounts receivable	$	4,105
Prepaid expenses and other assets	2,304
Intangible assets	31,400
Goodwill	72,291
Accounts payable, accrued expenses and accrued compensation	(3,794)
Deferred revenue	(3,699)
Deferred tax liabilities, net	(4,118)
Total purchase price allocation	$	98,489

Acquired intangible assets and their estimated useful lives at the date of acquisition are as follows:


	Intangible Assets
(dollars in thousands)	Cost		Estimated Useful Life
Acquired technology	$	31,300	7 years
Trade name	100		1 year
Acquired intangible assets	$	31,400

The results of operations of Alsid are included in our consolidated statements of operations from the acquisition date and were not material. Pro forma results of operations are not presented as they are not material to the consolidated statements of operations.

In general and administrative expense, we recognized $1.5 million and $3.7 million in acquisition-related transaction costs in the three and six months ended June 30, ~~2018~~2021, respectively.

Goodwill and ~~2017, respectively.~~Acquired Intangible Assets

The changes in the carrying amount of goodwill are as follows:


(in thousands)
Balance at December 31, 2020	$	54,414
Acquired goodwill	72,291
Balance at June 30, 2021	$	126,705

~~3. Debt~~

~~On May 4, 2017,~~The excess purchase consideration over the fair value of acquired assets and liabilities is recorded as goodwill. The acquired goodwill reflects the synergies we ~~entered into a $25.0 million revolving credit facility (“Credit Facility”) with Silicon Valley Bank, which is available for use until May 4, 2020. The Credit Facility is intended~~expect from marketing and selling new capabilities from Alsid to be used to fund working capital and to provide increased liquidity and financial flexibility and bears interest at either LIBOR plus 2%, or the lender's prime rate plus 1%. In addition, we pay quarterly in arrears 0.25%our customers. None of the ~~average unused portion. The Credit Facility~~acquired goodwill is ~~secured by a first priority security interest in all~~tax deductible.

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Acquired intangible assets ~~with a negative pledge on our Intellectual Property,~~subject to amortization are as ~~defined~~follows:


	June 30, 2021						December 31, 2020
(in thousands)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount
Acquired technology	$	48,625	$	(6,138)	$	42,487	$	17,325	$	(4,224)	$	13,101
Trade name	300		(177)		123		200		(108)		92
	$	48,925	$	(6,315)	$	42,610	$	17,525	$	(4,332)	$	13,193

Amortization of acquired intangible assets was $1.4 million, $0.6 million, $2.0 million and $1.2 million in the ~~credit agreement.~~

~~The Credit Facility contains certain restrictive covenants customary for facilities of this type including restrictions on indebtedness, liens, acquisitions~~three months ended June 30, 2021 and ~~investments, restricted payments~~2020 and dispositions. If, as of the last day of any quarter, the outstanding balance of the Credit Facility exceeds $5.0 million, there are financial covenants that require us to maintain a minimum level of earnings before income taxes, interest, depreciation and amortization (“EBITDA”) adjusted to add changes in deferred revenue in the period, and a minimum current ratio level. There were no borrowings under the Credit Facility during the six months ended June 30, ~~2018 or in 2017.~~2021 and 2020, respectively. At June 30, 2021, our acquired intangible assets are expected to be amortized over an estimated weighted average period of 6.4 years.

At June 30, 2021, estimated future amortization of acquired intangible assets is as follows:

~~4. Commitments and Contingencies~~


(in thousands)
Year ending December 31,
2021(1)	$	3,435
2022	6,718
2023	6,686
2024	6,686
2025	6,686
Thereafter	12,399
Total	$	42,610

~~Operating and Capital~~_______________

(1) Represents the six months ending December 31, 2021.

7. Leases

We have ~~entered into various non-cancelable~~ operating leases ~~primarily related to~~for office ~~real estate, that expire through 2022~~facilities and ~~generally contain renewal options~~finance leases for ~~up to five years.~~ office equipment. The components of lease expense were as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Operating lease cost	$	1,907	$	2,327	$	3,776	$	4,811

Finance lease cost
Amortization of ROU assets	$	2	$	76	$	4	$	186
Interest on lease liabilities	2		1		3		3
Total finance lease cost	$	4	$	77	$	7	$	189

Rent expense ~~was $1.3 million, $2.4 million, $0.9 million and $1.6 million~~for short-term leases in the three and six months ended June 30, ~~2018~~2021 and ~~2017, respectively.~~2020 was not material.

~~We also~~Supplemental information related to leases was as follows:


	June 30, 2021	December 31, 2020
Operating leases
Weighted average remaining lease term	9.9 years	10.0 years
Weighted average discount rate	5.6%	5.6%

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In the three and six months ended June 30, 2021, we did 0t obtain any right of use assets in exchange for lease ~~computer~~liabilities. During the three and ~~office equipment under non-cancelable capital leases that expire through 2022. The total obligations for capital~~six months ended June 30, 2020, we obtained $0.7 million of right of use assets related to operating lease ~~arrangements were $1.2 million and $1.5 million~~liabilities.

Maturities of operating lease liabilities at June 30, ~~2018 and December 31, 2017, respectively.~~

~~Future minimum non-cancelable lease payments for operating and capital leases at June 30, 2018~~2021 were as follows:


(in thousands)
Year ending December 31,
2021(1)	$	1,419
2022	8,017
2023	7,689
2024	7,843
2025	7,405
Thereafter	44,499
Total lease payments	76,872
Less: Imputed interest	(19,489)

Total	$	57,383

(in thousands)
Years ending December 31:
2018 $ 2,914
2019 5,035
2020 3,909
2021 7,440
2022 6,187
Thereafter 58,301
Total future minimum lease payments $ 83,786
_______________

(1) Represents the six months ending December 31, 2021.

Total future minimum lease payments at June 30, 2018 includes $68.2 million of future lease payments related to the lease of our new headquarters, which is currently being constructed in Columbia, Maryland. These lease payments are expected to commence in the first quarter of 2021.

~~5. Redeemable Convertible Preferred Stock and Common Stock~~

~~Redeemable Convertible Preferred Stock~~8. Debt

In ~~October 2012, Tenable, Inc. (now~~July 2020, we entered into a ~~wholly owned subsidiary of Tenable Holdings, Inc.~~$45.0 million senior secured credit facility (“2020 Credit Facility”) issued 15,847,500 shares of Series A redeemable convertible preferred stock at a price of $3.155067 per share, for an aggregate purchase price of $50 million, less $0.1 million in transaction costs. In December 2015, we issued 15,847,500 shares, par value of $0.01, of Series A redeemable convertible preferred stock (“Series A”) in exchange for Series A Convertible Preferred Stock of Tenable, Inc., in connection with a recapitalization. This exchange was made on a one for one basis. In addition, we authorized 42,000,000 shares and issued 39,538,354 shares, par value of $0.01, of Series B Convertible Preferred Stock (“Series B”) to certain investors at a price of $5.81735 per share. The gross purchase price was $230.0 million and we incurred transaction costs of $3.7 million. These proceeds were used to repurchase 39,387,322 shares of Tenable, Inc.’s common stock from its former stockholdersSilicon Valley Bank in connection with the ~~recapitalization.~~

~~Series~~expiration of our $25.0 million revolving credit facility. The 2020 Credit Facility bears interest at either LIBOR plus 2%, with a 1% LIBOR floor, or the base rate plus 1%, and terminates on July 24, 2022. A commitment fee of 0.35% per annum is payable quarterly in arrears based on the unused portion. The obligations under the 2020 Credit Facility are secured by a lien on our tangible and ~~Series B (together, the “Redeemable Convertible Preferred Stock”) automatically convert into common stock at the then applicable conversion rate in the event~~intangible property except intellectual property and certain subsidiaries and by a pledge of all of the ~~closing of a qualifying firm commitment underwritten public offering, which is defined as an offering~~equity interests of our ~~common~~material direct and indirect domestic subsidiaries and 65% of each class of capital stock of any material first-tier foreign subsidiaries, subject to limited exceptions. The 2020 Credit Facility includes a $45.0 million uncommitted expansion, as well as a $10.0 million sublimit for the ~~public at~~issuance of letters of credit and a ~~price~~swingline sub-facility of up to $10.0 million, and has a financial covenant requiring a minimum consolidated quick ratio of at least ~~$17.45 per share, that results~~1.5:1.0 on the last day of each quarter.

During the six months ended June 30, 2021, there were 0 amounts outstanding under our 2020 Credit Facility. At June 30, 2021, we were in ~~gross proceeds~~compliance with the financial covenant and our borrowing capacity was reduced by $5.5 million related to standby letters of ~~at least $75 million.~~ credit.

In ~~addition, each share of a series of Redeemable Convertible Preferred Stock will automatically convert into common stock at~~July 2021, the ~~then applicable conversion rate for such series upon the vote or written consent of holders of at least 60% of such series.~~2020 Credit Facility was terminated. See Note ~~10 to our consolidated financial statements~~13 for ~~details regarding the automatic conversion of the Redeemable Convertible Preferred Stock in connection with our IPO in July 2018.~~additional information.

~~We accreted the Redeemable Convertible Preferred Stock to the redemption price at the redemption date using the effective interest method.~~

~~Common Stock~~

The voting, dividend, and liquidation rights of common stockholders are subject to, and qualified by, the rights of preferred stockholders. The common stockholders are entitled to receive dividends when, as and if, declared by the Board of Directors, subject to preferential dividend rights of preferred stockholders. Upon dissolution or liquidation, our common stockholders will be entitled to receive all assets available for distribution to stockholders, subject to preferential rights of preferred stockholders.

6.9. Stock-Based Compensation

We have various stock incentive plans under which we have issued stock-based awards. Stock options granted under our stock incentive plans have a maximum term of ten years, generally vest over a period of three to four years, and the exercise price cannot be less than the fair market value on the date of grant. In February 2018 andAt June ~~2018, the Board of Directors approved increases of 3.0 million and 4.0 million~~30, 2021, there were 20,239,030 shares available for grant under ~~the 2016 Stock~~our 2018 Equity Incentive ~~Plan ("2016 Plan"), respectively. There were 1,118,311 shares available for grant at June 30, 2018.~~Plan.

Stock-based compensation expense included in the consolidated statements of operations ~~and comprehensive loss~~ was as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Cost of revenue	$	1,202	$	830	$	2,139	$	1,577
Sales and marketing	7,577		5,375		13,873		9,871
Research and development	5,176		3,893		9,332		6,841
General and administrative	6,514		5,568		12,077		10,412
Total stock-based compensation expense	$	20,469	$	15,666	$	37,421	$	28,701

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2018 2017 2018 2017
Cost of revenue $ 114
$ 50
$ 191
$ 104
Sales and marketing 675
358
1,277
628
Research and development 640
452
1,167
846
General and administrative 1,595
989
2,788
1,897
Total stock-based compensation expense $ 3,024
$ 1,849
$ 5,423
$ 3,475

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At June 30, ~~2018,~~2021, the ~~total~~ unrecognized stock-based compensation expense related to ~~outstanding~~unvested restricted stock ~~options~~units ("RSUs") was ~~$55.7~~$196.9 million, which is expected to be recognized over an estimated remaining weighted average period of ~~3.5~~3.1 years.

At June 30, ~~2018,~~2021, the unrecognized stock-based compensation expense related to ~~unvested awards of restricted~~outstanding stock options was ~~$4.2~~$6.0 million, which is expected to be recognized over an estimated remaining weighted average period of ~~2.5~~0.9 years.

~~At June 30, 2018, the unrecognized stock-based compensation expense related to unvested~~Restricted Stock and RSUs

A summary of our restricted stock ~~units was $15.8 million, which~~and RSU activity is ~~expected to be recognized over an estimated remaining period of 2.1 years.~~presented below:


	Restricted Stock			RSUs
(in thousands, except for per share data)	Number of Shares	Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value
Unvested balance at December 31, 2020	99	$	4.25	4,490	$	28.13
Granted	0	0		3,099	42.18
Vested	(99)	4.25		(1,184)	27.95
Forfeited	0	0		(353)	31.26
Unvested balance at June 30, 2021	0	0		6,052	35.18

Stock Options

A summary of our stock option activity is presented below:

(in thousands, except for per share data and years)
Number
of Shares

Weighted
Average
Exercise Price
Weighted-Average Remaining Contractual Term (in years)

Aggregate Intrinsic Value
Outstanding at December 31, 2017 14,573 $ 4.38
8.2 $ 77,020
Granted 5,914 14.91

Exercised (486) 2.08

Forfeited/canceled (480) 6.23

Outstanding at June 30, 2018 19,521 7.58
8.5 168,503
Exercisable at June 30, 2018 5,462 3.38
6.8 70,069


(in thousands, except for exercise prices and years)	Number of Shares	Weighted Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2020	9,441	$	8.56	6.4	$	412,547
Granted	0	0
Exercised	(1,212)	7.18			44,483
Forfeited/canceled	(28)	14.29
Outstanding at June 30, 2021	8,201	8.75		6.0	267,365
Exercisable at June 30, 2021	6,584	7.24		5.8	224,561

At June 30, ~~2018,~~2021, there were ~~19.5~~8.2 million stock options that were vested and expected to ~~vest, with a weighted average exercise price of $7.58 per share, a weighted average remaining contractual term of 8.5 years and an aggregate intrinsic value of $168.5 million.~~vest.

2018 Employee Stock Purchase Plan

At June 30, 2021, there were 6,587,717 shares reserved for issuance under our 2018 Employee Stock Purchase Plan ("2018 ESPP").

In the six months ended June 30, ~~2018, we granted stock options to~~2021, employees that vest over three to four years and had a weighted average grant date fair value of $6.73 per share. Estimating the fair value of stock options using the Black-Scholes option-pricing model require assumptions as to the fair value of our underlying common stock, the

~~estimated term of the option, the risk free interest rate, the expected volatility of the price~~purchased 399,187 shares of our common stock ~~and~~at a weighted average price of $20.16 per share, resulting in $8.0 million of cash proceeds.

At June 30, 2021, there was $4.4 million of employee contributions to the 2018 ESPP included in accrued compensation. At June 30, 2021, the unrecognized stock-based compensation expense related to our 2018 ESPP was $2.6 million, which is expected ~~dividend yield.~~ to be recognized over an estimated weighted average period of 0.7 years.

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The fair value of ~~each stock option~~the 2018 ESPP purchase rights was estimated on the ~~grant date based on~~offering or modification dates using a Black-Scholes option-pricing model and the following assumptions:



	~~Six Months Ended June 30, 2018~~
~~Expected term (in years)~~	~~6.3~~
~~Expected volatility~~	~~41.3% — 43.3%~~
~~Risk-free interest rate~~	~~2.7% — 2.9%~~
~~Expected dividend yield~~	—


	Six Months Ended June 30,
	2021	2020
Expected term (in years)	0.5 — 2.0	0.5 — 2.0
Expected volatility	52.0% — 59.4%	41.6% — 47.9%
Risk-free interest rate	0.1%	0.8% — 0.9%
Expected dividend yield	0	0

~~Restricted Stock and Restricted Stock Units~~

~~We did not grant any restricted stock awards~~As we now have sufficient history as a public company, in 2021 we began using the ~~six months ended June 30, 2018.~~

In the six months ended June 30, 2018, we granted 1.0 million restricted stock units ("RSUs") with a weighted average grant date fair value of $16.21 per share. The grant date fair value was based on the estimated fair valuevolatility of our common stock onto calculate expected volatility. Previously, we used the ~~date~~volatility of ~~grant. Compensation expense for~~ the ~~RSUs is recognized on a straight-line basis~~ ~~over the requisite service period as long as the performance condition in the form~~common stock of ~~a specified liquidity event is probable. As of June 30, 2018, the liquidity event was not probable, and no expense was recognized.~~similar peer companies.

7.10. Net Loss Per Share ~~Attributable to Common Stockholders~~

The following table sets forth the computation of basic and diluted net loss per ~~share attributable to common stockholders:~~share:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except per share data) 2018 2017 2018 2017
Net loss attributable to common stockholders $ (17,341 ) $ (9,405 ) $ (33,417 ) $ (18,418 )

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 23,750
22,060
23,623
21,661
Net loss per share attributable to common stockholders, basic and diluted $ (0.73 ) $ (0.43 ) $ (1.41 ) $ (0.85 )


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2021		2020		2021		2020
Net loss	$	(11,638)	$	(11,960)	$	(19,386)	$	(34,937)

Weighted-average shares used to compute net loss per share, basic and diluted	105,869		100,209		105,203		99,532
Net loss per share, basic and diluted	$	(0.11)	$	(0.12)	$	(0.18)	$	(0.35)

The following potentially dilutive securities have been excluded from the diluted per share calculations because they would have been antidilutive:

Three and Six Months Ended June 30,
(in thousands) 2018 2017
Redeemable convertible preferred stock 55,386
55,386
Stock options 19,521
13,939
Restricted shares 1,088
1,583
Restricted stock units 971
—
Total 76,966
70,908


	June 30,
(in thousands)	2021	2020
Stock options	8,201	11,058
RSUs	6,052	5,436
Shares to be issued under the 2018 ESPP	217	255
Restricted stock	0	297
Total	14,470	17,046

8.11. Income Taxes

~~On December 22, 2017,~~In the ~~Tax Cuts and Jobs Act was enacted into law, which contains several significant changes, including reducing~~three months ended June 30, 2021, the ~~corporate~~ income tax ~~rate from 35%~~benefit included a $1.1 million deferred tax benefit related to ~~21% effective January 1, 2018, imposing a one-time repatriation tax on accumulated~~the Alsid acquisition, which was partially offset by income taxes in certain foreign ~~earnings (“transition tax”) and instituting the global intangible low taxed income (“GILTI”) regime~~jurisdictions in which we conduct business and the ~~base erosion anti-abuse tax.~~related withholding taxes on sales with customers.

~~We are following the guidance~~Additionally, in Securities and Exchange Commission Staff Accounting Bulletin 118, which provides a company with the ability to record provisional amounts based on reasonable estimates that are subject to a measurement period of up to one year. At December 31, 2017, we made a reasonable estimate of the effects on existing deferred tax balances and the one-time transition tax. In the six months ended June 30, ~~2018, no changes were made~~2021, the provision for income taxes was impacted by discrete items, including $2.8 million of current expense from the restructuring of our research and development operations in Israel, partially offset by $2.6 million of discrete benefits, primarily related to ~~these provisional amounts. We will continue~~a Supreme Court decision in India on the taxability of software license payments to ~~evaluate~~nonresidents and the transition tax obligation and application of GILTI and have not yet made an election with regard to GILTI. Subsequent adjustments resulting from additional analysis may be recorded when our analysis is completed, which is expected to be in the second half of 2018.associated withholding taxes.

9.12. Geographic Information

We operate as ~~one~~1 operating segment. Our ~~chief executive officer,~~Chief Executive Officer, who is our chief operating decision maker, reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.

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Revenue by region, based on the address of the end user as specified in our subscription, license or service agreements, was as follows:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2018 2017 2018 2017
Americas $ 45,715
$ 33,092
$ 88,477
$ 63,566
Europe, Middle East and Africa 12,550
7,798
24,216
14,830
Asia Pacific 5,327
3,259
10,006
6,234
Revenue $ 63,592
$ 44,149
$ 122,699
$ 84,630


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
The Americas	$	84,462	$	71,946	$	165,057	$	141,260
Europe, Middle East and Africa	31,947		24,642		61,213		48,192
Asia Pacific	13,850		10,621		27,178		20,405
Revenue	$	130,259	$	107,209	$	253,448	$	209,857

Customers located in the United States accounted for ~~67%~~59%, ~~67%~~61%, ~~70%~~59% and ~~71%~~62% of revenue in the three months ended June 30, 2021 and 2020 and the six months ended June 30, ~~2018~~2021 and ~~2017,~~2020, respectively. No other country accounted for 10% or more of revenue in the periods presented.

Our property and equipment, net by geographic area is summarized as follows:

(in thousands) June 30, 2018 December 31, 2017
United States $ 6,950
$ 6,581
International 4,290
4,173
Property and equipment, net $ 11,240
$ 10,754


(in thousands)	June 30, 2021		December 31, 2020
United States	$	34,249	$	35,406
International	3,158		3,514
Property and equipment, net	$	37,407	$	38,920

~~10.~~13. Subsequent Events

~~Initial Public Offering~~Term Loan

On In July ~~30, 2018~~,2021, we ~~completed our IPO in~~entered into a credit agreement ("Credit Agreement") which ~~we issued~~is comprised of a $375.0 million senior secured term loan facility ("Term Loan") and ~~sold 12,535,000 shares~~a $50.0 million senior secured revolving credit facility ("Revolving Credit Facility") with a $15.0 million letter of ~~common stock~~credit sublimit. The Term Loan bears interest at a ~~price~~rate of 2.75% per annum over LIBOR, subject to a 0.50% floor. The Term Loan will amortize at 1% per annum in equal quarterly installments, starting in March 2022 until the ~~public~~final maturity date on July 7, 2028. The Revolving Credit Facility bears interest at a rate, depending on first lien net leverage, ranging from 2.00% to 2.50% over LIBOR and matures on July 7, 2026. We will pay a commitment fee during the term of ~~$23.00~~the Credit Agreement ranging from 0.25% to 0.375% per ~~share, including 1,635,000 shares~~annum of ~~common stock purchased by our underwriters from~~ the ~~full exercise~~average daily undrawn portion of ~~their over-allotment option. None~~the revolving commitments based on the first lien net leverage ratio. The Credit Agreement contains customary representations and warranties and affirmative and negative covenants. Additionally, if at least 35% of ~~our existing stockholders sold shares at~~ the ~~time~~Revolving Credit Facility is drawn on the last day of ~~our IPO. We received~~the quarter, the total net ~~proceeds of $265 million after deducting underwriting discounts and commissions and other offering expenses.~~leverage ratio cannot be greater than 5.50 to 1.00. Since the closing date, there have been 0 amounts outstanding under the Revolving Credit Facility.

Upon the completion of our IPO, all 15,847,500 shares of our Series A and 39,538,354 shares of our Series B automatically converted into an aggregate of 55,385,854 shares of our common stock. Our newly-adopted Amended and

~~Restated Certificate of Incorporation authorizes a total of 500,000,000 shares of common stock and 10,000,000 shares of preferred stock.~~

The unaudited pro forma condensed consolidated balance sheet below is presented as if our IPO was completed on June 30, 2018. It reflects (1) the issuance of 12,535,000 shares of common stock for estimated net proceeds of $265 million and (2) the conversion of all our Series A and Series B into 55,385,854 shares of common stock:

June 30, 2018
(in thousands) Actual Pro Forma Adjustments Pro Forma
Assets
Total current assets $ 105,987
$ 266,515
$ 372,502
Total noncurrent assets 63,371
(2,683 ) 60,688
Total assets $ 169,358
$ 263,832
$ 433,190
Liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity
Total liabilities $ 289,968
$ (1,168 ) $ 288,800
Redeemable convertible Series A preferred stock 49,946
(49,946 ) —
Redeemable convertible Series B preferred stock 228,168
(228,168 ) —
Stockholders' (deficit) equity
Common stock 250
679
929
Additional paid-in capital 26,651
542,435
569,086
Accumulated deficit (425,625 ) —
(425,625 )
Total stockholders' (deficit) equity (398,724 ) 543,114
144,390
Total liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity $ 169,358
$ 263,832
$ 433,190

~~Stock-Based Compensation~~

~~Compensation expense for our RSUs is recognized on a straight-line basis~~ ~~over the requisite service period as long as the performance condition in the form of a specified liquidity event is deemed probable.~~ In ~~July 2018, in~~ connection with the ~~completion~~Credit Agreement, we terminated the 2020 Credit Facility, which included the release of ~~our IPO, we determined that the performance condition was probable~~all related guarantees and we recorded cumulative stock-based compensation expense of $0.7 million. The remaining unrecognized stock-based compensation expense of $15.1 million related to the RSUs will be recorded over the remaining requisite service period. liens.

~~2018 Equity Incentive Plan~~Commitments

In ~~June 2018 our board of directors adopted, and in~~ July 2018 our stockholders approved, our 2018 Equity Incentive Plan ("2018 Plan"), which reserves 9.9 million shares of our common stock that may be issued as stock-based awards. The 2018 Plan became effective upon2021, we entered into a contract with Amazon Web Services, Inc. for cloud services from August 2021 through July 2024. Under the ~~execution~~terms of the ~~underwriting agreement related~~contract, we committed to our IPO, at which point no further grants were made under our 2016 Plan. Any shares subject to stock options or other stock awards granted under our 2016 Plan, 2012 Stock Incentive Plan or 2002 Stock Incentive Plan that would have otherwise returned to such plan (such as upon the expiration or terminationspend $43.7 million, $46.8 million and $50.1 million in contract years 1, 2 and 3, respectively, for a total spend of ~~a stock award prior to vesting) were added to, and are available for issuance under, our 2018 Plan.~~$140.6 million.

~~2018 Employee Stock Purchase Plan~~

~~In June 2018 our board~~

Table of directors adopted, and in July 2018 our stockholders approved, our 2018 Employee Stock Purchase Plan ("2018 ESPP"), which reserves 4.0 million shares of our common stock for issuance under the 2018 ESPP. The 2018 ESPP became effective upon the execution of the underwriting agreement related to our IPO.Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, or this Form 10-Q, and (2) our consolidated financial statements, related notes and management's discussion and analysis of financial condition and results of operations in our ~~final prospectus~~Annual Report on Form 10-K for ~~our initial public offering,~~the year ended December 31, 2020, or ~~IPO, dated as of July 25, 2018 and~~the 10-K, filed with the Securities and Exchange Commission ~~pursuant to Rule 424(b)(4) of the Securities Act of 1933, as amended, or the Securities Act,~~ on ~~July 26, 2018, or the Prospectus.~~

February 23, 2021. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part II, Item 1A of this Form 10-Q and in our other filings with the SEC. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are ~~the first and only~~a leading provider of ~~solutions for a new category of cybersecurity that we call~~ Cyber ~~Exposure.~~Exposure solutions. Cyber Exposure is a discipline for managing, measuring and ~~measuring~~comparing cybersecurity risk in the digital era. Our enterprise platform enables broad visibility into an organization’s cyber exposure across the modern attack surface and deep insights that help organizations translate vulnerability data into business insights to understand and reduce their cybersecurity risk.

In April 2021, we acquired Alsid SAS, a leader in securing Active Directory, for a purchase price of $98.5 million.

Our enterprise platform offerings include Tenable.io, ~~and SecurityCenter. Tenable.io~~which is our cloud-delivered software as a service, or SaaS, offering ~~that manages~~ and ~~measures cyber exposure across~~Tenable.sc, which is our on-premises offering, both of which provide organizations with a ~~range~~risk-based view of traditional and modern ~~IT assets. SecurityCenter was built~~attack surfaces. These applications are designed with views, workflows and dashboards to ~~manage~~deliver a complete and ~~measure cyber exposure across traditional IT~~continuous view of all assets, both known and ~~can be run on-premises,~~previously unknown, and any associated vulnerabilities, internal and regulatory compliance violations, misconfigurations and other cybersecurity issues, prioritize these issues for remediation based on risk assessment and predictive analytics, and provide insightful remediation guidance.

Our enterprise platform offerings also include:

•Tenable.ot - our solution that provides threat detection and mitigation, asset tracking, vulnerability management, and configuration control capabilities to protect operational technology, or OT, environments, including industrial networks.

•Tenable.ad - our solution to secure Active Directory environments by enabling users to find and fix existing weaknesses and detect ongoing attacks in real time without the ~~customer’s cloud~~need to deploy agents or in a hybrid environment. We plan to release Tenable.io Lumin, an application that will provide enhanced risk-based prioritization of issues and benchmarking against industry peers and best-in-class performers.use privileged accounts.

Our enterprise platform offerings are primarily sold on a subscription basis with a one-year term. Our subscription terms ~~ranging from one to~~are generally not longer than three ~~years, primarily one year.~~years. These offerings are typically prepaid in advance. To a lesser extent, we ~~generate~~recognize revenue ratably ~~recognizable revenue~~ from perpetual licenses and from the related ongoing maintenance.

We sell and market our products and services through our field sales force that works closely with our channel partners, which includes a network of distributors and resellers, in developing sales opportunities. We use a two-tiered channel model whereby we sell our enterprise platform offerings to our distributors, which in turn sell to our resellers, which then sell to end users, which we call customers.

Many of our enterprise platform customers initially use either our free or paid version of Nessus, one of the ~~industry’s~~ most widely deployed vulnerability assessment ~~solutions.~~solutions in the cybersecurity industry. Nessus, which is the technology that

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underpins our enterprise platform offerings, is designed to quickly and accurately identify security vulnerabilities, configuration ~~and compliance~~ issues and malware. Our free version of Nessus, Nessus ~~Home,~~Essentials, allows for vulnerability assessment over a limited number of IP addresses. We believe many of our Nessus customers begin with Nessus ~~Home~~Essentials and subsequently upgrade to Nessus Professional, the paid version of Nessus; however, we expect ~~many~~a significant number of users to continue to use Nessus ~~Home.~~ Essentials.

There have been more than 2.5 million cumulative unique downloads of Nessus Essentials, which refers to an individual email address utilized to register for the use of the product. We ~~have experienced rapid~~believe that the cumulative number of unique downloads of the free version of Nessus is representative of our brand recognition among cybersecurity professionals and that continued growth in ~~recent years.~~ this number suggests broader awareness among potential customers. While we believe that the cumulative number of unique downloads may provide an indication of the growth and scale of our thought leadership and brand awareness, we do not expect this metric to necessarily correlate to future revenue growth opportunities, and we do not consider this metric a measure of our operating performance.

Revenue in the three months ended June 30, ~~2018~~2021 and ~~2017~~2020 and the six months ended June 30, ~~2018~~2021 and ~~2017~~2020 was ~~$63.6~~$130.3 million, ~~$44.1~~$107.2 million, ~~$122.7~~$253.4 million and ~~$84.6~~$209.9 million, respectively, representing year-over-year growth of ~~44%~~22% and ~~45%~~21% in the quarterly and year-to-date periods, respectively. Our recurring revenue, which includes revenue from subscription arrangements for software and cloud-based solutions and maintenance associated with perpetual licenses, represented 94% of revenue in the three and six months ended June 30, 2021 and 93% of revenue in the three and six months ended June 30, 2020. Our net loss in the three months ended June 30, ~~2018~~2021 and ~~2017~~2020 and the six months ended June 30, ~~2018~~2021 and ~~2017~~2020 was ~~$17.2~~$11.6 million ~~$9.2~~, $12.0 million ~~$33.0~~, $19.4 million and ~~$18.0~~$34.9 million, respectively, as we continue to invest in our business and market opportunity.

~~Initial Public Offering~~

Our ~~IPO closed on~~ ~~July 30, 2018. As a result, our condensed consolidated financial statements as of~~cash flows from operating activities were $16.5 million, $17.0 million, $55.2 million and $21.5 million in the three months ended June 30, ~~2018~~2021 and ~~for~~2020 and the ~~periods then~~six months ended doJune 30, 2021 and 2020, respectively.

COVID-19 Update

We continue to monitor the impact of the COVID-19 pandemic on our customers, partners, employees and service providers. While we have not ~~reflect~~seen a significant adverse impact on our business from the ~~sale~~pandemic, the extent to which it will impact our business and operations will depend on future developments that are highly uncertain. We have resumed limited business travel and adopted a hybrid work environment, which we expect will lead to additional costs. For additional information on the potential effects of ~~12,535,000 shares~~the COVID-19 pandemic on our business, financial condition and results of ~~common stock at~~operations, see the ~~IPO price~~"Liquidity and Capital Resources" section below and “Risk Factors” in Part II, Item 1A of $23.00 for net proceeds to us of $265 million, after underwriting discounts and commissions and offering expenses, or the conversion of all outstanding shares of our redeemable convertible preferred stock into an aggregate of 55,385,854 shares of common stock.this Form 10-Q.

Financial Highlights

Below are our key financial ~~results for the three and six months ended June 30, 2018:~~

results:


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except per share data)	2018			2017			2018			2017			(in thousands, except per share data)	2021		2020		2021		2020
Revenue	$	63,592		$	44,149		$	122,699		$	84,630		Revenue	$	130,259	$	107,209	$	253,448	$	209,857
Loss from operations	(16,445		)	(9,229		)	(31,894		)	(17,975		)	Loss from operations	(11,881)		(10,565)		(17,683)		(32,237)
Net loss	(17,150		)	(9,214		)	(33,038		)	(18,040		)	Net loss	(11,638)		(11,960)		(19,386)		(34,937)
Net loss per share attributable to common stockholders, basic and diluted	(0.73		)	(0.43		)	(1.41		)	(0.85		)
Net cash provided by (used in) operating activities	242			(1,019		)	746			168
Net loss per share, basic and diluted													Net loss per share, basic and diluted	(0.11)		(0.12)		(0.18)		(0.35)
Net cash provided by operating activities													Net cash provided by operating activities	16,535		16,999		55,160		21,491
Purchases of property and equipment	(1,382		)	(221		)	(2,978		)	(681		)	Purchases of property and equipment	(1,534)		(10,390)		(2,595)		(11,004)

Factors Affecting Our Performance

Product Leadership

~~We offer the first and only Cyber Exposure~~Our enterprise platform toofferings provide visibility into the broadest range of traditional and modern IT assets across cloud and on-premises environments. We are intensely focused on continued innovation and ongoing development of our

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enterprise platform offerings that ~~empowers~~empower organizations to understand and reduce their cyber exposure. ~~This includes ongoing development of our enterprise platform offerings. In February 2017,~~Additionally, we released Tenable.io, our SaaS offering that is designed to provide broad visibility and insights across a broad range of traditional and modern IT assets and cloud environments. Throughout 2017, we introduced new features to Tenable.io, including web application scanning and container security.

We continue to expand the capabilities of our ~~enterprise platform offerings, as well as our~~ Nessus products, specifically as ~~it relates~~they relate to the ability to scan for and detect the rapidly expanding volume of vulnerabilities.

We intend to continue to invest in our engineering capabilities and marketing activities to maintain our position in the highly-competitive market for cybersecurity solutions. Our results of operations may fluctuate as we make these investments to drive increased customer adoption and usage.

New Enterprise Platform Customer Acquisition

We believe that our customer base provides a significant opportunity to expand sales of our enterprise platform offerings and that our ability to continue to grow ~~our~~the number of enterprise platform customers will increase future opportunities for renewals and follow-on sales. We believe that we have significant room to ~~capture additional~~increase our market share.

We expect to grow our enterprise platform customers by continuing to expand our sales organization and leveraging our channel partner network, which we believe will allow us to identify new enterprise customers, enter new markets, including internationally, as well as to convert more of our existing Nessus Professional customers to enterprise platform customers.

We ~~have increased our sales and marketing headcount in recent years and we~~ will continue to invest ~~significantly~~ in our partner network and sales and marketing capability in order to grow domestically and internationally.

Retaining and Expanding Revenue from Existing Customers

Our enterprise platform offerings utilize IT asset-based or IP address-based pricing models. Once enterprise customers have licensed our platform offerings, they typically seek broader coverage over their traditional IT assets, including networking infrastructure, desktops and on-premises servers. As customers launch new applications or migrate existing applications to the cloud and deploy web applications, containers, ~~internet of things, or~~ IoT and ~~operational technology, or~~ OT, they often increase the scope of their subscriptions and/or add additional perpetual licenses to our enterprise platforms.

We are also focused on upselling customers from Nessus Professional to our enterprise platform offerings. Nessus Professional customers are typically organizations or independent security consultants that use Nessus Professional for a single vulnerability assessment at a point in time. We seek to convert ~~our Nessus Professional users~~these customers to ~~customers of~~ our enterprise platform offerings, which provide continuous visibility and insights into their attack ~~surface.~~surface, as their needs develop.

Further, we plan to expand existing platform capabilities and launch new products, ~~such as Tenable.io Lumin,~~ which we believe will drive new product purchases and follow-on purchases over time, thereby contributing to customer renewals. We believe that there is a significant opportunity to drive additional sales to existing customers, and we expect to invest in sales and marketing and customer success personnel and activities to achieve additional revenue growth from existing customers.

~~Our~~ However, our ability to increase sales to existing customers will depend on a number of factors, including satisfaction or dissatisfaction with our products and services, competition, pricing, current economic conditions or overall changes in our and our clients' spending levels.

We evaluate our ability to expand sales with existing customers by assessing our dollar-based net expansion rate on a last twelve months, or LTM, basis. We have historically calculated our dollar-based net expansion rate as follows:

•Denominator: To calculate our dollar-based net expansion rate as of the end of a reporting period, we first determine the annual recurring revenue, or ARR, from all active subscriptions and maintenance from perpetual licenses as of the last day of the same reporting period in the prior year. This represents recurring payments that we expect to receive in the next 12-month period from the cohort of customers that existed on the last day of the same reporting period in the prior year.

•Numerator: We measure the ARR for that same cohort of customers representing all subscriptions and maintenance from perpetual licenses based on customer orders as of the end of the reporting period.

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We calculate dollar-based net expansion rate by dividing the numerator by the denominator.

Our dollar-based net expansion rate for the three months ended June 30, 2021 exceeded 110% on an LTM basis. Our dollar-based net expansion rate may fluctuate from quarter to quarter if our existing customers choose to reduce or delay technology spending in response to economic conditions resulting from the COVID-19 pandemic, or as a result of a number of other factors, including our existing customers' satisfaction with our solutions, the pricing of our solutions and the ability of competing solutions and the pricing thereof.

We have recently utilized an alternative dollar-based net expansion rate to assess our ability to expand sales with existing customers and evaluate the performance of our sales team. This alternative dollar-based net expansion rate is based on the methodology described above, but excludes the annual contract value of prior period multiyear sales from ARR in the numerator and the denominator of the calculation. We believe this methodology more closely aligns with the renewal and expansion goals established for our sales team, because it measures net expansion by customers with contracts up for renewal during the period. Applying this methodology would have increased the dollar-based net expansion rate by two to five percentage points for each of the fiscal quarters in 2020 and both fiscal quarters in 2021.

Investing in Business Growth

Since our founding, we have invested significantly in growing our business. We intend to continue to invest in sales and marketing to grow our sales team, expand brand and Cyber Exposure awareness and optimize our channel partner network. We also intend to continue to invest in our research and development team to further our technological leadership position in Cyber Exposure and enhance the functionality of our solutions. Any investments we make in our sales and marketing and research and development teams will occur in advance of experiencing the benefits from such investments, so it may be difficult for us to determine if we are efficiently allocating resources in those areas. We may also explore acquisitions of businesses, technology and/or development personnel that will expand and enhance the functionality of our platform offerings. These investment activities could increase our net losses over the short term if our revenue growth does not increase at higher rates. However, we expect that these investments will ultimately benefit our results of operations.

Key Operating and Financial Metrics

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain operating metrics and non-GAAP financial measures, as described below, to understand and evaluate our core operating and financial performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance investors’ overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We believe that these operating metrics and non-GAAP financial measures provide useful information about our operating and financial performance, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important metrics used by management for financial and operational decision-making. We present these operating metrics and non-GAAP financial measures to assist investors in seeing our operating and financial performance using a management view and because we believe that these measures provide an additional tool for investors to use in comparing our core operating and financial performance over multiple periods with other companies in our industry.

Calculated Current Billings

We use the non-GAAP measure of calculated current billings, which we believe is a key metric to measure our periodic performance. Given that most of our customers pay in advance, we typically recognize a majority of the related revenue ratably over time. We use calculated current billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers.

Calculated current billings consists of revenue recognized in a period plus the change in current deferred revenue in the corresponding period. We believe that calculated current billings, which excludes deferred revenue for periods beyond

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twelve months in a customer’s contractual term, more closely correlates with annual contract ~~value and that the variability~~value. Variability in total billings, depending on the timing of large multi-year contracts and the preference for annual billing versus multi-year upfront billing, may distort growth in one period over another.

While we believe that calculated current billings provides valuable insight into the cash that will be generated from sales of our subscriptions, this metric may vary from period-to-period for a number of reasons, and therefore has a number of limitations as a quarter-to-quarter or year-over-year comparative measure. ~~For example, calculated~~Calculated current billings ~~include amounts that have not yet been recognized~~in any one period may be impacted by the overall timing of sales, including early renewals, as ~~revenue;~~well as the timing and amount of multi-year prepaid contracts, which could favorably or unfavorably impact year-over-year comparisons. For example, an increasing number of large sales transactions, for which the timing has and will continue to vary, may occur in quarters subsequent to or in advance of those that we ~~anticipate; and our~~anticipate. Our calculation of calculated current billings may be different from other companies that report similar financial measures. Additionally, calculated current billings in any one period may be impacted by the timing of customer renewals, including early renewals, which could favorably or unfavorably impact year-over-year comparisons. Because of these and other limitations, you should consider calculated current billings along with revenue and our other GAAP financial results.

The following table presents a reconciliation of revenue, the most directly comparable financial measure calculated in accordance with GAAP, to calculated current billings:


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2018			2017			2018			2017			(in thousands)	2021		2020		2021		2020
Revenue	$	63,592		$	44,149		$	122,699		$	84,630		Revenue	$	130,259	$	107,209	$	253,448	$	209,857
Deferred revenue (current), end of period	174,277			122,190			174,277			122,190
Deferred revenue (current), beginning of period⁽¹⁾	(160,503		)	(110,605		)	(154,898		)	(107,006		)
Add: Deferred revenue (current), end of period													Add: Deferred revenue (current), end of period	334,106		274,953		334,106		274,953
Less: Deferred revenue (current), beginning of period(1)													Less: Deferred revenue (current), beginning of period(1)	(327,569)		(270,916)		(331,275)		(274,348)
Calculated current billings	$	77,366		$	55,734		$	142,078		$	99,814		Calculated current billings	$	136,796	$	111,246	$	256,279	$	210,462

_______________

(1) ~~In connection with adopting ASC 606, we recorded $19.0~~Deferred revenue (current), beginning of period for the three and six months ended June 30, 2021 includes $2.5 million ~~of current~~related to Alsid's deferred revenue ~~on January 1, 2017, related to perpetual license~~at the acquisition date, which is not included in the deferred revenue, ~~recognized in prior periods.~~current balance at March 31, 2021 or December 31, 2020.

Free Cash Flow

We use the non-GAAP measure of free cash flow, which we define as GAAP net cash flows from operating activities reduced by purchases of property and equipment. We believe free cash flow is an important liquidity measure of the cash (if any) that is available, after purchases of property and equipment, for investment in our business and to make acquisitions. We believe that free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash.

Our use of free cash flow has limitations as an analytical tool and you should not consider it in isolation or as a substitute for an analysis of our results under GAAP. First, free cash flow is not a substitute for net cash ~~used in~~flows from operating activities. Second, other companies may calculate free cash flow or similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison. Additionally, the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for a given period. Because of these and other limitations, you should consider free cash flow along with net cash provided by operating activities and our other GAAP financial measures.

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The following table ~~summarizes our cash flows for the periods presented and~~ presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Net cash provided by operating activities	$	16,535	$	16,999	$	55,160	$	21,491
Purchases of property and equipment	(1,534)		(10,390)		(2,595)		(11,004)
Free cash flow(1)	$	15,001	$	6,609	$	52,565	$	10,487

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2018 2017 2018 2017
Net cash provided by operating activities $ 242
$ (1,019 ) $ 746
$ 168
Purchases of property and equipment (1,382 ) (221 ) (2,978 ) (681 )
Free cash flow $ (1,140 ) $ (1,240 ) $ (2,232 ) $ (513 )
_______________

(1) Free cash flow for the periods presented was impacted by:


	Three Months Ended June 30,				Six Months Ended June 30,
(in millions)	2021		2020		2021		2020
Employee stock purchase plan activity	$	3.1	$	3.3	$	(1.9)	$	(0.4)
Acquisition-related expenses	(1.6)		—		(3.3)		(0.7)
Tax payment on intra-entity asset transfer	—		—		2.8		—
Proceeds from lease incentives	—		8.6		—		8.6
Capital expenditures related to new headquarters	(0.6)		(9.7)		(0.8)		(9.8)

Free cash flow for the three and six months ended June 30, 2021 was benefited by approximately $5 million and $10 million, respectively, as a result of the accelerated timing of payments for insurance, professional fees and rent in the three months ended December 31, 2020.

Enterprise Platform Customers

We believe that our customer base provides a significant opportunity to expand sales of our enterprise platform offerings. The following tables summarize key components of our customer base:

Three Months Ended June 30,
2018 2017 Change (%)
Number of new enterprise platform customers added in period⁽¹⁾
282 217 30%


	Three Months Ended June 30,
	2021	2020	Change (%)
Number of new enterprise platform customers added in period(1)(2)	490	341	44%

_______________


~~(1)~~	We define an enterprise platform customer as a customer that has licensed Tenable.io or SecurityCenter for an annual amount of $5,000 or greater. New enterprise platform customers represent new customer logos during the periods presented and do not include customer conversions from Nessus Professional to enterprise platforms.

(1) We define an enterprise platform customer as a customer that has licensed Tenable.io, Tenable.sc, Tenable.ad or Tenable.ot for an annual amount of $5,000 or greater. New enterprise platform customers represent new customer logos during the periods presented and do not include customer conversions from Nessus Professional to enterprise platforms.

At June 30,
2018 2017 Change (%)
Number of customers with $100,000 and greater in annual contract value at end of period 340 181 88%
(2) The number of new enterprise platform customers added in the three months ended June 30, 2021 includes 91 legacy Alsid customers.


	At June 30,
	2021	2020	Change (%)
Number of customers with $100,000 and greater in annual contract value at end of period	933	715	30%

Non-GAAP ~~Loss~~Income (Loss) from Operations and Non-GAAP Operating Margin

We use non-GAAP ~~loss~~income (loss) from operations ~~which excludes the effect of stock-based compensation and amortization of intangible assets, as a key indicator of our financial performance,~~ along with non-GAAP operating margin ~~which is calculated~~ as key indicators of our financial performance. We define these non-GAAP ~~loss from operations divided by our revenue in~~financial measures as their respective GAAP measures, excluding the ~~period.~~ effects of stock-based compensation, acquisition-related expenses and amortization of acquired intangible assets. Acquisition-related expenses include transaction expenses and costs related to the transfer of acquired intellectual property.

We believe that these non-GAAP financial measures provide useful information about our core operating results over multiple periods. There are a number of limitations related to the use of the non-GAAP financial measures as compared to GAAP loss from operations and operating margin, including that non-GAAP ~~loss~~income (loss) from operations and non-GAAP

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operating margin exclude stock-based compensation expense, which has been, and will continue to be, ~~for the foreseeable future,~~ a significant recurring expense in our business and an important part of our compensation strategy.

The following table presents a reconciliation of loss from operations, the most directly comparable financial measure calculated in accordance with GAAP, to non-GAAP ~~loss~~income (loss) from operations, and operating margin, the most directly comparable financial measure calculated in accordance with GAAP, to non-GAAP operating margin:


	Three Months Ended June 30,						Six Months Ended June 30,
(dollars in thousands)	2021			2020			2021			2020
Loss from operations	$	(11,881)		$	(10,565)		$	(17,683)		$	(32,237)
Stock-based compensation	20,469			15,666			37,421			28,701
Acquisition-related expenses	1,542			—			3,700			339
Amortization of acquired intangible assets	1,404			578			1,983			1,157
Non-GAAP income (loss) from operations	$	11,534		$	5,679		$	25,421		$	(2,040)

Operating margin	(9)		%	(10)		%	(7)		%	(15)		%
Non-GAAP operating margin	9		%	5		%	10		%	(1)		%

Three Months Ended June 30, Six Months Ended June 30,
(in thousands) 2018 2017 2018 2017
Loss from operations $ (16,445 ) $ (9,229 ) $ (31,894 ) $ (17,975 )
Stock-based compensation 3,024
1,849
5,423
3,475
Amortization of intangible assets 151
151
302
302
Non-GAAP loss from operations $ (13,270 ) $ (7,229 ) $ (26,169 ) $ (14,198 )

Operating margin (26 )% (21 )% (26 )% (21 )%
Non-GAAP operating margin (21 )% (16 )% (21 )% (17 )%

Non-GAAP Net ~~Loss,~~Income (Loss) and Non-GAAP ~~Net Loss~~Earnings (Loss) Per Share~~and Pro Forma Non-GAAP Net Loss Per Share~~

We use non-GAAP net ~~loss,~~income (loss), which excludes the effect of ~~the accretion of Series A and B redeemable convertible preferred stock,~~ stock-based compensation, ~~and~~acquisition-related expenses, amortization of acquired intangible assets, as well as the related tax impact, and the tax impact of intra-entity asset transfers resulting from the internal restructuring of legal entities, to calculate non-GAAP ~~net loss~~earnings (loss) per ~~share and pro forma non-GAAP net loss per~~ share. Pro forma non-GAAP net loss per share is calculated by giving effect to the conversion of our redeemable convertible preferred stock into common stock as though the conversion occurred at the beginning of each period presented. We believe that these non-GAAP measures provide important information to management and investors because they facilitate comparisons of our core operating results over multiple periods.

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The following table presents a reconciliation of net loss and net loss per share, ~~attributable to common stockholders,~~ the most comparable financial measures calculated in accordance with GAAP, to non-GAAP net ~~loss,~~income (loss) and non-GAAP ~~net loss per share and pro forma non-GAAP net loss~~earnings (loss) per share:

Three Months Ended June 30, Six Months Ended June 30,
(in thousands, except for per share amounts) 2018 2017 2018 2017
Net loss attributable to common stockholders $ (17,341 ) $ (9,405 ) $ (33,417 ) $ (18,418 )
Accretion of Series A and B redeemable convertible preferred stock 191
191
379
378
Stock-based compensation 3,024
1,849
5,423
3,475
Tax impact of stock-based compensation⁽¹⁾
(25 ) (12 ) (48 ) (22 )
Amortization of intangible assets⁽¹⁾
151
151
302
302
Non-GAAP net loss $ (14,000 ) $ (7,226 ) $ (27,361 ) $ (14,285 )

Net loss per share attributable to common stockholders, basic and diluted $ (0.73 ) $ (0.43 ) $ (1.41 ) $ (0.85 )
Accretion of Series A and B redeemable convertible preferred stock 0.01
0.01
0.02
0.02
Stock-based compensation 0.12
0.08
0.22
0.16
Tax impact of stock-based compensation⁽¹⁾
0.00
0.00
0.00
0.00
Amortization of intangible assets⁽¹⁾
0.01
0.01
0.01
0.01
Non-GAAP net loss per share, basic and diluted $ (0.59 ) $ (0.33 ) $ (1.16 ) $ (0.66 )

Weighted-average shares used to compute net loss per share attributable to common stockholders and non-GAAP net loss per share, basic and diluted 23,750
22,060
23,623
21,661
Pro forma adjustment to reflect assumed conversion of our convertible redeemable preferred stock as of the beginning of the period 55,386
55,386
55,386
55,386
Weighted-average shares used to compute pro forma non-GAAP net loss per share, basic and diluted 79,136
77,446
79,009
77,047

Pro forma non-GAAP net loss per share $ (0.18 ) $ (0.09 ) $ (0.35 ) $ (0.19 )


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands, except for per share amounts)	2021		2020		2021		2020
Net loss	$	(11,638)	$	(11,960)	$	(19,386)	$	(34,937)
Stock-based compensation	20,469		15,666		37,421		28,701
Tax impact of stock-based compensation(1)	(480)		437		(484)		635
Acquisition-related expenses(2)	1,542		—		3,700		339
Tax impact of acquisition(3)	(1,137)		—		(1,137)		—
Amortization of acquired intangible assets(2)	1,404		578		1,983		1,157
Tax impact of intra-entity asset transfer(4)	—		—		2,808		—
Non-GAAP net income (loss)	$	10,160	$	4,721	$	24,905	$	(4,105)

Net loss per share, diluted	$	(0.11)	$	(0.12)	$	(0.18)	$	(0.35)
Stock-based compensation	0.19		0.16		0.36		0.29
Tax impact of stock-based compensation(1)	—		—		—		0.01
Acquisition-related expenses(2)	0.02		—		0.03		—
Tax impact of acquisition(3)	(0.01)		—		(0.01)		—
Amortization of acquired intangible assets(2)	0.01		0.01		0.02		0.01
Tax impact of intra-entity asset transfer(4)	—		—		0.02		—
Adjustment to diluted earnings per share(5)	(0.01)		(0.01)		(0.02)		—
Non-GAAP earnings (loss) per share, diluted	$	0.09	$	0.04	$	0.22	$	(0.04)

Weighted-average shares used to compute GAAP net loss per share, diluted	105,869		100,209		105,203		99,532

Weighted-average shares used to compute non-GAAP earnings (loss) per share, diluted(6)	113,869		108,587		113,905		99,532

________________

(1) The tax impact of ~~the adjustments to net loss attributable to common stockholders~~stock-based compensation is based on the tax treatment for the applicable tax jurisdictions. ~~There was no~~

(2) The tax impact of acquisition-related expenses and amortization of acquired intangible assets is not material.

(3) The tax impact of the Alsid acquisition includes a $1.1 million deferred tax benefit.

(4) The tax impact of the intra-entity asset transfer is related to the ~~amortization~~internal restructuring of ~~intangible assets as it was incurred~~Indegy, resulting in a current tax payment based on the ~~United States in~~applicable Israeli tax rate.

(5) An adjustment may be necessary to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.

(6) In periods in which ~~we had~~there is a non-GAAP net ~~operating~~ loss, ~~for which we maintained a full valuation allowance.~~basic and diluted weighted average shares outstanding are the same, as potentially dilutive shares would be antidilutive.

Components of Our Results of Operations

Revenue

We generate revenue from subscription arrangements for our software and cloud-based solutions, perpetual licenses, maintenance associated with perpetual licenses and professional services. ~~We begin to recognize revenue when control of our software or services is transferred to the customer, which for sales made through distributors is concurrent with the transfer to the end user.~~

Our subscription arrangements generally have annual or multi-year contractual terms ~~and allow customers~~ to use our software or cloud-based solutions, including ongoing software updates during the contractual period. ~~Revenue~~For our software subscriptions that are dependent on ongoing software updates and the ability to identify the latest cybersecurity vulnerabilities, revenue is

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recognized ratably over the subscription term given the critical utility provided by the ongoing updates that are released ~~throughout~~through the contract period. For our software where the critical utility does not depend on ongoing updates, we separate the software license from the maintenance and support. We recognize revenue attributable to the license at the time of delivery and the revenue attributable to the maintenance and support ratably over the contract period.

Our perpetual licenses are generally sold with one or more years of maintenance, which includes ongoing software updates. Given the critical utility provided by the ongoing software updates and updated ability to identify network vulnerabilities included in maintenance, we combine the perpetual license and the maintenance into a single performance obligation. Perpetual license arrangements generally contain a material right related to the customer’s ability to renew maintenance at a price that is less than the initial license fee. We apply a practical alternative to allocating a portion of the transaction price to the material right performance obligation and estimate a hypothetical transaction price which includes fees for expected maintenance renewals based on the estimated economic life of perpetual license contracts. We allocate the transaction price between the cybersecurity subscription provided in the initial contract and the material right related to expected contract renewals based on the hypothetical transaction price. We recognize the amount allocated to the combined license and maintenance performance obligation over the initial contractual period, which is generally one year. We recognize the amount allocated to the material right over the expected maintenance renewal period, which begins at the end of the initial contractual term and is generally four years. We have estimated the five-year economic life of perpetual license contracts based on historical contract attrition, expected renewal periods, the lifecycle of our technology and other factors. This estimate may change over time.

Professional services and other revenue is primarily comprised of advisory services and training related to the deployment and optimization of our products. These services do not result in significant customization of our products. Professional services and other revenue is recognized as the services are performed.

We have historically experienced, and expect in the future to experience, seasonality in entering into agreements with customers. We typically enter into a significantly higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the third and fourth quarters of the year. The increase in customer agreements in the third quarter is primarily attributable to U.S. government and related agencies, and the increase in the fourth quarter is primarily attributable to large enterprise account buying patterns typical in the software industry. ~~Our recent growth and the~~The ratable nature of our subscription revenue makes this seasonality less apparent in our overall financial results.

Cost of Revenue, Gross Profit and Gross Margin

Cost of revenue includes personnel costs related to our technical support group that provides assistance to customers, including salaries, benefits, bonuses, payroll taxes, stock-based compensation and ~~stock-based compensation.~~any severance. Cost of revenue also includes ~~hosting~~cloud infrastructure costs, ~~for Tenable.io,~~ the costs related to professional services and training, depreciation, amortization of acquired and ~~amortization~~developed technology and allocated overhead costs, which consist of information technology and facilities.

We intend to continue to invest additional resources in our cloud-based platform and ~~our~~ customer support team as we grow our business. The level and timing of investment in these areas could affect our cost of revenue in the future.

Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors, including the timing of our acquisition of new customers and our renewals of and follow-on sales to existing customers, the costs associated with operating our cloud-based platform, the

extent to which we expand our customer support team and the extent to which we can increase the efficiency of our technology and infrastructure through technological improvements.

We expect our gross profit to increase in absolute dollars but our gross margin to decrease over time, as we expect revenue from our cloud-based subscriptions to increase as a percentage of ~~revenue, although~~revenue. However, our gross margin could fluctuate from period to period depending on the interplay of all of these ~~factors.~~factors, particularly as it relates to cloud infrastructure costs.

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Operating Expenses

Our operating expenses consist of sales and marketing, research and development and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, payroll taxes, stock-based compensation and any severance. Operating expenses also include depreciation and amortization as well as allocated overhead costs, including IT and facilities costs.

Sales and Marketing

Sales and marketing expense consists of personnel costs, sales commissions, ~~that are recognized as expense over the period of benefit,~~ marketing programs, travel and entertainment, expenses for conferences and events and allocated overhead costs. We capitalize sales commissions, including related fringe benefit costs, and recognize the expense over an estimated period of benefit, which ranges between three and four years for subscription arrangements and five years for perpetual license arrangements. Sales commissions on contract renewals are capitalized and amortized ratably over the contract term, with the exception of contracts with renewal periods that are one year or less, in which case the incremental costs are expensed as incurred. Sales commissions on professional services arrangements are expensed as incurred as the contractual periods of these arrangements are generally less than one year.

We intend to continue to make ~~significant~~ investments in our sales and marketing teams to grow revenue, further penetrate the market and expand our global customer base. We expect our sales and marketing expense to ~~continue to~~ increase in absolute dollars annually and to be our largest operating expense category for the foreseeable future. However, as our revenue increases, we expect our sales and marketing expense to decrease as a percentage of our revenue over the long ~~term, although our~~term. Our sales and marketing expense may fluctuate ~~as a percentage of our revenue~~ from period to period due to the timing and extent of these ~~expenses.~~expenses, including sales commissions, which may fluctuate depending on the mix of sales and related expense recognition.

Research and Development

Research and development expense consists of personnel costs, software used to develop our products, travel and entertainment, consulting and professional fees for third-party development resources as well as allocated overhead. Our research and development expense supports our efforts to continue to add capabilities to our existing products and enable the continued detection of new network vulnerabilities.

We expect our research and development expense to continue to increase annually in absolute dollars for the foreseeable future ~~particularly in 2018,~~ as we continue to invest in research and development efforts to enhance the functionality of our cloud-based platform. However, we expect our research and development expense to decrease as a percentage of our revenue over the long term, although our research and development expense may fluctuate ~~as a percentage of our revenue~~ from period to period due to the timing and extent of these expenses.

General and Administrative

General and administrative expense consists of personnel costs for our executive, finance, legal, human resources and administrative departments. Additional expenses include travel and entertainment, professional fees, insurance, allocated overhead and ~~allocated overhead.~~acquisition-related costs.

We expect our general and administrative expense to continue to increase annually in absolute dollars for the foreseeable future ~~in particular in 2018,~~ due to additional costs associated with accounting, compliance, insurance and investor relations as a public company. However, we expect our general and administrative expense to decrease as a percentage of our revenue over the long term, although our general and administrative expense may fluctuate ~~as a percentage of our revenue~~ from period to period due to the timing and extent of these expenses.

~~Other~~Interest (Expense) Income, Net

~~Other~~Interest (expense) income, net consists primarily of ~~net foreign currency remeasurement and transaction gains and losses,~~interest income earned on cash and cash equivalents and short-term investments and interest expense in connection with our credit facility, including unused ~~line~~commitment fees and letter of credit ~~fees on our revolving credit facility.~~fees.

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Other Expense, Net

Other expense, net consists primarily of foreign currency remeasurement and transaction gains and losses.

(Benefit) Provision for Income Taxes

~~Provision~~(Benefit) provision for income taxes consists ~~primarily~~ of income taxes in certain foreign jurisdictions in which we conduct ~~business.~~business and the related withholding taxes on sales with customers. We have recorded deferred tax assets for which a full valuation allowance has been provided, including net operating loss carryforwards and tax credits. We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized based on our history of losses.

In the three months ended June 30, 2021, the income tax benefit included a $1.1 million deferred tax benefit related to the Alsid acquisition, which was partially offset by income taxes in certain foreign jurisdictions in which we conduct business and the related withholding taxes on sales with customers.

Additionally, in the six months ended June 30, 2021, the provision for income taxes was impacted by discrete items, including $2.8 million of current expense from the restructuring of our research and development operations in Israel, partially offset by $2.6 million of discrete benefits, primarily related to a Supreme Court decision in India on the taxability of software license payments to nonresidents and the associated withholding taxes.

Results of Operations

The following tables set forth our consolidated results of ~~operations for the periods presented:~~operations:


	Three Months Ended June 30,						Six Months Ended June 30,							Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2018			2017			2018			2017			(in thousands)	2021		2020		2021		2020
Revenue	$	63,592		$	44,149		$	122,699		$	84,630		Revenue	$	130,259	$	107,209	$	253,448	$	209,857
Cost of revenue⁽¹⁾	9,879			5,348			18,607			9,786			Cost of revenue(1)	26,425		19,142		48,498		37,843
Gross profit	53,713			38,801			104,092			74,844			Gross profit	103,834		88,067		204,950		172,014
Operating expenses:													Operating expenses:
Sales and marketing⁽¹⁾	41,826			27,773			81,414			53,941			Sales and marketing(1)	65,678		55,443		124,313		115,298
Research and development⁽¹⁾	17,791			13,713			34,976			26,171			Research and development(1)	28,201		25,310		55,039		52,141
General and administrative⁽¹⁾	10,541			6,544			19,596			12,707			General and administrative(1)	21,836		17,879		43,281		36,812
Total operating expenses	70,158			48,030			135,986			92,819			Total operating expenses	115,715		98,632		222,633		204,251
Loss from operations	(16,445		)	(9,229		)	(31,894		)	(17,975		)	Loss from operations	(11,881)		(10,565)		(17,683)		(32,237)
Other (expense) income, net	(461		)	56			(469		)	27
Interest (expense) income, net													Interest (expense) income, net	(42)		455		(70)		1,189
Other expense, net													Other expense, net	(471)		(298)		(537)		(1,258)
Loss before income taxes	(16,906		)	(9,173		)	(32,363		)	(17,948		)	Loss before income taxes	(12,394)		(10,408)		(18,290)		(32,306)
Provision for income taxes	244			41			675			92
Net loss and comprehensive loss	$	(17,150	)	$	(9,214	)	$	(33,038	)	$	(18,040	)
(Benefit) provision for income taxes													(Benefit) provision for income taxes	(756)		1,552		1,096		2,631
Net loss													Net loss	$	(11,638)	$	(11,960)	$	(19,386)	$	(34,937)

_______________

(1) Includes stock-based compensation expense as follows:


	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2021		2020		2021		2020
Cost of revenue	$	1,202	$	830	$	2,139	$	1,577
Sales and marketing	7,577		5,375		13,873		9,871
Research and development	5,176		3,893		9,332		6,841
General and administrative	6,514		5,568		12,077		10,412
Total stock-based compensation expense	$	20,469	$	15,666	$	37,421	$	28,701

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Comparison of the Three Months Ended June 30, ~~2018~~2021 and ~~2017~~2020

Revenue

Three Months Ended June 30, Change
(dollars in thousands) 2018 2017 ($) (%)
Revenue $ 63,592
$ 44,149
$ 19,443
44 %

The following table presents the increase in revenue:


	Three Months Ended June 30,				Change
(dollars in thousands)	2021		2020		($)		(%)
Subscription revenue	$	114,167	$	92,010	$	22,157	24	%
Perpetual license and maintenance revenue	12,567		12,179		388		3	%
Professional services and other revenue	3,525		3,020		505		17	%
Revenue	$	130,259	$	107,209	$	23,050	22	%

U.S. revenue ~~of $19.4~~increased $10.9 million, ~~was comprised of increases in subscription revenue of $17.9 million, perpetual license and maintenance revenue of $1.1 million and professional services and other revenue of $0.4 million.~~

~~Revenue from existing customers comprised 44% of the increase, while the remaining increase was due to revenue from new customers since July 1, 2017.~~or 17%. International revenue increased ~~$7.9~~$12.2 million, or ~~61%~~29%.

Cost of Revenue, Gross Profit and Gross Margin


	Three Months Ended June 30,						Change					Three Months Ended June 30,						Change
(dollars in thousands)	2018			2017			($)		(%)		(dollars in thousands)	2021			2020			($)	(%)
Cost of revenue	$	9,879		$	5,348		$	4,531	85	%	Cost of revenue	$	26,425		$	19,142		7,283	38	%
Gross profit	53,713			38,801			14,912		38	%	Gross profit	103,834			88,067			15,767	18	%
Gross margin	84		%	88		%					Gross margin	80		%	82		%

The increase in cost of revenue of ~~$4.5~~$7.3 million was primarily due to:

•a ~~$2.0~~$5.0 million increase in third-party cloud infrastructure costs ~~largely~~ associated with ~~the increased adoption of Tenable.io;~~investments in our cloud platform;

•a ~~$1.5~~$0.8 million increase in personnel costs, ~~primarily due to increased headcount;~~

including a ~~$0.6~~$0.4 million increase in ~~allocated overhead costs driven by both the increase in headcount and the overall increase in such costs on~~ stock-based compensation;

•a ~~year-over-year basis; and~~

~~a $0.2~~$0.8 million increase in ~~depreciation~~amortization of intangible assets due to intangible assets acquired in the period; and ~~amortization.~~

•a $0.4 million increase in professional fees.

Operating Expenses

Sales and Marketing


	Three Months Ended June 30,				Change					Three Months Ended June 30,				Change
(dollars in thousands)	2018		2017		($)		(%)		(dollars in thousands)	2021		2020		($)		(%)
Sales and marketing	$	41,826	$	27,773	$	14,053	51	%	Sales and marketing	$	65,678	$	55,443	$	10,235	18	%

The increase in sales and marketing expense of ~~$14.1~~$10.2 million was primarily due to:

•a ~~$6.3~~$3.7 million increase in personnel costs largely associated with an increase in ~~headcount;~~headcount, including a $2.2 million increase in stock-based compensation;

•a ~~$4.4~~$3.2 million increase in expenses for demand generation programs, including advertising, sponsorships and brand awareness efforts;

•a $2.0 million increase in sales commissions, including sales commission draws, due to increased sales and the amortization of deferred commissions; and

•a ~~$1.8 million increase in expenses for demand generation programs, including advertising, sponsorships and brand awareness efforts aimed at acquiring new customers; and~~

~~a $1.1 million increase in selling expenses, including travel and meeting costs and the costs of software subscriptions.~~

~~Research and Development~~

Three Months Ended June 30, Change
(dollars in thousands) 2018 2017 ($) (%)
Research and development $ 17,791
$ 13,713
$ 4,078
30 %

~~The increase in research and development expense of $4.1 million was primarily due to:~~

~~a $3.2 million increase in personnel costs largely associated with an increase in headcount, net of $0.4 million of development costs capitalized related to internal use software;~~

~~a $0.3 million increase in third-party cloud infrastructure costs related to the development of new and future offerings; and~~

~~a $0.2 million increase in allocated overhead driven by both the increase in headcount and the overall increase in such costs on a year-over-year basis.~~

~~General and Administrative~~

Three Months Ended June 30, Change
(dollars in thousands) 2018 2017 ($) (%)
General and administrative $ 10,541
$ 6,544
$ 3,997
61 %

~~The increase in general and administrative expense of $4.0 million was primarily due to:~~

~~a $2.3 million increase in personnel costs largely associated with an increase in headcount;~~

~~a $1.1 million increase in professional fees; and~~

~~a $0.2 million increase in software subscriptions.~~

~~Comparison of the Six Months Ended June 30, 2018 and 2017~~

~~Revenue~~

Six Months Ended June 30, Change
(dollars in thousands) 2018 2017 ($) (%)
Revenue $ 122,699
$ 84,630
$ 38,069
45 %

The increase in revenue of $38.1 million was comprised of increases in subscription revenue of $34.5 million, perpetual license and maintenance revenue of $2.6 million and professional services and other revenue of $1.0 million. Revenue from existing customers comprised 52% of the increase, while the remaining increase was due to revenue from new customers since July 1, 2017. International revenue increased $15.4 million, or 62%.

~~Cost of Revenue, Gross Profit and Gross Margin~~

Six Months Ended June 30, Change
(dollars in thousands) 2018 2017 Change ($) (%)
Cost of revenue $ 18,607
$ 9,786
$ 8,821
90 %
Gross profit 104,092
74,844
29,248
39 %
Gross margin 85 % 88 %

~~The increase in cost of revenue of $8.8 million was primarily due to:~~

~~a $4.0 million increase in third-party cloud infrastructure costs largely associated with the increased adoption of Tenable.io;~~

~~a $2.8 million increase in personnel costs primarily due to increased headcount;~~

~~a $1.2 million increase in allocated overhead costs driven by both the increase in headcount and the overall increase in such costs on a year-over-year basis; and~~

~~a $0.3 million increase in depreciation and amortization.~~

~~Operating Expenses~~

~~Sales and Marketing~~

Six Months Ended June 30, Change
(dollars in thousands) 2018 2017 ($) (%)
Sales and marketing $ 81,414
$ 53,941
$ 27,473
51 %

~~The increase in sales and marketing expense of $27.5 million was primarily due to:~~

~~a $12.2 million increase in personnel costs largely associated with an increase in headcount;~~

~~a $7.1 million increase in sales commissions, including sales commission draws, due to increased sales and the amortization of deferred commissions;~~

~~a $4.5 million increase in expenses for demand generation programs, including advertising, sponsorships and brand awareness efforts aimed at acquiring new customers;~~

~~a $2.7~~$1.4 million increase in selling expenses, including travel and meeting costs and the costs of software subscriptions; ~~and~~partially offset by

•a ~~$0.7~~$0.2 million ~~increase~~decrease in allocated overhead ~~costs, driven by both the increase in headcount and the overall increase in such costs on a year-over-year basis.~~costs.

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Research and Development


	Six Months Ended June 30,				Change					Three Months Ended June 30,				Change
(dollars in thousands)	2018		2017		($)		(%)		(dollars in thousands)	2021		2020		($)		(%)
Research and development	$	34,976	$	26,171	$	8,805	34	%	Research and development	$	28,201	$	25,310	$	2,891	11	%

The increase in research and development expense of ~~$8.8~~$2.9 million was primarily due to:

•a ~~$6.5~~$2.0 million increase in personnel costs, including a $1.3 million increase in stock-based compensation; and

•a $0.6 million increase in third-party cloud infrastructure costs.

General and Administrative


	Three Months Ended June 30,				Change
(dollars in thousands)	2021		2020		($)		(%)
General and administrative	$	21,836	$	17,879	$	3,957	22	%

The increase in general and administrative expense of $4.0 million was primarily due to:

•a $1.8 million increase in personnel costs largely associated with an increase in headcount ~~net of~~and including a $0.9 million increase in stock-based compensation;

•a $1.5 million increase in acquisition-related costs; and

•a $0.5 million increase in professional fees.

Comparison of ~~development costs capitalized related to internal use software;~~the Six Months Ended June 30, 2021 and 2020

Revenue

The following table presents the increase in revenue:


	Six Months Ended June 30,				Change
(dollars in thousands)	2021		2020		($)		(%)
Subscription revenue	$	221,569	$	178,400	$	43,169	24	%
Perpetual license and maintenance revenue	24,972		25,598		(626)		(2)	%
Professional services and other revenue	6,907		5,859		1,048		18	%
Revenue	$	253,448	$	209,857	$	43,591	21	%

U.S. revenue increased $20.5 million, or 16%. International revenue increased $23.1 million, or 29%.

Cost of Revenue, Gross Profit and Gross Margin


	Six Months Ended June 30,						Change
(dollars in thousands)	2021			2020			($)		(%)
Cost of revenue	$	48,498		$	37,843		$	10,655	28	%
Gross profit	204,950			172,014			32,936		19	%
Gross margin	81		%	82		%

The increase in cost of revenue of $10.7 million was primarily due to:

•a ~~$0.8~~$7.2 million increase in third-party cloud infrastructure costs ~~related~~associated with investments in our cloud platform;

•a $1.8 million increase in personnel costs primarily due to support for cloud-based products;

•a $0.8 million increase in amortization of intangible assets due to intangible assets acquired in the ~~development of new~~period; and ~~future offerings;~~

•a $0.6 million increase in ~~event and travel costs, primarily for our inaugural user conference held in February 2017; and~~professional fees; partially offset by

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•a $0.3 million decrease in allocated overhead.

Operating Expenses

Sales and Marketing


	Six Months Ended June 30,				Change
(dollars in thousands)	2021		2020		($)		(%)
Sales and marketing	$	124,313	$	115,298	$	9,015	8	%

The increase in sales and marketing expense of $9.0 million was primarily due to:

•a $4.4 million increase in personnel costs, primarily due to a $4.0 million increase in stock-based compensation;

•a $3.5 million increase in sales commissions, due to increased sales and the amortization of deferred commissions; and

•a $3.5 million increase in expenses for demand generation programs, including advertising, sponsorships and brand awareness efforts; partially offset by

•a $2.1 million decrease in selling expenses, including a $3.6 million decrease in travel and meeting costs; and

•a $0.5 million decrease in allocated overhead ~~driven by both the~~costs.

Research and Development


	Six Months Ended June 30,				Change
(dollars in thousands)	2021		2020		($)		(%)
Research and development	$	55,039	$	52,141	$	2,898	6	%

The increase in ~~headcount~~research and ~~the overall~~development expense of $2.9 million was primarily due to:

•a $3.3 million increase in ~~such~~personnel costs, onprimarily due to a ~~year-over-year basis.~~$2.5 million increase in stock-based compensation; and

•a $1.0 million increase in third-party cloud infrastructure costs; partially offset by

•a $1.1 million decrease in travel and meeting costs; and

•a $0.5 million decrease in allocated overhead costs, primarily facilities costs.

General and Administrative


	Six Months Ended June 30,				Change					Six Months Ended June 30,				Change
(dollars in thousands)	2018		2017		($)		(%)		(dollars in thousands)	2021		2020		($)		(%)
General and administrative	$	19,596	$	12,707	$	6,889	54	%	General and administrative	$	43,281	$	36,812	$	6,469	18	%

The increase in general and administrative expense of ~~$6.9~~$6.5 million was primarily due to:

•a ~~$3.6~~$3.4 million increase in acquisition-related expenses; and

•a $3.2 million increase in personnel costs, ~~largely associated with an increase in headcount;~~

including a ~~$2.0~~$1.7 million increase in ~~professional fees;~~stock-based compensation.

~~a $0.4 million increase in software subscription expense;~~

~~a $0.2 million increase in travel costs; and~~

~~a $0.2 million increase in depreciation and amortization.~~

Liquidity and Capital Resources

At June 30, ~~2018,~~2021, we had $135.9 million of cash and cash equivalents, ~~consisting~~which consisted of bank deposits and money market funds, and $125.1 million of ~~$23.7 million. Subsequent to quarter end, in July 2018 we received net proceeds~~short-term investments, which consisted of ~~$265 million upon the completion of our IPO.~~commercial paper, U.S. Treasury and agency obligations and corporate and supranational bonds.

Since our inception and prior to our IPO, we financed our operations through cash provided by operations, including payments received from customers using our software products and services, and we did not raise any primary institutional ~~capital prior to our IPO.~~capital. The proceeds of our Series A and Series B redeemable convertible preferred stock financings were

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used to repurchase shares of capital stock from former stockholders. We have generated significant operating losses ~~from our operations~~ as reflected by our accumulated deficit of ~~$425.6~~$627.2 million at June 30, ~~2018.~~

2021.

We typically invoice our customers annually in advance and, to a lesser extent, multi-year in advance. Therefore, a substantial source of our cash is from such prepayments, which are included on our consolidated balance sheets as deferred revenue. Deferred revenue consists primarily of the unearned portion of billed fees for our subscriptions and perpetual licenses, which is subsequently recognized as revenue in accordance with our revenue recognition policy. At June 30, ~~2018,~~2021, we had deferred revenue of ~~$247.1~~$444.9 million, of which ~~$174.3~~$334.1 million was recorded as a current liability and is expected to be ~~recorded~~recognized as revenue in the next 12 months, provided all other revenue recognition criteria are met.

Our principal uses of cash in recent periods have been funding our operations, expansion of our sales and marketing and research and development activities, ~~and~~ investments in ~~infrastructure.~~ infrastructure, including the build-out of our new headquarters, and acquiring complementary businesses and technology. In April 2021, we paid $98.5 million, net to acquire Alsid. We may in the future enter into arrangements to acquire or invest in other complementary businesses, services and technologies, including intellectual property rights.

We expect to continue incurring operating losses ~~and generating negative~~in the near term. Even though we generated positive cash flows from operations and free cash flow in the ~~near-term; however,~~six months ended June 30, 2021, we may not be able to sustain these cash flows in the near term. We believe that our existing cash and cash equivalents ~~including cash proceeds from our IPO, together with amounts available under the revolving credit facility,~~and short-term investments will be sufficient to fund our operating and capital needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our revenue growth rate, subscription renewal activity, the timing and extent of spending to support further infrastructure and research and development efforts, the timing and extent of additional capital expenditures to invest in new and existing office spaces, ~~such as our new corporate headquarters,~~ the expansion of sales, ~~and~~ marketing and international operating activities, the timing of our introduction of new product capabilities and enhancements of our platform and the continuing market acceptance of our platform.

~~We may in the future enter into arrangements to acquire or invest in complementary businesses, services and technologies, including intellectual property rights. We~~ It may be ~~required~~necessary to seek additional equity or debt financing. In the event that financing is required from outside sources, we may not be able to raise it on terms acceptable to us or at all. If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.

The full extent to which the ongoing COVID-19 pandemic impacts our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the duration of the outbreak, the duration and effect of business disruptions, the effectiveness and widespread adoption of a vaccine, both domestically and globally, and the duration and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease. We also do not yet know the full extent of potential impacts on our business and operations, or those of our partners and customers, or the global economy as a whole. Accordingly, the current results and financial conditions discussed herein may not be indicative of our future operating results and trends. See the section titled “Risk Factors” in Part II, Item 1A of this Form 10-Q.

Term Loan and Credit Facility

During the six months ended June 30, 2021, there were no amounts outstanding under our $45.0 million senior secured credit facility, or the 2020 Credit Facility. At June 30, 2021, we were in compliance with the financial covenant and our borrowing capacity was reduced by $5.5 million related to standby letters of credit.

In ~~May 2017,~~July 2021, we entered into a ~~$25.0~~credit agreement, or the Credit Agreement, which is comprised of a $375.0 million senior secured term loan facility, or the Term Loan, and a $50.0 million senior secured revolving credit facility, or the Revolving Credit Facility, with ~~Silicon Valley Bank. Pursuant to the terms of the revolving credit facility, we may issue up to $5.0~~a $15.0 million ~~of letters~~letter of credit ~~which reduce the total amount available for borrowing under such facility.~~sublimit. The ~~revolving credit facility terminates on May 4, 2020. To date, we have not borrowed any amounts under the revolving credit facility.~~

Interest on borrowings under the revolving credit facility accrues at a variable rate tied to the prime rate or the LIBOR rate, at our election. Interest is payable quarterly in arrears. We are required to pay a quarterly commitment fee that accruesTerm Loan bears interest at a rate of ~~0.25%~~2.75% per annum over LIBOR, subject to a 0.50% floor. The Term Loan will amortize at 1% per annum in equal quarterly installments, starting in March 2022 until the final maturity date on July 7, 2028. The Revolving Credit Facility bears interest at a rate, depending on first lien net leverage, ranging from 2.00% to 2.50% over LIBOR and matures on July 7, 2026. We will pay a commitment fee during the ~~unused~~term of the Credit Agreement ranging from 0.25% to 0.375% per annum of the average daily undrawn portion of the ~~borrowing commitment.~~

revolving commitments based on the first lien net leverage ratio. The ~~revolving credit facility~~Credit Agreement contains customary ~~conditions to borrowing, events~~representations and warranties and affirmative and negative covenants. Additionally, if at

Table of ~~default and covenants, including restrictions~~Contents

least 35% of the Revolving Credit Facility is drawn on ~~indebtedness, liens, acquisitions and investments, restricted payments and dispositions. If, as of~~ the last day of ~~any~~the quarter, the ~~outstanding balance of~~total net leverage ratio cannot be greater than 5.50 to 1.00. Since the ~~revolving credit facility exceeds $5.0 million,~~closing date, there are financial covenants that require us to maintain a minimum level of earnings before income taxes, interest, depreciation and amortization adjusted to add changes in deferred revenue in the period and a minimum current ratio level. We were in compliance with all covenantshave been no amounts outstanding under the ~~revolving credit facility at June 30, 2018.~~Revolving Credit Facility.

In connection with the Credit Agreement, we terminated the 2020 Credit Facility, which included the release of all related guarantees and liens.

Cash Flows

The following table summarizes our cash flows for the periods presented:


	Six Months Ended June 30,							Six Months Ended June 30,
(in thousands)	2018			2017			(in thousands)	2021		2020
Net cash provided by operating activities	$	746		$	168		Net cash provided by operating activities	$	55,160	$	21,491
Net cash used in investing activities	(2,978		)	(681		)
Net cash (used in) provided by financing activities	(832		)	1,754
Net cash (used in) provided by investing activities							Net cash (used in) provided by investing activities	(112,708)		21,763
Net cash provided by financing activities							Net cash provided by financing activities	16,745		20,273
Effect of exchange rate changes on cash and cash equivalents and restricted cash	(491		)	45			Effect of exchange rate changes on cash and cash equivalents and restricted cash	(1,463)		(1,463)
Net (decrease) increase in cash and cash equivalents and restricted cash	$	(3,555	)	$	1,286		Net (decrease) increase in cash and cash equivalents and restricted cash	$	(42,266)	$	62,064

Operating Activities

In the six months ended June 30, ~~2018,~~2021, net cash provided by operating activities was ~~$0.7~~$55.2 million, which primarily consisted of our ~~$33.0~~$19.4 million loss, adjusted for stock-based compensation expense of ~~$5.4~~$37.4 million and depreciation and amortization of ~~$3.0~~$6.8 million, as well as a net cash inflow of ~~$24.7~~$30.6 million from changes in operating assets and liabilities. The net inflow from changes in operating assets and liabilities was primarily related to a $19.0 million decrease in accounts receivable due to collections from customers, a $7.6 million decrease in prepaid expenses and a $6.7 million increase in deferred revenue.

In the six months ended June 30, 2020, net cash provided by operating activities was $21.5 million, which primarily consisted of our $34.9 million loss, adjusted for stock-based compensation expense of $28.7 million and depreciation and amortization of $5.3 million, as well as a net cash inflow of $21.9 million from changes in operating assets and liabilities. The net inflow from changes in operating assets and liabilities was primarily due to a ~~$21.3~~$13.5 million ~~increase~~decrease in ~~deferred revenue primarily~~accounts receivable due to ~~increased subscription sales as a majority of our~~collections from customers ~~are invoiced~~and $8.6 million in ~~advance.~~

In the six months ended June 30, 2017, net cash provided by operating activities was $0.2 million, which primarily consisted of our $18.0 million loss, adjusted for stock-based compensation expense of $3.5 million and depreciation and amortization of $2.1 million, as well as a net cash inflow of $12.3 millionproceeds from changes in operating assets and liabilities. The net inflow from changes in operating assets and liabilities was primarily due to a $19.5 million increase in deferred revenue from increased subscription sales,lease incentives, partially offset by a ~~$6.1~~$5.3 million decrease in ~~deferred commissions.~~accrued compensation, which included quarterly bonuses and commissions earned in the fourth quarter of 2019 that were paid in the first quarter of 2020.

Investing Activities

Net cash used in investing activities increased by ~~$2.3~~$134.5 million, primarily due to ~~additional internal use software development costs incurred~~$98.5 million of cash paid for the Alsid acquisition and a $44.4 million decrease in ~~2018, which are capitalized on~~sales and maturities, net of purchases, of short-term investments in commercial paper, U.S. Treasury and agency obligations, corporate bonds and supranational bonds, partially offset by a $9.0 million decrease in capital expenditures related to our ~~balance sheet.~~new headquarters.

Financing Activities

Net cash provided by financing activities decreased by ~~$2.6~~$3.5 million, primarily due to ~~lower~~a $2.3 million decrease in the proceeds from the exercise of stock options and ~~payments~~$2.0 million of ~~deferred offering costs.~~loan proceeds that we received from the state of Maryland in 2020, partially offset by a $0.7 million increase in proceeds from the employee stock purchase plan.

Contractual Obligations

At June 30, ~~2018,~~2021, there were no material changes in our contractual obligations and commitments from those disclosed in our ~~Prospectus.~~10-K.

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In July 2021, we entered into a contract with Amazon Web Services, Inc. for cloud services from August 2021 through July 2024. Under the terms of the contract, we committed to spend $43.7 million, $46.8 million and $50.1 million in contract years 1, 2 and 3, respectively, for a total spend of $140.6 million.

Off-Balance Sheet Arrangements

At June 30, ~~2018,~~2021, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Critical Accounting Policies and Estimates

Our financial statements are prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our

estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.

There have been no material changes to our critical accounting policies and estimates as described in our ~~Prospectus.~~10-K.

Recently Issued Accounting Pronouncements

Refer to Note 1 to our consolidated financial statements for more information regarding recently issued accounting ~~pronouncements not yet adopted.~~pronouncements.

~~Emerging Growth Company Status~~

We are an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012, or the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to market risks in the ordinary course of our business, including interest rate, foreign currency exchange and inflation risks.

Interest Rate Risk

WeAt June 30, 2021, we had $135.9 million of cash and cash equivalents, ~~of $23.7 million at June 30, 2018, consisting~~which consisted of cash deposits and money market funds. We also had $125.1 million of short-term investments, which consisted of commercial paper, U.S. treasury and agency securities and corporate and supranational bonds. Our investments are carried at their fair market values with cumulative unrealized gains or losses recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash and investments. We do not enter into investments for trading or speculative purposes. ~~Due to the short-term nature~~Interest-earning instruments carry a degree of ~~these instruments, we believe that we do not have any material exposure to changes in fair value as a result of changes in interest rates.~~

We have not had any amounts outstanding under the revolving credit facility since it was established in May 2017. Any borrowings under the revolving credit facility would bear interest at a variable rate tied to the prime rate or the LIBOR rate. We do not have any other long-term debt or financial liabilities with floating interest rates that would subject us to interest rate ~~fluctuations.~~

Arisk; however, a hypothetical 10% change in interest rates during any of the periods presented would not have had a material impact on our financial statements.

We did not had any borrowings under our $45.0 million 2020 Credit Facility since it was established in July 2020. In July 2021, we entered into the Term Loan, which has a variable interest rate. As the LIBOR rate in July 2021 was below the 0.50% floor, a one-half percentage point increase in the rate would not have a material impact on our financial statements in the six months ended December 31, 2021.

In July 2021, we also entered into the Revolving Credit Facility, which has a variable interest rate, but does not currently have any outstanding borrowings under this facility. Because the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced the desire to phase out the use of LIBOR by the end of 2021, future borrowings under our Term Loan and Revolving Credit Facility could be subject to reference rates other than LIBOR.

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Foreign Currency Exchange Risk

Substantially all of our sales contracts are denominated in U.S. dollars, with a limited number of contracts denominated in foreign ~~currencies.~~currencies, including foreign denominated leases. A portion of our operating expenses are incurred outside the United States, denominated in foreign currencies and subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the Euro, British Pound, Australian dollar and ~~Australian dollar.~~Israeli New Shekel. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize remeasurement and transaction gains (losses) in our consolidated statements of ~~operations and comprehensive loss.~~operations. As the impact of foreign currency exchange rates has not been material to our historical operating results, we have not entered into derivative or hedging transactions, but we may do so in the future if our exposure to foreign currency becomes more significant.

Inflation Risk

We do not believe that inflation has had a material effect on our business, results of operations, or financial condition. Nonetheless, if our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs. Our inability or failure to do so could harm our business, results of operations, or financial condition.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act, that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act ), as of the end of the period covered by this Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, ~~2018,~~2021, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed by us in this Form 10-Q was (a) reported

within the time periods specified by SEC rules and regulations, and (b) communicated to our management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding any required disclosure.

Changes in Internal Control Over Financial Reporting

We implemented business combination controls in connection with our acquisition of Alsid. There were no other changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Effectiveness of Internal Controls

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable, not absolute, assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs. Our management, including our Chief Executive Officer and Chief Financial Officer, believes that our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives and are effective at the reasonable assurance level. However, our management does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all errors and all fraud.

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PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be subject to legal proceedings and claims in the ordinary course of business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, results of operations, financial condition or cash flows. We have received, and may in the future continue to receive, claims from third parties asserting, among other things, infringement of their intellectual property rights. Future litigation may be necessary to defend ourselves, our partners and our customers by determining the scope, enforceability and validity of third-party proprietary rights, or to establish our proprietary rights. The results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors

Our operations and financial results are subject to significant risks and uncertainties including those described below. You should carefully consider the risks and uncertainties described below, in addition to other information contained in this Quarterly Report on Form 10-Q, including our consolidated financial statements and related notes. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially and adversely affected.

Selected Risks Affecting Our Business

Our business is subject to a number of risks of which you should be aware before making a decision to invest in our common stock. These risks are more fully described in this “Risk Factors” section, including the following:

•Our business, operations and financial performance may be materially adversely affected by the ongoing and evolving COVID-19 pandemic.

•We have a history of losses and may not achieve or maintain profitability in the future.

•We face intense competition. If we do not continue to innovate and offer solutions that address the dynamic cybersecurity landscape, we may not remain competitive.

•We may not be able to sustain our revenue growth rate in the future.

•We may not be able to scale our business quickly enough to meet our customers’ growing needs.

•Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable and accurate performance of our solutions, infrastructure and third-party suppliers. If we experience performance problems, or if our solutions fail to detect vulnerabilities or incorrectly detect vulnerabilities, or if they contain undetected errors or defects, our brand and reputation could be harmed.

•Our future quarterly results of operations are likely to fluctuate significantly due to a wide range of factors, which makes our future results difficult to predict.

•Our business and results of operations depend substantially on our customers renewing their subscriptions with us and expanding the number of IT assets or IP addresses under their subscriptions. Any decline in our customer renewals, terminations or failure to convince our customers to expand their use of subscription offerings would harm our business, results of operations, and financial condition.

•We rely on third parties to maintain and operate certain elements of our network infrastructure.

•We rely on our third-party channel partner network of distributors and resellers to generate a substantial amount of our revenue.

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Risks Related to Our Business and Industry

Our business, operations and financial performance may be materially adversely affected by the ongoing and evolving COVID-19 pandemic.

Our business, operations and financial performance could be adversely affected by the effects of the ongoing and evolving COVID-19 pandemic, and such effects could be material; however, as of June 30, 2021, we have not seen a significant adverse impact to our financial position, results of operations, cash flows and liquidity as a result of the COVID-19 pandemic. The COVID-19 pandemic resulted in travel and other restrictions in order to reduce the spread of the disease, including state and local orders across the United States and in countries in which we operate that, among other things, directed individuals to follow social distancing guidelines and or to shelter at their places of residence, directed businesses and governmental agencies to cease non-essential operations at physical locations, prohibited certain non-essential gatherings and events and ordered cessation of non-essential travel. In response to public health directives and orders, we implemented work-from-home policies for our global workforce, including at our headquarters in Columbia, Maryland. As these restrictions have eased, we have begun to resume some activities, including limited business travel, and implemented hybrid work environments that permit in-person work at the option of the employee at certain of our global office locations, including at our headquarters. Re-opening our offices could expose our employees to health risks, and us to associated liability. We expect many employees to continue to work remotely or a hybrid of in-person and remote work, which presents risks, uncertainties and costs that could affect our performance, including operational and workplace culture challenges, uncertainty regarding office space needs and heightened vulnerability to cyber attacks.

Further developments in the COVID-19 pandemic could result in changes to our remote and hybrid work policies, and additional quarantines, shelter-in-place or similar government orders, shutdowns or other restrictions on the conduct of business operations which may adversely affect our business and our ability to generate sales of, and revenues from, our platform offerings. For example, since the onset of the COVID-19 pandemic substantially all of our field sales and other professional services were conducted remotely. As health and safety restrictions have eased, we have begun to permit in-person field sales and professional services activity in limited circumstances, and while we did not see a significant adverse impact from remote operations in our ability to attract, retain or upsell customers, we anticipate that our revenue growth could be adversely impacted by developments in the COVID-19 pandemic that negatively impact global economic conditions, including, for example, as a result of the tightening of health and safety restrictions in the United States or globally.

We also do not yet know the full effects of the ongoing COVID-19 pandemic on our partners, customers and service providers. Health concerns and political or governmental developments in response to COVID-19 could create or contribute to economic, social or labor instability or prolonged contractions in the industries in which our customers or partners operate. As a result, existing and potential customers have and may continue to choose to reduce or delay technology spending in response to the COVID-19 pandemic, or may attempt to renegotiate contracts and obtain concessions, which could materially and negatively impact our operating results, financial condition and prospects. Because our platform offerings are primarily sold on a subscription basis, any such adverse effects may not be fully reflected in our operating results until future periods, and such effects may be offset by temporary decreases in our expenses related to restrictions on the conduct of our business. We expect to incur additional costs as we resume business-related travel and return to the office, the timing and extent of which remains subject to ongoing developments in the COVID-19 pandemic.

The COVID-19 pandemic continues to rapidly evolve. The full extent to which the COVID-19 pandemic impacts our business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence at the time of this Form 10-Q, such as the duration of the outbreak, the duration and effect of business disruptions, the ongoing effectiveness and widespread adoption of vaccines, both domestically and globally, the duration and ultimate effectiveness of the travel restrictions, quarantines, social distancing requirements and business closures in the United States and other countries to contain and treat the disease, and the impact of new variants or mutations of the coronavirus, such as the Delta variant. Accordingly, we do not yet know the full extent of potential impacts on our business and operations, or those of our partners and customers, or the global economy as a whole. Weak global economic conditions also may exacerbate the ongoing impact of the pandemic.

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In addition, to the extent the ongoing COVID-19 pandemic adversely affects our business and results of operations, it may also have the effect of heightening many of the other risks and uncertainties described in this “Risk Factors” section.

We have a history of losses and may not achieve or maintain profitability in the future.

We have historically incurred net losses, including net losses of ~~$37.2 million, $41.0~~$19.4 million and ~~$33.0~~$34.9 millionin ~~2016, 2017 and~~ the six months ended June 30, ~~2018,~~2021 and 2020, respectively. As of June 30, ~~2018,~~2021, we had an accumulated deficit of ~~$425.6~~$627.2 million. Because the market for our offerings is highly competitive and rapidly evolving and these solutions have not yet reached widespread adoption, it is difficult for us to predict our future results of operations. Further, we do not yet know the full effects of the COVID-19 pandemic, which increases the difficulty in predicting future results of operations.

While we have experienced significant revenue growth in recent periods, we are not certain whether or when we will obtain a high enough volume of sales of our offerings to sustain or increase our growth or achieve or maintain profitability in the future. We also expect our costs to increase in future periods, which could negatively affect our future operating results if our revenue does not increase at a greater rate. In particular, we expect to continue to expend substantial financial and other resources on:

•public cloud infrastructure and computing costs;

•research and development related to our offerings, including investments in our research and development team;

•sales and marketing, including a significant expansion of our sales organization, both domestically and internationally;

•continued international expansion of our business; and

•general and administrative expense, including legal and accounting expenses related to being a public company.

These investments may not result in increased revenue or growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations will be harmed and we may not be able to achieve or maintain profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our financial performance may be harmed, and we may not achieve or maintain profitability in the future.

We face intense competition. If we do not continue to innovate and offer solutions that address the dynamic cybersecurity landscape, we may not remain competitive.

The market for cybersecurity solutions is fragmented, intensely competitive and constantly evolving. We compete with a range of established and emerging cybersecurity software and services vendors, as well as homegrown solutions. Our competitors include: vulnerability management and assessment vendors, including Qualys and Rapid7; diversified security software and services vendors; endpoint security vendors with nascent vulnerability assessment capabilities, including Tanium and CrowdStrike; and providers of point solutions that compete with some of the features present in our solutions. We also compete against internally-developed efforts that often use open source solutions.

Some of our actual and potential competitors have significant advantages over us, such as longer operating histories, significantly greater financial, technical, marketing or other resources, stronger brand and business user recognition, larger intellectual property portfolios, government certifications and broader global distribution and presence. In addition, our industry is evolving rapidly and is becoming increasingly competitive. Companies that are larger and more established than us are focusing on cybersecurity and could directly compete with us. For example, in 2019 Microsoft introduced a vulnerability management offering as part of their existing endpoint security platform. Smaller companies could also launch new products and services that we do not offer and that could gain market acceptance quickly.

In addition, some of our larger competitors have substantially broader product offerings and can bundle competing products and services with other software offerings which customers may choose even if individual products have more limited functionality than our solutions. These competitors may also offer their products at a lower price, which could increase pricing pressure on our offerings and cause the average sales price for our offerings to decline. These larger competitors are also often better positioned to withstand any significant reduction in capital spending, and will therefore not be as susceptible to economic downturns. One component of our enterprise platform involves assessing cyber exposure in a public cloud environment. We are dependent upon the providers to allow our solutions to access their cloud

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offerings. If one or more cloud providers elected to offer exclusively their own cloud security product or otherwise eliminate the ability of our solutions to access their cloud on behalf of our customers, our business and financial results could be harmed.

Additionally, the cybersecurity market is characterized by very rapid technological advances, changes in customer requirements, frequent new product introductions and enhancements and evolving industry standards. Our success depends on continued innovation to provide features that make our solutions responsive to the cybersecurity landscape, including the shift to employees working from home during the COVID-19 pandemic. Developing new solutions and product enhancements is uncertain, expensive and time-consuming, and there is no assurance that such activities will result in significant cost savings, revenue or other expected benefits. If we spend significant time and effort on research and development and are unable to generate an adequate return on our investment, our business and results of operations may be materially and adversely affected. Further, we may not be able to successfully anticipate or adapt to changing technology or customer requirements or the dynamic threat landscape on a timely basis, or at all, which would impair our ability to execute on our business strategy. Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements or new or evolving attacks by, or indicators of compromise that identify, cyber bad actors.

Furthermore, our current and potential competitors may establish cooperative relationships among themselves or with third parties that may further enhance their resources and products and services offerings in the markets we address. In addition, current or potential competitors may be acquired by third parties with greater available resources, which may enable them to adapt more quickly to new technologies and customer needs, devote greater resources to the promotion or sale of their products and services, initiate or withstand substantial price competition, take advantage of other opportunities more readily or develop and expand their product and service offerings more quickly than we do. For all of these reasons, we may not be able to compete successfully against our current or future competitors.

We may not be able to sustain our revenue growth rate in the future.

From 2016 to 2017, our revenue grew from $124.4 million to $187.7 million, representing year-over-year growth of 51%. Our adoption of ASC 606 as of January 1, 2017 contributed three percentage points to that growth rate. From the six months ended June 30, ~~2017~~2020 to the six months ended June 30, ~~2018,~~2021, our revenue grew from ~~$84.6~~$209.9 million to ~~$122.7 million.~~$253.4 million, representing year over year growth of 21%. This growth was primarily from an increase in subscription revenue. Although we have experienced rapid growth historically and currently have high customer renewal rates, we may not continue to grow as rapidly in the future due to a decline in our renewal rates, failure to attract new customers or other factors. Any success that we may experience in the future will depend in large part on our ability to, among other things:

•maintain and expand our customer base;

•increase revenue from existing customers through increased or broader use of our offerings within their organizations;

•improve the performance and capabilities of our offerings through research and development;

•continue to develop and expand our enterprise platform;

•maintain the rate at which customers purchase and renew subscriptions to our enterprise platform offerings;

•continue to successfully expand our business domestically and internationally; and

•successfully compete with other companies.

If we are unable to maintain consistent revenue or revenue growth, including as a result of the COVID-19 pandemic, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. You should not rely on our revenue for any prior quarterly or annual periods as any indication of our future revenue or revenue growth.

We may be unable to rapidly and efficiently adjust our cost structure in response to significant revenue declines, which could adversely affect our operating results.

We recognize substantially all of our revenue ratably over the term of our subscriptions and, to a lesser extent, perpetual licenses ratably over an expected period of benefit and, as a result, downturns in sales may not be immediately reflected in our operating results.

We recognize substantially all of our revenue ratably over the terms of our subscriptions with customers, which generally occurs over a one-year period and, for our perpetual licenses, over a five-year expected period of benefit. As a

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result, a substantial portion of the revenue that we report in each period will be derived from the recognition of deferred revenue relating to agreements entered into during previous periods. Consequently, a decline in new sales or renewals in any one period, including as a result of the COVID-19 pandemic, may not be immediately reflected in our revenue results for that period. This decline, however, ~~will~~would negatively affect our revenue in future periods. Accordingly, the effect of significant downturns in sales and market acceptance of our solutions and potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods. This also makes it difficult for us to rapidly increase our revenue growth through additional sales in any period, as revenue from new customers generally will be recognized over the term of the applicable agreement.

We may not be able to scale our business quickly enough to meet our customers’ growing needs.

As usage of our enterprise platform grows, and as customers expand in size or expand the number of IT assets or IP addresses under their subscriptions, we may need to devote additional resources to improving our technology architecture, integrating with third-party systems and maintaining infrastructure performance. In addition, we will need to appropriately scale our sales and marketing headcount, as well as grow our third-party channel partner network, to serve our growing customer base. If we are unable to scale our business appropriately, it could reduce the attractiveness of our solutions to customers, resulting in decreased sales to new customers, lower renewal rates by existing customers or the issuance of service credits or requested refunds, each of which could hurt our revenue growth and our reputation. Even if we are able to upgrade our systems and expand our personnel, any such expansion will be expensive and complex, requiring management time and attention. We could also face inefficiencies or operational failures as a result of our efforts to scale our infrastructure. Moreover, there are inherent risks associated with upgrading, improving and expanding our information technology systems. We cannot be sure that the expansion and improvements to our infrastructure and systems will be fully or effectively implemented on a timely basis, if at all. These efforts may reduce revenue and our margins and adversely impact our financial results.

If our enterprise platform offerings do not interoperate with our customers’ network and security infrastructure, including remote devices, or with third-party products, websites or services, our results of operations may be harmed.

Our enterprise platform offerings, Tenable.io, Tenable.sc and ~~SecurityCenter,~~Tenable.ot, must interoperate with our customers’ existing network and security ~~infrastructure.~~infrastructure, including remote devices. These complex systems are developed, delivered and maintained by the customer, their employees and a myriad of vendors and service providers. As a result, the components of our customers’ infrastructure, including remote devices, have different specifications, rapidly evolve, utilize multiple protocol standards, include multiple versions and generations of products and may be highly customized. We must be able to interoperate and provide our security offerings to customers with highly complex and customized networks, including remote devices, which requires careful planning and execution between our customers, our customer support teams and our channel partners. Further, when new or updated elements of our customers’ infrastructure, new usage trends, such as remote work during the COVID-19 pandemic, or new industry standards or protocols ~~such as HTTP/2,~~ are introduced, we may have to update or enhance our cloud platform and our other solutions to allow us to continue to provide service to customers. Our competitors or other vendors may refuse to work with us to allow their products to interoperate with our solutions, which could make it difficult for our cloud platform to function properly in customer networks that include these third-party products.

We may not deliver or maintain interoperability quickly or cost-effectively, or at all. These efforts require capital investment and engineering resources. If we fail to maintain compatibility of our cloud platform and our other solutions with our customers’ network and security infrastructures, including for remote devices, our customers may not be able to fully utilize our solutions, and we may, among other consequences, lose or fail to increase our market share and experience reduced demand for our services, which would materially harm our business, operating results and financial condition.

Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable and accurate performance of our solutions, infrastructure and third-party suppliers. If we experience performance problems as a result of security breaches of our systems or otherwise, or if our solutions fail to detect vulnerabilities or incorrectly detect vulnerabilities, or if they contain undetected errors or defects, or if we

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or our third party service providers experience a security breach or unauthorized parties otherwise obtain access to our customers' data or systems, our brand and reputation could be harmed.

IfWe have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, deliberate or unintentional human or software errors, capacity constraints and fraud or cybersecurity attacks. Any disruptions or other performance problems with our solutions could harm our reputation and business and may damage our customers’ businesses, including by interrupting their networking traffic or operational technology environments. Interruptions in our service delivery might reduce our revenue, cause us to issue credits to customers, subject us to potential liability and cause customers to not renew their purchases of our solutions.

In addition, if our solutions fail to detect vulnerabilities in our customers’ cybersecurity infrastructure, including for remote devices, or if our solutions fail to identify to new and increasingly complex methods of cyberattacks, our business and reputation may suffer. There is no guarantee that our solutions will detect all vulnerabilities, especially in light of the rapidly changing security landscape to which we must ~~respond.~~respond, including as a result of the increased remote work environment during the COVID-19 pandemic. Additionally, our solutions may falsely detect vulnerabilities or threats that do not actually exist. For example, our solutions rely on information provided by an active community of users who contribute new exploits, attacks and vulnerabilities. If the information from these third parties is inaccurate, the potential for false indications of security vulnerabilities increases. These false positives, while typical in the industry, may impair the perceived reliability of our offerings and ~~may therefore~~ adversely impact market acceptance of our products and could result in negative publicity, loss of customers and sales and increased costs to remedy any problem.

~~Our solutions may also contain undetected errors or defects when first introduced or as new versions are released.~~ We have experienced ~~these~~ errors or defects in the past in connection with the release of new solutions and product upgrades, and we expect that these errors or defects will be found from time to time in the future in new or enhanced solutions after commercial release. In addition, we use third parties to assist in the development of our products and these third parties could be a source of errors or defects. Defects may cause our solutions to be vulnerable to attacks, cause them to fail to detect vulnerabilities, or temporarily interrupt customers’ networking ~~traffic. Any errors, defects, disruptions in service~~traffic or ~~other performance problems with our solutions~~operational technology environments, any of which may damage our customers’ business and could hurt our reputation. If our solutions or fail to detect vulnerabilities for any reason, we may incur significant costs, the attention of our key personnel could be diverted, our customers may delay or withhold payment to us or elect not to renew or other significant customer relations problems may arise. We may also be subject to liability claims for damages related to errors or defects in our solutions. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our solutions may harm our business and operating results.

Computer malware, viruses, social engineering (phishing attacks), threats from insiders, and increasingly, threats from bad actors and advanced new attacks against information systems increase risk of cybersecurity incidents. These incidents can include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, corrupting data or causing operational disruption. Because the techniques used to obtain unauthorized access, insert malicious code or other otherwise sabotage systems change frequently and may not immediately produce signs of intrusion, we may be unable to implement adequate preventative measures or timely discover these intrusions. An actual or perceived security breach or theft of the sensitive data of ours, one of our customers or partners, regardless of whether the breach is attributable to the failure of our solutions or employee error, could adversely affect the market’s perception of our brand and our offerings and subject us to legal claims.

We sell cybersecurity products and, as a result, may be at increased risk of being a target of cyber attacks designed to penetrate our platform or internal systems or to otherwise impede the performance of our products. We may be required to expend additional, significant resources, fundamentally change our business activities or practices, or modify our operations or information technology in an effort to protect against security breaches. Additionally, applicable data protection requirements may require us to implement specific security measures or use new or different industry-standard measures designed to protect against security breaches. Data protection requirements may also require us to notify relevant stakeholders of security breaches, including affected individuals, partners, collaborators, customers, regulators, law enforcement agencies and others. Such disclosures are costly, and the disclosures or failure to comply with such requirements could lead to adverse impacts, including reputational harm or fines and penalties. There can be no assurance that any limitations or exclusions of liabilities in our contracts would be enforceable or adequate or would

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otherwise protect us from liabilities or damages if we fail to comply with data protection requirements related to information security or security breaches. We cannot be sure that our insurance coverage, if any, will be adequate or otherwise protect us from or adequately mitigate liabilities or damages with respect to claims, costs, expenses, litigation, fines, penalties, business loss, data loss, regulatory actions or other impacts arising out of security breaches.

Our future quarterly results of operations are likely to fluctuate significantly due to a wide range of factors, which makes our future results difficult to predict.

Our revenue and results of operations have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control, including:

•the potential impact of the COVID-19 pandemic on our business and that of our partners and customers;

•the level of demand for our enterprise platform;

•the introduction of new products and product enhancements by existing competitors or new entrants into our market, and changes in pricing for solutions offered by us or our competitors;

•the rate of renewal of subscriptions, and extent of expansion of IT assets under such subscriptions, with existing customers;

•the mix of customers licensing our products on a subscription basis as compared to a perpetual license;

•large customers failing to renew their subscriptions;

•the size, timing and terms of our subscription agreements with new customers;

•our ability to interoperate our solutions with our customers’ network and security ~~infrastructure;~~infrastructure, including remote devices;

•the timing and growth of our business, in particular through our hiring of new employees and international expansion;

•network outages, security breaches, technical difficulties or interruptions with our ~~solutions;~~solutions (including security breaches by our service providers or vendors);

•changes in the growth rate of the markets in which we compete;

•the length of the license term, amount prepaid and other material terms of subscriptions to our solutions sold during a period;

•customers delaying purchasing decisions in anticipation of new developments or enhancements by us or our competitors or otherwise;

•changes in customers’ budgets;

•seasonal variations related to sales and marketing and other activities, such as expenses related to our customers;

•our ability to increase, retain and incentivize the channel partners that market and sell our solutions;

•our ability to integrate our solutions with our ecosystem partners’ technology;

•our ability to integrate any future acquisitions of businesses;

•our brand and reputation;

•the timing of our adoption of new or revised accounting pronouncements applicable to public companies and the impact on our results of operations;

•our ability to control costs, including our operating ~~expenses;~~expenses, such as third-party cloud infrastructure costs and facilities costs;

•our ability to hire, train and maintain our direct sales force;

•unforeseen litigation and intellectual property infringement;

•fluctuations in our effective tax rate; ~~and~~

•general economic and political conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers ~~operate.~~operate; and

•other events or factors, including those resulting from pandemics, war, incidents of terrorism or responses to these events.

Any one of these or other factors discussed elsewhere in this Quarterly Report on Form 10-Q, or the cumulative effect of some of these factors, may result in fluctuations in our revenue and operating results, meaning that quarter-to-quarter comparisons of our revenue, results of operations and cash flows may not necessarily be indicative of our future performance and may cause us to miss our guidance and analyst expectations and may cause our stock price to decline.

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In addition, we have historically experienced seasonality in entering into agreements with customers. We typically enter into a significantly higher percentage of agreements with new customers, as well as renewal agreements with existing customers, in the third and fourth quarters. The increase in customer agreements in the third quarter is primarily attributable to U.S. government and related agencies, and the increase in the fourth quarter is primarily attributable to large enterprise account buying patterns typical in the software industry. We expect that seasonality will continue to affect our operating results in the future and may reduce our ability to predict cash flow and optimize the timing of our operating expenses.

~~We face intense competition.~~

The market for cybersecurity solutions is fragmented, intensely competitive and constantly evolving. We compete with a range of established and emerging cybersecurity software and services vendors, as well as homegrown solutions. With the introduction of new technologies and market entrants, we expect the competitive environment to remain intense going forward. Our competitors include: vulnerability management and assessment vendors, including Qualys and Rapid7; diversified security software and services vendors, including IBM; endpoint security vendors with nascent vulnerability assessment capabilities, including Tanium and CrowdStrike; and providers of point solutions that compete with some of the features present in our solutions. We also compete against internally-developed efforts that often use open source solutions.

is evolving rapidly and is becoming increasingly competitive. Larger and more established companies may focus on cybersecurity and could directly compete with us. Smaller companies could also launch new products and services that we do not offer and that could gain market acceptance quickly.

Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. With the introduction of new technologies, the evolution of our offerings and new market entrants, we expect competition to intensify in the future. In addition, some of our larger competitors have substantially broader product offerings and can bundle competing products and services with other software offerings. As a result, customers may choose a bundled product offering from our competitors, even if individual products have more limited functionality than our solutions. These competitors may also offer their products at a lower price as part of this larger sale, which could increase pricing pressure on our offerings and cause the average sales price for our offerings to decline. These larger competitors are also often in a better position to withstand any significant reduction in capital spending, and will therefore not be as susceptible to economic downturns. One component of our enterprise platform involves assessing Cyber Exposure in a public cloud environment. We are dependent upon the public cloud providers to allow our solutions to access their cloud offerings. If one or more cloud providers elected to offer exclusively their own cloud security product or otherwise eliminate the ability of our solutions to access their cloud on behalf of our customers, our business and financial results could be harmed.

Furthermore, our current and potential competitors may establish cooperative relationships among themselves or with third parties that may further enhance their resources and products and services offerings in the markets we address. In addition, current or potential competitors may be acquired by third parties with greater available resources. As a result of such relationships and acquisitions, our current or potential competitors might be able to adapt more quickly to new technologies and customer needs, devote greater resources to the promotion or sale of their products and services, initiate or withstand substantial price competition, take advantage of other opportunities more readily or develop and expand their product and service offerings more quickly than we do. For all of these reasons, we may not be able to compete successfully against our current or future competitors.

~~If we do not continue to innovate and offer solutions that address the dynamic cybersecurity landscape, we may not remain competitive.~~

The cybersecurity market is characterized by very rapid technological advances, changes in customer requirements, frequent new product introductions and enhancements and evolving industry standards. Our success also depends on continued innovation to provide features that make our solutions responsive to the cybersecurity landscape. While we continue to invest significant resources in research and development in order to ensure that our solutions continue to address the cyber security risks that our customers face, the introduction of solutions and services embodying new technologies could render our existing solutions or services obsolete or less attractive to customers. In addition, developing new solutions and product enhancements is expensive and time-consuming, and there is no assurance that such activities will result in significant cost savings, revenue or other expected benefits. For example, we plan to release a new product, Tenable.io Lumin, and there can be no assurance that product will offer the benefits we expect or generate customer interest. We may also face delays or uncertainty in our release timing for Tenable.io Lumin that may be costly or reduce the benefits of Lumin. If we spend significant time and effort on research and development and are unable to generate an adequate return on our investment, our business and results of operations may be materially and adversely affected. Further, we may not be able to successfully anticipate or adapt to changing technology or customer requirements or the dynamic threat landscape on a timely basis, or at all, which would impair our ability to execute on our business strategy.

Our business and results of operations depend substantially on our customers renewing their subscriptions with us and expanding the number of IT assets or IP addresses under their subscriptions. Any decline in our customer renewals, terminations or failure to convince our customers to expand their use of subscription offerings would harm our business, results of operations, and financial condition.

Our subscription offerings are term-based and a majority of our subscription contracts ~~entered into in 2017 and 2018 were~~are for one year in duration. In order for us to maintain or improve our results of operations, it is important that a high percentage of our customers renew their subscriptions with us when the existing subscription term expires, and renew on the same or more favorable terms. Our customers have no obligation to renew their subscriptions, and we may not be able to accurately predict customer renewal rates. In addition, the growth of our business depends in part on our customers expanding their use of subscription offerings and related services. Historically, some of our customers have elected not to renew their subscriptions with us for a variety of reasons, including as a result of changes in their strategic IT priorities, budgets, costs and, in some instances, due to competing solutions. Our

retention rate may also decline or fluctuate if our existing customers choose to reduce or delay technology spending in response to economic conditions resulting from the ongoing COVID-19 pandemic, as well as a result of a number of other factors, including our customers’ satisfaction or dissatisfaction with our software, the increase in the contract value of subscription and support contracts from new customers, the effectiveness of our customer support services, our pricing, the prices of competing products or services, mergers and acquisitions affecting our customer base, global economic conditions, and the other risk factors described in this Quarterly Report on Form 10-Q. Additionally, many of our customers, including certain top customers, have the right to terminate their agreements with us for convenience and for other reasons. We cannot assure you that customers will maintain their agreements with us, renew subscriptions or increase their usage of our software. If our customers do not maintain or renew their subscriptions or renew on less favorable terms, or if we are unable to expand our customers’ use of our software, our business, results of operations, and financial condition may be harmed.

In addition, while customers are typically invoiced in advance, including multi-year contracts, and our contracts generally do not provide for refunds during the subscription or maintenance period, a small number of customers could take the position that provisions in their customer agreements give them the right to terminate their agreement with us, or allege a material breach of their agreement with us, due to or in connection with the sale of our common stock. Early termination of these customer agreements for these reasons would generally only allow us to retain fees already paid by the customer for services rendered prior to the termination. Termination of these agreements, or allegations that we have breached one of these agreements with them, could decrease our customer revenue and increase legal and administrative costs.

~~Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable performance of our solutions and network infrastructure.~~

We have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints and fraud or cybersecurity attacks. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.

Prolonged delays or unforeseen difficulties in connection with adding capacity or upgrading our network architecture when required may cause our service quality to suffer. Problems with the reliability or security of our systems could harm our reputation. Damage to our reputation and the cost of remedying these problems could negatively affect our business, financial condition, and operating results.

Any disruptions or other performance problems with our solutions could harm our reputation and business and may damage our customers’ businesses. Interruptions in our service delivery might reduce our revenue, cause us to issue credits to customers, subject us to potential liability and cause customers to not renew their purchases of our solutions.

We must maintain and enhance our brand.

We believe that developing and maintaining widespread awareness of our brand in a cost-effective manner is critical to achieving widespread acceptance of our enterprise platform and attracting new customers. Brand promotion activities may not generate customer awareness or increase revenue and, even if they do, any increase in revenue may not offset the expenses we incur in building our brand. If we fail to successfully promote and maintain our brand, or incur substantial expenses, we may fail to attract or retain customers necessary to realize a sufficient return on our brand-building efforts, or to achieve the widespread brand awareness that is critical for broad customer adoption of our solutions.

We rely on third parties to maintain and operate certain elements of our network infrastructure.

We utilize data centers located in North America, Europe and Asia to operate and maintain certain elements of our own network infrastructure. Some elements of this complex system are operated by third parties that we do not control and that could require significant time to replace. We expect this dependence on third parties to continue. For example, Tenable.io is hosted on Amazon Web Services, or AWS, which provides us with computing and storage capacity. Interruptions in our systems or the third-party systems on which we rely, particularly AWS, whether due to system failures, computer viruses, physical or electronic break-ins or other factors, could affect the security or availability of our solutions, network infrastructure and website.

Our existing data center facilities and third-party hosting providers have no obligations to renew their agreements with us on commercially reasonable terms or at all, and certain of the agreements governing these relationships may be terminated by either party with notice or access to hosting services may be restricted by the provider at any time, with no or limited notice. For example, our agreement with AWS allows AWS to terminate the agreement with ~~30 days’~~two years' written

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notice and allows AWS, under certain circumstances, to temporarily restrict access to hosting services provided by AWS without prior notice. Although we expect that we could receive similar services from other third parties, if any of our arrangements with third parties, including AWS, are terminated, we could experience interruptions on our platform and in our ability to make our platform available to customers, as well as downtime, delays and additional expenses in arranging alternative cloud infrastructure services.

It is possible that our customers and potential customers would hold us accountable for any breach of security affecting third parties’ infrastructure. We may incur significant liability from those customers and from third parties with respect to any such breach. Because our agreement with AWS limits their liability for damages, we may not be able to recover a material portion of our liabilities to our customers and third parties from AWS in the event of any breach affecting AWS systems.

~~If we continue to grow, we may not be able to manage our growth effectively.~~

We have recently experienced a period of rapid growth in our headcount and operations. In particular, we grew from 751 employees as of December 31, 2016 to 984 employees as of December 31, 2017 and to 1,152 employees as of June 30, 2018. We have also significantly increased the size of our customer base over the last several years. We anticipate that we will continue to significantly expand our operations and headcount in the near term. Our growth has placed, and future growth will place, a significant strain on our management, administrative, operational and financial infrastructure. Our success will depend in part on our ability to manage this growth effectively. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. Failure to effectively manage our growth could result in difficulty or delays in deploying our solutions and services to customers, declines in quality or customer satisfaction, increases in costs, difficulties in introducing new features or other operational difficulties. Any of these difficulties could adversely impact our business performance and results of operations.

Our rapid growth also makes it difficult to evaluate our future prospects. Our ability to forecast our future operating results is subject to a number of uncertainties, including our ability to plan for and model future growth. If our assumptions regarding these uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, our business could suffer and the trading price of our stock may decline.

Organizations may be reluctant to purchase our enterprise platform offerings that are cloud-based due to the actual or perceived vulnerability of cloud solutions.

Some organizations, including those in the defense industry and highly regulated industries such as healthcare and financial services, have historically been reluctant to use cloud-based solutions for cybersecurity because they have concerns regarding the risks associated with the reliability or security of the technology delivery model associated with these solutions. If we or other software companies with cloud-based offerings experience security incidents, breaches of customer data, disruptions in service delivery or other problems, the market for cloud-based solutions as a whole may be negatively impacted, which in turn would negatively impact our revenue and our growth prospects.

Our sales cycle is long and unpredictable.

The timing of sales of our offerings is difficult to forecast because of the length and unpredictability of our sales cycle, particularly with large enterprises and with respect to certain of our solutions. We sell our solutions primarily to IT departments that are managing a growing set of user and compliance demands, which has increased the complexity of customer requirements to be met and confirmed during the sales cycle and prolonged our sales cycle. Our average sales cycle with an enterprise customer is approximately four ~~months.~~months, and to the extent we continue to enter into larger deals, our average sales cycle is likely to increase. Further, the length of time that potential customers devote to their testing and evaluation, contract negotiation and budgeting processes varies significantly, depending on the size of the organization and nature of the product or service under consideration. The COVID-19 pandemic has also impacted the budgets and purchasing decisions and processes of certain of our customers and prospective customers, some of whom have added additional controls on expenditures and require additional internal approvals of expenditures, even if relatively small in dollar amount, all of which could lengthen our sales cycle. In addition, we might devote substantial time and effort to a particular unsuccessful sales effort, and as a result, we could lose other sales opportunities or incur expenses that are not offset by an increase in revenue, which could harm our business.

We are subject to stringent and changing privacy and data security laws, as well as contractual obligations, self-regulatory schemes, government regulation, and standards related to data privacy and security. Compliance with, or the failure or perceived failure to comply with such obligations, could adversely affect our ability to conduct our business.

We, along with a significant number of our customers, vendors and other third parties upon whom we rely are subject to laws, rules, regulations, and industry standards related to data privacy and cyber security, and restrictions or technological requirements regarding the collection, use, storage, protection, retention or transfer of data. For example, the General Data Protection Regulation, or GDPR, came into force in May 2018. The GDPR contains numerous requirements and changes from prior European Union, or EU, law, including more robust obligations on data processors and data controllers, greater rights for data subjects, and heavier documentation requirements for data protection compliance programs. Specifically, the GDPR introduced numerous privacy-related changes for companies operating in the EU, including greater control over personal data by data subjects, such as the “right to be forgotten", increased data portability for EU consumers, data breach notification requirements, and increased fines. In particular, under the GDPR, fines of up to €20 million or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain of the GDPR’s requirements. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information. Post-Brexit, the UK also issued its own similar version of the GDPR. We have an internal data privacy function that

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oversees and supervises our compliance with European and UK data protection regulations but, despite our efforts, we may fail, or be perceived to have failed, to comply. Further, local data protection authorities may have different interpretations of the GDPR, leading to potential inconsistencies amongst various EU states.

In the United States and globally, governments and agencies have adopted, and could in the future adopt, modify, apply or enforce laws, policies, regulations, and standards covering data subject privacy, data security, technologies such as cookies that are used to collect, store and/or process data, marketing online, the use of data to inform marketing, the taxation of products and services, unfair and deceptive practices and the collection, including the collection of information, use, processing, transfer, storage and/or disclosure of data associated with unique individual internet users. We may be subject directly or via contract to such laws, policies, regulations, and standards. New regulation or legislative actions regarding data privacy and security, together with applicable industry standards, may increase the costs of doing business and could have a material adverse impact on our operations and cash flows.

The GDPR generally restricts the transfer of personal data to countries outside of the European Economic Area, or EEA, that the EU does not deem to have adequate data protection legislation (such as the United States) without the use of an appropriate transfer mechanism. While we have taken steps to lawfully transfer personal data, such as implementing standard contractual clauses as appropriate, the efficacy and longevity of these mechanisms remains uncertain. For example, the European Court of Justice, or EJC, recently invalidated the use of the EU-US Privacy Shield, or the Privacy Shield, which had enabled the transfer of personal data from the European Union to the United States for companies like us that were self-certified under the Privacy Shield. The ECJ also called into question the use of the standard contractual clauses. As we are no longer able to rely on the Privacy Shield, if we are unable to implement a valid compliance mechanism for cross-border transfers of personal data, we may face increased exposure to regulatory actions, substantial fines and injunctions against processing or transferring personal data from the EEA. Recently, the European Commission adopted new standard contractual clauses under the GDPR for personal data transfers from the EEA to outside of the EEA, and the European Data Protection Board also issued guidelines for companies to identify and implement appropriate supplementary measures, if applicable, for transferring personal data of European Union data subjects across borders. In connection with these developments, we may have obligations to conduct transfer impact assessments for such cross-border data transfers and may need to implement additional security or other supplementary measures. If we elect to rely on the standard contractual clauses for data transfers, we may be required to expend significant time and resources to update our contractual arrangements and to comply with such obligations. Additionally, the new standard contractual clauses could be invalidated, which could require us to implement costly substitutions for the data transfers we undertake in order to perform our services or prevent such transfers entirely.

Additionally, the exit by the United Kingdom from the EU, or Brexit, took effect in January 2020, which will lead to further legislative and regulatory changes. The Data Protection Act of 2018, that “implements” and complements the GDPR achieved Royal Assent on May 23, 2018 and is now effective in the United Kingdom. With the expiration of the transition period on December 31, 2020, companies will have to comply with both the GDPR and the GDPR as incorporated into United Kingdom national law, which has the ability to separately fine up to the greater of £17.5 million or 4% of global turnover, which exposes us to further compliance risk. While the European Commission recently adopted an adequacy decision for the UK, meaning data may freely flow from the EU to the UK, the adequacy decision is subject to a “sunset clause”, which provides uncertainty on the ability to rely on the adequacy decision in the long-term. We may incur liabilities, expenses, costs, and other operational losses under GDPR and applicable EU Member States and the United Kingdom privacy laws in connection with any measures we take to comply with them.

Similarly, there are a number of new state consumer data privacy laws as well as federal and state level legislative proposals in the United States that could impose new obligations on us. For example, the California Consumer Privacy Act, or the CCPA, went into effect on January 1, 2020 and creates new individual privacy rights for consumers and places increased privacy and security obligations on entities handling the personal data of consumers or households. The CCPA requires covered businesses to provide new disclosures to California consumers, which could include our employees residing in California based on the broad definitions in the law, to provide such consumers new ways to opt out of certain sales of personal information and to allow for new causes of action for data breaches. In addition, some countries are considering or have passed legislation implementing more onerous data protection requirements or requiring local storage and processing of data or other requirements that could increase the cost and complexity of delivering our services.

Further, California voters approved a new privacy law, the California Privacy Rights Act, or CPRA, in November 2020. Effective on January 1, 2023, the CPRA will significantly modify the CCPA, including by expanding consumers’ rights with

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respect to certain sensitive personal information. The CPRA also creates a new state agency that will be vested with authority to implement and enforce the CCPA and the CPRA. New legislation proposed or enacted in various other states will continue to shape the data privacy environment nationally. Certain state laws may be more stringent or broader in scope, or offer greater individual rights, with respect to confidential, sensitive and personal information than federal, international or other state laws, and such laws may differ from each other, which may complicate compliance efforts. For example, Virginia recently passed its Consumer Data Protection Act and Colorado recently passed the Colorado Privacy Act, both of which differ from the CPRA and go into effect on January 1, 2023 and July 1, 2023 respectively.

We are also subject to the terms of our external and internal privacy and security policies, representations, certifications, standards, publications and frameworks, and contractual obligations to third parties related to privacy, information and security including, without limitation, operating rules and standards imposed by industry organizations.

If we fail, or are perceived to have failed, to address or comply with applicable data protection laws, privacy policies and data protection obligations, or if our privacy policies are, in whole or part, found to be inaccurate, incomplete deceptive, unfair or misrepresentative of our actual practices, it could: result in fines and other penalties; result in reputational harm; lead to a loss of customers; reduce the use of our products; result in litigation and liability; result in an inability to process personal data or operate in certain jurisdictions; cause a material adverse impact to our business operations or financial results or otherwise harm our business. Moreover, any such investigation or charges by applicable data protection authorities could have a negative effect on our existing business and on our ability to attract and retain new customers, even if the investigation determines we have not committed any violations. Existing and proposed laws and regulations can be costly to comply with, can delay or impede the development or adoption of our products and services, reduce the overall demand for our services, result in negative publicity, increase our operating costs, require significant management time and attention and subject us to claims or other remedies, including fines or demands that we modify or cease existing business practices.

We rely on our third-party channel partner network of distributors and resellers to generate a substantial amount of our revenue.

Our success is dependent in part upon establishing and maintaining relationships with a variety of channel partners that we utilize to extend our geographic reach and market penetration. We use a two-tiered, indirect fulfillment model whereby we sell our products and services to our distributors, which in turn sell to our resellers, which then sell to our end users, which we call customers. We anticipate that we will continue to rely on this two-tiered sales model in order to help facilitate sales of our offerings as part of larger purchases in the United States and to grow our business internationally. In ~~2016, 2017 and~~ the six months ended June 30, ~~2017~~2021 and ~~2018,~~2020, we derived ~~80%, 83%, 81%~~92% and ~~87%~~91%, respectively, of our revenue from subscriptions and perpetual licenses sold through channel partners, and the percentage of revenue derived from channel partners may continue to increase in future periods. Ingram Micro, Inc., a distributor, accounted for ~~42%, 45% 42%~~40% and ~~46%~~43% of our revenue in ~~2016, 2017 and~~ the six months ended June 30, ~~2017~~2021 and ~~2018,~~2020, respectively, and ~~51%~~37% of our accounts receivable as of ~~each of December 31, 2016 and 2017 and 48% as of~~ June 30, ~~2018. At December 31, 2017, our channel partners accounted for over 20% of our new enterprise customer sales.~~2021. Our agreements with our channel partners, including our agreement with Ingram Micro, are non-exclusive and do not prohibit them from working with our competitors or offering competing solutions, and some of our channel partners may have more established relationships with our competitors. Similarly, our channel partners have no obligations to renew their agreements with us on commercially reasonable terms or at all, and certain of the agreements governing these relationships may be terminated by either party at any time, with no or limited notice. For example, our agreement with Ingram Micro allows Ingram Micro to terminate the agreement in their discretion upon 30 days’ written notice to us. If our channel partners choose to place greater emphasis on products of their own or those offered by our competitors or a result of an acquisition, competitive factors or other reasons do not continue to market and sell our solutions in an effective manner or at all, our ability to grow our business and sell our solutions, particularly in key international markets, may be adversely affected. In addition, our failure to recruit additional channel partners, or any reduction or delay in their sales of our solutions and professional services, including as a result of the COVID-19 pandemic, or conflicts between channel sales and our direct sales and marketing activities may harm our results of operations. Finally, even if we are successful, our relationships with channel partners may not result in greater customer usage of our solutions and professional services or increased revenue.

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A portion of our revenue is generated from subscriptions and perpetual licenses sold to domestic governmental entities, foreign governmental entities and other heavily regulated organizations, which are subject to a number of challenges and risks.

A portion of our revenue is generated from subscriptions and perpetual licenses sold to governmental entities in the United States. Additionally, many of our current and prospective customers, such as those in the financial services, energy, insurance and healthcare industries, are highly regulated and may be required to comply with more stringent regulations in connection with subscribing to and implementing our enterprise platform. Selling licenses to these entities can be highly competitive, expensive and time-consuming, often requiring significant upfront time and expense without any assurance that we will successfully complete a sale. Governmental demand and payment for our enterprise platform may also be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our enterprise platform. In addition, governmental entities have the authority to terminate contracts at any time for the convenience of the government, which creates risk regarding revenue anticipated under our existing government contracts.

Further, governmental and highly regulated entities often require contract terms that differ from our standard customer arrangements, including terms that can lead to those customers obtaining broader rights in our solutions than would be expected under a standard commercial contract and terms that can allow for early termination. The U.S. government will be able to terminate any of its contracts with us either for its convenience or if we default by failing to perform in accordance with the contract schedule and terms. Termination for convenience provisions would generally enable us to recover only our costs incurred or committed, settlement expenses, and profit on the work completed prior to termination. Termination for default provisions do not permit these recoveries and would make us liable for excess costs incurred by the U.S. government in procuring undelivered items from another source. Contracts with governmental and highly regulated entities may also include preferential pricing terms. In the United States, federal government agencies may promulgate regulations, and the President may issue executive orders, requiring federal contractors to adhere to different or additional requirements after a contract is signed. If we do not meet applicable requirements of law or contract, we could be subject to significant liability from our customers or regulators. Even if we do meet these requirements, the additional costs associated with providing our enterprise platform to government and highly regulated customers could harm our operating results. Moreover, changes in the underlying statutory and regulatory conditions that affect these types of customers could harm our ability to efficiently provide them access to

our enterprise platform and to grow or maintain our customer base. In addition, engaging in sales activities to foreign governments introduces additional compliance risks, including risks specific to anti-bribery regulations, including the U.S. Foreign Corrupt Practices Act of 1977, as amended, or the FCPA, the U.K. Bribery Act 2010 and other similar statutory requirements prohibiting bribery and corruption in the jurisdictions in which we operate. Further, in some jurisdictions we may be required to obtain government certifications, which may be costly to maintain and, if we lost such certifications in the future or if such certification requirements changed, would restrict our ability to sell to government entities until we have attained such certifications.

Some of our revenue is derived from contracts with U.S. government entities, as well as subcontracts with higher-tier contractors. As a result, we are subject to federal contracting regulations, including the Federal Acquisition Regulation, or the FAR. Under the FAR, certain types of contracts require pricing that is based on estimated direct and indirect costs, which are subject to change.

In connection with our U.S. government contracts, we may be subject to government audits and review of our policies, procedures, and internal controls for compliance with contract terms, procurement regulations, and applicable laws. In certain circumstances, if we do not comply with the terms of a contract or with regulations or statutes, we could be subject to contract termination or downward contract price adjustments or refund obligations, could be assessed civil or criminal penalties, or could be debarred or suspended from obtaining future government contracts for a specified period of time. Any such termination, adjustment, sanction, debarment or suspension could have an adverse effect on our business.

In the course of providing our solutions and professional services to governmental entities, our employees and those of our channel partners may be exposed to sensitive government information. Any failure by us or our channel partners to safeguard and maintain the confidentiality of such information could subject us to liability and reputational harm, which could materially and adversely affect our results of operations and financial performance.

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Our pricing model subjects us to various challenges that could make it difficult for us to derive expected value from our customers and we may need to reduce our prices or change our pricing model to remain competitive.

Subscriptions and perpetual licenses to our enterprise platform are generally priced based on the number of IP addresses ~~that can be monitored,~~ or ~~the~~ total IT assets that can be monitored. We expect that we may need to change our pricing from time to time. As competitors introduce new products that compete with ours or reduce their prices, we may be unable to attract new customers or retain existing customers based on our historical pricing. We also must determine the appropriate price to enable us to compete effectively internationally. Moreover, mid- to large-size enterprises may demand substantial price discounts as part of the negotiation of sales ~~contracts.~~contracts and, as the amount of IT assets or IP addresses within our customers' organization grows, we may face additional pressure from our customers regarding our pricing. As a result, we may be required or choose to reduce our prices or change our pricing model, which could adversely affect our business, revenue, operating ~~results~~margins and financial condition.

~~Our pricing model subjects us to various challenges that could make it difficult for us to derive expected value from~~Further, our ~~customers.~~

Our enterprise platform offerings are generally priced based on the number of IT assets or IP addresses that a customer chooses to monitor. As the amount of IT assets or IP addresses within our customers’ organizations grows, we may face pressure from our customers regarding our pricing, which could adversely affect our revenue and operating margins.

~~Our~~ subscription agreements and perpetual licenses generally provide that we can audit our customers’ use of our offerings to ensure compliance with the terms of such agreement or license and monitor an increase in IT assets and IP addresses being monitored. However, a customer may resist or refuse to allow us to audit their usage, in which case we may have to pursue legal recourse to enforce our rights under the agreement or license, which would require us to spend money, distract management and potentially adversely affect our relationship with our customers and users.

If our enterprise platform offerings do not achieve sufficient market acceptance, our results of operations and competitive position will suffer.

We spend substantial amounts of time and money to research and develop and enhance our enterprise platform offerings to meet our customers’ rapidly evolving demands. In addition, we invest in efforts to continue to add capabilities to our existing products and enable the continued detection of new network vulnerabilities. We typically incur expenses and expend resources upfront to market, promote and sell our new and enhanced offerings. Therefore, when we develop and introduce new or enhanced offerings, they must achieve high levels of market acceptance in order to justify the amount of our investment in developing and bringing them to market. For example, if ~~Tenable.io~~

Tenable Lumin does not garner widespread market adoption and implementation, our operating results and competitive position could suffer.

Further, we may make enhancements to our offerings that our customers do not like, find useful or agree with. We may also discontinue certain features, begin to charge for certain features that are currently free or increase fees for any of our features or usage of our offerings.

Our new offerings or enhancements and changes to our existing offerings could fail to attain sufficient market acceptance for many reasons, including:

•failure to predict market demand accurately, including changes in demand as a result of the COVID-19 pandemic, in terms of functionality and to supply offerings that meets this demand in a timely fashion;

•defects, errors or failures;

•negative publicity about their performance or effectiveness;

•delays in releasing our new offerings or enhancements to our existing offerings to the market;

•introduction or anticipated introduction of competing products by our competitors;

•poor business conditions for our customers, including as a result of the COVID-19 pandemic, causing them to delay or forgo IT purchases; and

•reluctance of customers to purchase cloud-based offerings.

If our new or enhanced offerings do not achieve adequate acceptance in the market, our competitive position will be impaired, and our revenue will be diminished. The adverse effect on our operating results may be particularly acute because of the significant research, development, marketing, sales and other expenses we will have incurred in connection with the new or enhanced offerings.

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Our strategy of offering and deploying our solutions in the cloud, on-premises environments or using a hybrid approach causes us to incur increased expenses and may pose challenges to our business.

We offer and sell our enterprise platform for use in the cloud, on-premises environments or using a hybrid approach using the customer’s own infrastructure. Our cloud offering enables our customers to eliminate the burden of provisioning and maintaining infrastructure and to scale their usage of our solutions quickly, while our on-premises offering allows for the customer’s complete control over data security and software infrastructure. Historically, our solutions were developed in the context of the on-premises offering, and we have less operating experience offering and selling subscriptions to our solutions via our cloud offering. Although a substantial majority of our revenue has historically been generated from customers using our solutions on an on-premises basis, our customers are increasingly adopting our cloud offering. We expect that our customers will continue to move to our cloud offering and that it will become more central to our distribution model. We expect our gross profit to increase in absolute dollars and our gross margin to decrease to the extent that revenue from our cloud-based subscriptions increases as a percentage of revenue, although our gross margin could fluctuate from period to period. To support both on-premises environments and cloud instances of our product, our support team must be trained on and learn multiple environments in which our solution is deployed, which is more expensive than supporting only a cloud offering. Moreover, we must engineer our software for an on-premises environment, cloud offering and hybrid installation, which we expect will cause us additional research and development expense that may impact our operating results. As more of our customers transition to the cloud, we may be subject to additional competitive pressures, which may harm our business. We are directing a significant portion of our financial and operating resources to implement a robust and secure cloud offering for our customers, but even if we continue to make these investments, we may be unsuccessful in growing or implementing our cloud offering in a way that competes successfully against our current and future competitors and our business, results of operations and financial condition could be harmed.

Our customers’ increased usage of our cloud-based offerings requires us to continually improve our computer network and infrastructure to avoid service interruptions or slower system performance.

As usage of our cloud-based offerings grows and as customers use them for more complicated applications, increased assets and with increased data requirements, we will need to devote additional resources to improving our platform architecture and our infrastructure in order to maintain the performance of our cloud offering. Any failure or delays in our computer systems could cause service interruptions or slower system performance. If sustained or repeated, these performance issues could reduce the attractiveness of our enterprise platform to customers. These performance issues could result in lost customer opportunities and lower renewal rates, any of which could hurt our revenue growth, customer loyalty and reputation.

A component of our growth strategy is dependent on our continued international expansion, which adds complexity to our operations.

We market and sell our solutions and professional services throughout the world and have personnel in many parts of the world. International operations generated ~~31%~~41% and ~~33%~~38% of our revenue in ~~2017 and~~ the six months ended June 30, ~~2018,~~2021 and 2020, respectively. Our growth strategy is dependent, in part, on our continued international expansion. We expect to conduct a significant amount of our business with organizations that are located outside the United States, particularly in Europe and Asia. We cannot assure that our expansion efforts into international markets will be successful in creating further demand for our solutions and professional services outside of the United States or in effectively selling our solutions and professional services in the international markets that we enter. Our current international operations and future initiatives will involve a variety of risks, including:

•increased management, infrastructure and legal costs associated with having international operations;

•reliance on channel partners;

•trade and foreign exchange ~~restrictions;~~restrictions, including potential changes in trade relations arising from policy initiatives;

•economic or political instability in foreign markets, including instability related to the United Kingdom’s ~~referendum in June 2016 in which voters approved an~~recent exit from the European Union ~~commonly referred to as “Brexit”;~~and the corresponding impact on its ongoing legal, political, and economic relationship with the European Union;

•travel restrictions resulting from the COVID-19 pandemic, including restrictions on U.S. travelers entering some foreign countries;

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•greater difficulty in enforcing contracts, accounts receivable collection and longer collection periods;

•changes in regulatory requirements, including, but not limited to data privacy, data protection and data security regulations;

•difficulties and costs of staffing, managing and potentially reorganizing foreign operations;

•the uncertainty and limitation of protection for intellectual property rights in some countries;

•costs of compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations;

•differing labor regulations in foreign jurisdictions where labor laws are generally more advantageous to employees, including deemed hourly wage and overtime regulations in these locations;

•costs of compliance with U.S. laws and regulations for foreign operations, including the FCPA, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell or provide our solutions in certain foreign markets, and the risks and costs of non-compliance;

•requirements to comply with foreign privacy, data protection and information security laws and regulations and the risks and costs of noncompliance;

•heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, and irregularities in, financial statements;

•the potential for political unrest, pandemics, acts of terrorism, hostilities or war;

•management communication and integration problems resulting from cultural differences and geographic dispersion;

•costs associated with language localization of our solutions; and

•costs of compliance with multiple and possibly overlapping tax ~~structures.~~structures and regimes.

Our business, including the sales of our solutions and professional services by us and our channel partners, may be subject to foreign governmental regulations, which vary substantially from country to country and change from time to time. Our failure, or the failure by our channel partners, to comply with these regulations could adversely affect our business. Further, in many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. regulations applicable to us. Although we have implemented policies and procedures designed to comply with these laws and policies, there can be no assurance that our employees, contractors, channel partners and agents have complied, or will comply, with these laws and policies. Violations of laws or key control policies by our employees, contractors, channel partners or agents could result in delays in revenue recognition, financial reporting misstatements, fines, penalties or the prohibition of the importation or exportation of our solutions and could have a material adverse effect on our business and results of operations. If we are unable to successfully manage the challenges of international expansion and operations, our business and operating results could be adversely affected.

We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales and technology ~~professionals.~~professionals, and our ability to increase our customer base will depend to a significant extent on our ability to expand our sales and marketing operations.

We believe our success has depended, and continues to depend, on the efforts and talents of our senior management team and our highly skilled team members, including our sales personnel, professional services personnel and software engineers. We do not maintain key ~~man~~person insurance on any of our executive officers or ~~key employees. From time to time, there may be changes in our senior management team resulting from the termination or~~

~~departure of our executive officers and~~ key employees. Our senior management and key employees are employed on an at-will basis, which means that they could terminate their employment with us at any time. The loss of any of our senior management or key employees could adversely affect our ability ~~to build on the efforts they have undertaken and~~ to execute our business plan, and we may not be able to find adequate replacements. We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees.

Our ability to successfully pursue our growth strategy also depends on our ability to attract, motivate and retain our personnel. Competition for well-qualified employees in all aspects of our business ~~including sales personnel, professional services personnel and software engineers,~~ is intense. ~~Our~~The recent move by companies to offer a remote or hybrid work environment may increase competition for such employees outside of our traditional office locations. In addition, employee turnover rates in the broader global economy have increased during the COVID-19 pandemic and may continue to be elevated, which could lead to increased recruiting, ~~efforts focus on elite universities~~training and our primary recruiting competition are well-known, high-paying firms. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate existing employees.retention costs if we experience a similar increase in turnover. If we do not succeed in attracting well-qualified employees or retaining and motivating existing employees, our business would be adversely affected.

~~We must effectively develop and expand~~

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In addition, our ~~sales and marketing capabilities.~~

~~Our~~ ability to increase our customer base and achieve broader market acceptance of our Cyber Exposure solutions will depend to a significant extent on our ability to expand our sales ~~and marketing operations. We plan to continue expanding our sales~~ force and our third-party channel partner network of distributors and resellers, both domestically and ~~internationally; however, there is no assurance that we will~~internationally. We may not be successful in attracting and retaining talented sales personnel or strategic partners, ~~or that~~and any new sales personnel or strategic partners ~~will~~may not be able to achieve productivity in a reasonable period of time or at all. We also plan to dedicate significant resources to sales and marketing programs, including through electronic marketing campaigns and, when deemed safe to do so, trade event sponsorship and participation. All of these efforts will require us to invest significant financial and other resources and our business will be harmed if our efforts do not generate a correspondingly significant increase in revenue.

We must offer high-quality support.

Our customers rely on our personnel for support of our enterprise platform. High-quality support is important for the renewal of our agreements with existing customers and to our existing customers expanding the number of IP addresses or IT assets under their subscriptions. The importance of high-quality support will increase as we expand our business and pursue new customers. If we do not help our customers quickly resolve issues and provide effective ongoing support, our ability to sell new software to existing and new customers would suffer and our reputation with existing or potential customers would be harmed.

Our growth depends in part on the success of our strategic relationships with third parties.

In order to grow our business, we anticipate that we will continue to depend on relationships with strategic partners to provide broader customer coverage and solution delivery capabilities. We depend on partnerships with market leading technology companies to maintain and expand our Cyber Exposure ecosystem by integrating third party data into our platform. ~~For example, we developed our Industrial Security solution in partnership with Siemens.~~ Identifying partners, and negotiating and documenting relationships with them, requires significant time and resources. Our agreements with our strategic partners generally are non-exclusive and do not prohibit them from working with our competitors or offering competing solutions. Our competitors may be effective in providing incentives to third parties to favor their products or services or to prevent or reduce subscriptions to our services. If our partners choose to place greater emphasis on products of their own or those offered by our competitors or do not effectively market and sell our product, our ability to grow our business and sell software and professional services may be adversely affected. In addition, acquisitions of our partners by our competitors could result in a decrease in the number of our current and potential customers, as our partners may no longer facilitate the adoption of our solutions by potential customers. We also license third-party threat data that is used in our solutions in order to deliver our offerings. In the future, this data may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use any of this data could result in delays in the provisioning of our offerings until equivalent data is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business.

If we are unsuccessful in establishing or maintaining our relationships with third parties, our ability to compete in the marketplace or to grow our revenue could be impaired and our operating results may suffer. Even if we are successful, we cannot assure you that these relationships will result in increased customer usage of our solutions or increased revenue.

Catastrophic events may disrupt our business.

Our corporate headquarters are located in Columbia, Maryland. The area around Washington, D.C. could be subject to terrorist attacks. Additionally, we rely on our network and third-party infrastructure and enterprise

applications, internal technology systems and our website for our development, marketing, operational support, hosted services and sales activities.

While we have begun to initiate hybrid remote and in-person work policies, substantially all of our employees have been working remotely due to the COVID-19 pandemic, which may pose additional security risks. Additionally, ransomware attacks, including those from organized criminal threat actors, nation-states and nation-state supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions, delays, or outages in our operations, loss of data, loss of income, significant extra expenses to restore data or systems, reputational loss and the diversion of funds. To alleviate the financial, operational and reputational impact of a ransomware attack, it may be necessary to make extortion payments, but we may be unable to do so if applicable laws prohibit such payments.

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In the event of a major hurricane, earthquake or other catastrophic event such as fire, power loss, telecommunications failure, cyberattack, war or terrorist attack, or epidemic or pandemic, such as the COVID-19 pandemic, that impacts our corporate headquarters, other facilities, or off-premises infrastructure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our software development, lengthy interruptions in our services, breaches of data security and loss of critical data, all of which could have an adverse effect on our future operating results.

~~Future~~Recent and future acquisitions could disrupt our business and adversely affect our business operations and financial results.

We have in the past acquired products, technologies and ~~technologies~~businesses from other parties, such as our recent acquisition of Alsid SAS in April 2021, and we may choose to expand our current business by acquiring additional businesses or technologies in the future. Acquisitions involve many risks, including the following:

•an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition;

•we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us;

•an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management;

•an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company;

•we may encounter difficulties in, or may be unable to, successfully sell any acquired solutions;

•an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions;

•our use of cash to pay for an acquisition would limit other potential uses for our cash; and

•if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants.

The occurrence of any of these risks could have a material adverse effect on our business operations and financial results. In addition, we may only be able to conduct limited due diligence on an acquired company’s operations. Following an acquisition, we may be subject to unforeseen liabilities arising from an acquired company’s past or present operations and these liabilities may be greater than the warranty and indemnity limitations that we negotiate. Any unforeseen liability that is greater than these warranty and indemnity limitations could have a negative impact on our financial condition.

We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months. However, we intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our product, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Our current loan agreement includes, and ~~security agreement with Silicon Valley Bank includes~~we expect that any future agreements governing our indebtedness will include, restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential ~~acquisitions, and any debt financing that we secure in the future could have similar restrictive covenants.~~acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.

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If we do not generate sufficient cash flows, we may be unable to service all of our indebtedness.

To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash, make scheduled payments or to refinance our debt obligations depends on our successful financial and operating performance, which may be affected by a range of economic, competitive and business factors, many of which are outside of our control and some of which are described elsewhere in the “Risk Factors” section of this report.

If our cash flows and capital resources are insufficient to fund our debt service obligations, or to repay the Term Loan when it matures, we may have to undertake alternative financing plans, such as refinancing or restructuring our debt, selling assets or operations, reducing or delaying capital investments, or seeking to raise additional capital. We may not be able to refinance our debt, or any refinancing of our debt could be at higher interest rates and may require us to comply with more restrictive covenants that could further restrict our business operations. Our ability to implement successfully any such alternative financing plans will depend on a range of factors, including general economic conditions, the level of activity in capital markets generally, and the terms of our various debt instruments then in effect.

Covenants under our Credit Agreement may restrict our business and operations in many ways, and if we do not effectively manage our covenants, our financial conditions and results of operations could be adversely affected.

Our Credit Agreement imposes various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things:

•pay dividends or distributions, repurchase equity, prepay, redeem or repurchase certain debt, and make certain investments;

•incur additional debt and issue certain preferred stock;

•provide guarantees in respect of obligations of other persons;

•incur liens on assets;

•engage in certain asset sales, including capital stock of our subsidiaries;

•merge, consolidate with, or sell all or substantially all our assets to another person;

•enter into transactions with affiliates;

•enter into agreements that restrict distributions from our subsidiaries;

•designate subsidiaries as unrestricted subsidiaries; and

•prohibit certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to us.

These covenants may:

•limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, or other general business purposes;

•limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions, or other general business purposes;

•require us to use a substantial portion of our cash flow from operations to make debt service payments;

•limit our flexibility to plan for, or react to, changes in our business and industry;

•place us at a competitive disadvantage compared to less leveraged competitors; and

•increase our vulnerability to the impact of adverse economic and industry conditions.

If we are unable to successfully manage the limitations and decreased flexibility on our business due to our significant debt obligations, we may not be able to capitalize on strategic opportunities or grow our business to the extent we would be able to without these limitations.

Our failure to comply with any of the covenants could result in a default under the Credit Agreement, which could permit the administrative agent or the lenders to cause the administrative agent to declare all or part of any of our outstanding senior secured term loans or revolving loans to be immediately due and payable or to exercise any remedies provided to the administrative agent, including, proceeding against the collateral granted to secure our obligations under

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the credit agreement. An event of default under the credit agreement could also lead to an event of default under the terms of certain of our other agreements. Any such event of default or any exercise of rights and remedies by our creditors could seriously harm our business.

The LIBOR calculation method may change, and LIBOR is expected to be phased out after 2021.

Loans under the Credit Agreement bear interest at a rate based on the London Interbank Offered Rate, or LIBOR. On July 27, 2017, the U.K. Financial Conduct Authority, or the FCA, announced that it will no longer require banks to submit rates for the calculation of LIBOR after 2021. In the meantime, actions by the FCA, other regulators, or law enforcement agencies may result in changes to the method by which LIBOR is calculated. If changes to LIBOR result in an increase in rates, our interest expense under the Credit Agreement would increase. Further, if LIBOR is no longer available, our Credit Agreement provides a process to determine a substitute rate, and if such substitute rate is higher than LIBOR, our interest expense under the Credit Agreement would increase.

The nature of our business requires the application of complex ~~revenue recognition rules. Significant~~accounting rules and regulations. If there are significant changes in current principles, ~~will affect our consolidated~~ financial ~~statements and changes in financial accounting~~reporting standards or ~~practices~~interpretations, or if our estimates or judgments relating to our critical accounting policies prove to be incorrect, we may ~~cause adverse,~~experience unexpected financial reporting fluctuations and ~~harm~~ our results of ~~operations.~~operations could be adversely affected.

The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board, ~~or FASB,~~ the Securities and Exchange Commission, or SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. In addition, many companies’ accounting disclosures are being subjected to heightened scrutiny by regulators and the public. Further, the accounting rules and regulations are continually changing in ways that could impact our financial statements.

~~For example, in May 2014, the FASB issued new accounting guidance on revenue recognition in the form of ASU No. 2014-09,~~ ~~Revenue from Contracts with Customers (Topic 606)~~, or ASC 606. The core principle of ASC 606 is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. We early adopted ASC 606 as of January 1, 2017. The most significant impact of adopting ASC 606 was the deferral of perpetual license revenue over an estimated economic life, including estimated maintenance renewal periods, whereas under previous guidance we recognized perpetual license revenue upon delivery of the perpetual license. The impact of the adoption of ASC 606 on our 2017 revenue was a net increase of $3.5 million after giving effect to the recognition of perpetual license revenue from prior year sales and the deferral of perpetual license revenue from 2017 sales. Additionally, the incremental costs of obtaining a contract with a customer are deferred and will be amortized over a longer estimated period of benefit, whereas under previous guidance such costs were recognized immediately or amortized over the contract term.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect or financial reporting standards or interpretations change, our results of operations could be adversely affected.

The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include the determination of the estimated economic life of perpetual licenses for revenue recognition, the estimated period of benefit for deferred commissions, ~~income taxes~~useful lives of long-lived assets, the valuation of stock-based compensation, the incremental borrowing rate for operating leases, and the ~~related~~ valuation ~~allowance and stock-based compensation.~~of deferred tax assets. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our common stock.

Additionally, we regularly monitor our compliance with applicable financial reporting standards and review new pronouncements and drafts thereof that are relevant to us. ~~As a result of new standards, changes to existing standards and changes in their interpretation, we~~We might be required to change our accounting policies, alter our operational policies and implement new or enhance existing systems, ~~so that they reflect new or amended financial reporting standards,~~ or we may be required to restate our published financial ~~statements.~~statements, as a result of new standards, changes to existing standards and changes in their interpretation. Such changes to existing standards or changes in their interpretation may have an adverse effect on our reputation, business, financial position and profit, or cause an adverse deviation from our revenue and operating profit target, which may negatively impact our financial results.

Our operating results may be negatively affected if we are required to pay additional state sales tax, value added, or other transaction taxes, and we could be subject to liability with respect to all or a portion of past or future sales.

We currently collect and remit sales and use, value added and other transaction taxes in certain of the jurisdictions where we do business based on our assessment of the amount of taxes owed by us in such jurisdictions. However, in some jurisdictions in which we do business, we do not believe that we owe such taxes, and therefore we currently do not collect and remit such taxes in those jurisdictions or record contingent tax liabilities in respect of those jurisdictions.

Further, due to uncertainty in the application and interpretation of applicable tax laws in various jurisdictions, we may be exposed to sales and use, value added or other transaction tax liability. A successful assertion that we are required to pay additional taxes in connection with sales of our solutions, or the imposition of new laws or regulations requiring the payment of additional taxes, would create increased costs and administrative burdens for us. If we are subject to additional taxes and determine to offset such increased costs by collecting and remitting sales taxes from our customers, or otherwise passing those costs through to our customers, companies may be discouraged from using our solutions. Any increased tax burden may decrease our ability or willingness to compete in relatively burdensome tax jurisdictions, result in substantial tax liabilities related to past sales or otherwise harm our business and operating results.

~~Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.~~

As of December 31, 2017 we had federal, state and foreign net operating loss carryforwards, or NOLs, of $103.7 million, $38.6 million, and $18.4 million, respectively, available to offset future taxable income, which begin to expire in 2030. A lack of future taxable income would adversely affect our ability to utilize these NOLs before they expire.

~~Uncertainties in the interpretation and application of the 2017 Tax Cuts and Jobs Act could materially affect our tax obligations and effective tax rate.~~

Forecasts of our income tax position and effective tax rate for financial accounting purposes are complex and subject to uncertainty because our income tax position for each year combines the effects of a mix of profits earned and losses incurred by us in various tax jurisdictions with a broad range of income tax rates, as well as changes in the valuation of deferred tax assets and liabilities, the impact of various accounting rules and changes to these rules and tax laws, the results of examinations by various tax authorities, and the impact of any acquisition, business combination or other reorganization or financing transaction. To forecast our global tax rate, we estimate our pre-tax profits and losses by jurisdiction and forecast our tax expense by jurisdiction. If the mix of profits and losses, our ability to use tax credits, our assessment of the need for valuation allowances, or effective tax rates by jurisdiction is different than those estimated, our actual tax rate could be materially different than forecasted, which could have a material impact on our results of business, financial condition and results of operations.

On December 22, 2017, U.S. Federal tax reform was enacted with the signing of the Tax Cuts and Jobs Act, or TCJA. Notable provisions of the TCJA include significant changes to corporate taxation, including reduction of the corporate tax rate from a top marginal rate of 35% to a flat rate of 21%, limitation of the tax deduction for interest expense to 30% of adjusted earnings (except for certain small businesses), limitation of the deduction for net operating losses to 80% of current year taxable income and elimination of net operating loss carrybacks, one time taxation of offshore earnings at reduced rates regardless of whether they are repatriated, elimination of U.S. tax on foreign earnings (subject to certain important exceptions), immediate deductions for certain new investments instead of deductions for depreciation expense over time, and modifying or repealing many business deductions and credits.

While the changes from the TCJA are generally effective beginning in 2018, U.S. GAAP accounting for income taxes requires the effect of a change in tax laws or rates to be recognized in income from continuing operations for the period that includes the enactment date. Due to the complexities involved in accounting for the enactment of the TCJA, the Securities and Exchange Commission published Staff Accounting Bulletin No. 118, which allows us to record provisional amounts in earnings for the year ended December 31, 2017. Where reasonable estimates can be made, the provisional accounting should be based on such estimates. When no reasonable estimate can be made, the provisional accounting may be based on the tax law in effect before the TCJA. We are required to complete our tax accounting for the TCJA in the period when we have obtained, prepared, and analyzed the information to complete the income tax accounting, or by December 22, 2018, whichever date comes first.

We have not completed our accounting for the tax effects of enactment of the TCJA; however, as we describe in Note 8 to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, we have made reasonable estimates of the effects of the TCJA in certain cases in our financial statements that are included as a component of income tax expense. The U.S. Department of Treasury has broad authority to issue regulations and interpretative guidance that may significantly impact how we will apply the law and impact our results of operations in the period issued. As additional regulatory guidance is issued by the applicable taxing authorities, as accounting treatment is clarified, as we perform additional analysis on the application of the law, and as we refine estimates in calculating the effect, our final analysis, which will be recorded in the period completed, may be different from our current provisional amounts, which could materially affect our tax obligations and effective tax rate.

We are subject to anti-corruption laws, anti-bribery and similar laws with respect to our domestic and international operations, and non-compliance with such laws can subject us to criminal and/or civil liability and materially harm our business and reputation.

We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the U.K. Bribery Act 2010, and other anti-corruption laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit our company from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We use third-party law firms, accountants, and other representatives for regulatory compliance, sales, and other purposes in several countries. We sell directly and indirectly, via third-party representatives, to the U.S. and non-U.S. government sectors, and our employees and third-party representatives interact with government officials. We can be held liable for the corrupt or other illegal activities of these third-party representatives, our employees, contractors, and other agents, even if we do not explicitly authorize such activities. Noncompliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our reputation, business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations, and financial condition. Moreover, as an issuer of securities, we also are subject to the accounting and internal controls provisions of the FCPA. These provisions require us to maintain accurate books and records and a system of internal controls sufficient to detect and prevent corrupt conduct. Failure to abide by these provisions may have an adverse effect on our business, operations or financial condition.

We are subject to governmental export and import controls and economic and trade sanctions that could impair our ability to conduct business in international markets and subject us to liability if we are not in compliance with applicable laws and regulations.

The United States and other countries maintain and administer export and import laws and regulations. Our products are subject to U.S. export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions administered by the U.S. Treasury Department’s Office of Foreign Assets Control. We are required to comply with these laws and regulations. If we fail to comply with such laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. In addition, changes in our solutions, or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our products in international markets or, in some cases, prevent the export or import of our solutions to certain countries, governments or persons altogether. Any change in export or import laws and regulations or economic or trade sanctions, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations could also result in decreased use of our products, or in our decreased ability to export or sell our products to existing or potential customers. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition, and results of operations.

Furthermore, we incorporate encryption technology into certain of our solutions. Various countries regulate the import of certain encryption technology, including import permitting and licensing requirements, and have enacted laws that could limit our ability to distribute our solutions or could limit our customers’ ability to implement our solutions in those countries. Encrypted products and the underlying technology may also be subject to export control restrictions. Governmental regulation of encryption technology and regulation of imports or exports of encryption solutions, or our failure to obtain required import or export approval for our solutions, could harm our international sales and adversely affect our revenue. Compliance with applicable laws and regulations regarding the export and import of our solutions, including with respect to new solutions or changes in existing solutions, may create delays in the introduction of our solutions in international markets, prevent our customers with international operations from deploying our solutions globally or, in some cases, could prevent the export or import of our solutions to certain countries, governments, entities or persons altogether.

Moreover, U.S. export control laws and economic sanctions programs prohibit the shipment of certain products and services to countries, governments and persons that are subject to U.S. economic embargoes and trade sanctions. Any violations of such economic embargoes and trade sanction regulations could have negative consequences, including government investigations, penalties and reputational harm.

Risks Related to Government Regulation, Data Collection and Intellectual Property

Our business could be adversely affected if our employees cannot obtain and maintain required security clearances or we cannot establish and maintain a required facility security clearance.

Certain U.S. government contracts may require our employees to maintain various levels of security clearances, and may require us to maintain a facility security clearance, to comply with Department of Defense, or DoD, requirements. The DoD has strict security clearance requirements for personnel who perform work in support of classified programs. Obtaining and maintaining a facility clearance and security clearances for employees ~~involves~~can be a ~~lengthy process, and it is~~ difficult, ~~to identify, recruit and retain~~sometimes lengthy

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process. If we do not have employees ~~who already hold security clearances. If our employees are unable to obtain~~with the appropriate security clearances, ~~in a timely manner, or at all, or if our employees who hold security clearances are unable to maintain their clearances or terminate employment with us,~~ then a customer requiring classified work could terminate an existing contract or decide not to renew the contract upon its expiration. To the extent we are not able to obtain or maintain a facility security clearance, we may not be able to bid on or win new classified contracts, and existing contracts requiring a facility security clearance could be terminated.

Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results.

Our success and ability to compete depend in part on our ability to protect our proprietary technology and intellectual property. To safeguard these rights, we rely on a combination of patent, trademark, copyright and trade secret laws and contractual protections in the United States and other jurisdictions, all of which provide only limited protection and may not now or in the future provide us with a competitive advantage.

As of June 30, ~~2018,~~2021, we had 1422 issued patents and ~~three~~14 patent applications pending in the United States relating to our technology. We cannot assure you that any patents will issue from any patent applications, that patents that issue from such applications will give us the protection that we seek or that any such patents will not be challenged, invalidated or circumvented. Any patents that may issue in the future from our pending or future patent applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers. Obtaining and enforcing software patents in the United States is becoming increasingly challenging. Any patents we have obtained or may obtain in the future may be found to be invalid or unenforceable in light of recent and future changes in the law. We have registered the “Tenable,” ~~“Nessus”~~“Nessus,” “Tenable.io” and ~~“Tenable.io” names~~"Lumin" trademarks and our Tenable logo in the United States and certain other countries. We have registrations and/or pending applications for additional ~~marks~~trademarks in the United States; however, we cannot assure you that any future trademark registrations will be issued for pending or future applications or that any registered trademarks will be enforceable or provide adequate protection of our proprietary rights. While we have copyrights in our software we do not typically register such copyrights with the Copyright Office. This failure to register the copyrights in our software may preclude us from obtaining statutory damages for infringement under certain circumstances. We also license software from third parties for integration into our software, including open source software and other software available on commercially reasonable terms. We cannot assure you that such third parties will maintain such software or continue to make it available.

In order to protect our unpatented proprietary technologies and processes, we rely on trade secret laws and confidentiality and invention assignment agreements with our employees, consultants, strategic partners, vendors and others. Despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, copy, reverse engineer or otherwise obtain and use them. In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret rights, or develop similar technologies and processes. Further, several agreements may give customers limited rights to access portions of our proprietary source code, and the contractual provisions that we enter into may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property ~~rights~~ and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights. Moreover, policing unauthorized use of our technologies, trade secrets and intellectual property is difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. To the extent that we expand our activities outside of the United States, our exposure to unauthorized copying and use of our solutions and proprietary information may increase. We may be unable to determine the extent of any unauthorized use or infringement of our solutions, technologies or intellectual property rights.

There can be no assurance that the steps that we take will be adequate to protect our proprietary technology and intellectual property, that others will not develop or patent similar or superior technologies, solutions or services, or that our trademarks, patents, and other intellectual property will not be challenged, invalidated or circumvented by others. Furthermore, effective trademark, patent, copyright, and trade secret protection may not be available in every country in which our software is available or where we have employees or independent contractors. In addition, the legal standards relating to the validity, enforceability, and scope of protection of intellectual property rights in internet and software-related industries are uncertain and still evolving.

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In order to protect our intellectual property rights, we may be required to spend significant resources to monitor and protect these rights. Litigation brought to protect and enforce our intellectual property rights could be costly, time-consuming and distracting to management and could result in the impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect and enforce our intellectual property rights could seriously adversely affect our brand and adversely impact our business.

We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies.

Companies in the software and technology industries, including some of our current and potential competitors, own significant numbers of patents, copyrights, trademarks and trade secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. In addition, many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. The litigation may involve patent holding companies or other adverse patent owners that have no relevant product revenue and against which our patents may therefore provide little or no deterrence. In the past, we have been subject to allegations of patent infringement that were unsuccessful, and we expect in the future to be subject to claims that we have misappropriated, misused, or infringed other parties’ intellectual property rights, and, to the extent we gain greater market visibility or face increasing competition, we face a higher risk of being the subject of intellectual property infringement claims, which is not uncommon with respect to enterprise software companies. We may in the future be subject to claims that employees or contractors, or we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of our competitors or other parties. To the extent that intellectual property claims are made against our customers based on their usage of our technology, we have certain obligations to indemnify and defend such customers from those claims. The term of our contractual indemnity provisions often survives termination or expiration of the applicable agreement. Large indemnity payments, defense costs or damage claims from contractual breach could harm our business, results of operations and financial condition.

There may be third-party intellectual property rights, including issued or pending patents that cover significant aspects of our technologies or business methods. Any intellectual property claims, with or without merit, could be very time-consuming, could be expensive to settle or litigate, could divert our management’s attention and other resources and could result in adverse publicity. These claims could also subject us to making substantial payments for legal fees, settlement payments, and other costs or damages, potentially including treble damages if we are found to have willfully infringed patents or copyrights. These claims could also result in our having to stop making, selling, offering for sale, or

using technology found to be in violation of a third party’s rights. We might be required to seek a license for the third-party intellectual property rights, which may not be available on reasonable terms or at all. Even if a license is available to us, we may be required to pay significant upfront fees, milestones or royalties, which would increase our operating expenses. Moreover, to the extent we only have a license to any intellectual property used in our solutions, there may be no guarantee of continued access to such intellectual property, including on reasonable terms. As a result, we may be required to develop alternative non-infringing technology, which could require significant effort and expense. If a third party is able to obtain an injunction preventing us from accessing such third-party intellectual property rights, or if we cannot license or develop technology for any infringing aspect of our business, we would be forced to limit or stop sales of our software or cease business activities covered by such intellectual property, and may be unable to compete effectively. Any of these results would adversely affect our business, results of operations, financial condition and cash flows.

Portions of our solutions utilize open source software, and any failure to comply with the terms of one or more of these open source licenses could negatively affect our business.

Our software contains software made available by third parties under so-called “open source” licenses. From time to time, there have been claims against companies that distribute or use open source software in their products and services, asserting that such open source software infringes the claimants’ intellectual property rights. We could be subject to suits by parties claiming that what we believe to be licensed open source software infringes their intellectual property rights. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. In addition, certain open source licenses require that source code for software programs that are subject to the license be made available to the public and that any modifications or derivative

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works to such open source software continue to be licensed under the same terms. Further, certain open source licenses also include a provision that if we enforce any patents against the software programs that are subject to the license, we would lose the license to such software. If we were to fail to comply with the terms of such open source software licenses, such failures could result in costly litigation, lead to negative public relations or require that we quickly find replacement software which may be difficult to accomplish in a timely manner.

Although we monitor our use of open source software in an effort both to comply with the terms of the applicable open source licenses and to avoid subjecting our software to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our product or operate our business. By the terms of certain open source licenses, we could be required to release the source code of our software and to make our proprietary software available under open source licenses, if we combine or distribute our software with open source software in a certain manner. In the event that portions of our software are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all, or a portion of, that software or otherwise be limited in the licensing of our software, each of which could reduce or eliminate the value of our product. Many of the risks associated with usage of open source software cannot be eliminated, and could negatively affect our business, results of operations and financial condition.

Risks Related to An Investment in Our Common Stock

Our stock price may be volatile, and the value of our common stock may decline.

The market price of our common stock may fluctuate substantially and depends on a number of factors, including those described in this “Risk Factors” section, many of which are beyond our control and may not be related to our operating performance. Factors that could cause fluctuations in the market price of our common stock include the following:

•actual or anticipated changes or fluctuations in our operating results;

•the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

•announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments;

•industry or financial analyst or investor reaction to our press releases, other public announcements and filings with the SEC;

•rumors and market speculation involving us or other companies in our industry;

•price and volume fluctuations in the overall stock market from time to time;

•changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

•failure to compy with the ~~expiration~~terms of ~~market stand-off or contractual lock-up agreements and~~ the Credit Agreement;

•sales of shares of our common stock by us or our ~~stockholders;~~stockholders, or the perception that these sales might occur, including in connection with anticipated distributions of shares of our common stock by entities affiliated with members of our Board of Directors;

•failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

•actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally;

•litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors;

•developments or disputes concerning our intellectual property rights or our solutions, or third-party proprietary rights;

•announced or completed acquisitions of businesses or technologies by us or our competitors;

•new or proposed laws or regulations or new interpretations of existing laws or regulations applicable to our ~~business;~~business, including proposed changes to the U.S. corporate income tax rate and capital gains tax rates;

•any major changes in our management or our ~~board~~Board of ~~directors;~~Directors;

•general economic conditions and slow or negative growth of our markets; and

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•other events or factors, including those resulting from pandemics, war, incidents of terrorism or responses to these events.

Recently, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many ~~companies.~~companies, including in connection with the COVID-19 pandemic. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may negatively impact the market price of our common stock. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial costs and divert our management’s attention.

~~An active public trading market may not continue to develop or be sustained.~~

Prior to our initial public offering, or IPO, in July 2018, there was no public market or active private market for our common stock. Following our IPO, an active public trading market may not continue to develop or be sustained. The lack of an active market may impair your ability to sell your shares at the time you wish to sell them or at a price that you consider reasonable. The lack of an active market may also reduce the fair value of your shares. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability to acquire other companies or technologies by using our shares as consideration.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.

The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports. As a new public company, we may be slow to attract research coverage and the analysts who publish information about our common stock will have had relatively little experience with our company, which could affect their ability to accurately forecast our results and make it more likely that we fail to meet their estimates. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. In addition, the stock prices of many companies in the technology industry have declined significantly after those companies have failed to meet, or significantly exceed, the financial guidance publicly announced by the companies or the expectations of analysts. If our financial results fail to meet, or exceed, our announced guidance or the expectations of analysts or public investors, analysts could downgrade our common stock or publish unfavorable research about us. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

Future sales of substantial amounts of our common stock in the public markets by us or our stockholders, or the perception ~~that they~~such sales might occur, could reduce the price that our common stock might otherwise attain.

Sales of a substantial number of shares of our common stock in the public market by us or our stockholders, or the perception that these sales might occur, including in connection with anticipated distributions of shares of our common stock by entities affiliated with members of our Board of Directors, could depress the market price of our common stock, impair our ability to raise capital through the sale of additional equity securities and make it more difficult for you to sell your common stock at a time and price that you deem appropriate. ~~Shares of our common stock owned by our directors, executive officers and substantially all of~~

~~our stockholders are restricted as a result of securities laws, lock-up agreements or other contractual restrictions that restrict transfers for 180 days after~~Further, the date of our IPO. Subject to certain limitations, 80,179,454 shares of our common stock will be eligible for sale upon the expiration of this 180-day lock-up period. The underwriters in our IPO may, in their sole discretion, permit our stockholders who are subject to these lock-up agreements to sell shares prior to the expiration of the lock-up agreements.

Additionally, stockholders holding 70,927,042 shares of our common stock outstanding, will, after the expiration of the lock-up periods specified above, have the right, subject to various conditions and limitations, to include their shares of our common stock in registration statements relating to our securities. If the offer and sale of these shares are registered, they will be freely tradable without restriction under the Securities Act. Shares of common stock sold under such registration statements can be freely sold in the public market. In the event such registration rights are exercised and a large number of shares of common stock are sold in the public market, such sales could reduce the trading price of our common stock.

In addition, in the future we may issue common stock or other securities convertible into shares of our common stock from time to time in connection with a financing, acquisition, investment or otherwise. The number of new shares of our common stock issued by us in connection with raising additional capital ~~could constitute~~in connection with a ~~material portion of the then outstanding shares of our common stock, which~~financing, acquisition, investment or otherwise could result in substantial dilution to our existing ~~stockholders and cause the market price of our common stock to decline.~~

Concentration of ownership among our existing directors, executive officers and holders of 5% or more of our outstanding common stock may prevent new investors from influencing significant corporate decisions, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.

Our executive officers, directors and current beneficial owners of 5% or more of our common stock beneficially own a significant percentage of our outstanding common stock. These persons, acting together, will be able to significantly influence all matters requiring stockholder approval, including the election and removal of directors and any merger or other significant corporate transactions. The interests of this group of stockholders may not coincide with the interests of other stockholders.

~~The requirements of being a public company may strain our resources, divert management’s attention and affect our ability to attract and retain qualified board members.~~

As a public company, we are subject to the reporting and corporate governance requirements of the Exchange Act, the listing requirements of the Nasdaq Stock Market and other applicable securities rules and regulations, including the Sarbanes-Oxley Act and the Dodd-Frank Wall Street Reform and Consumer Protection Act. Compliance with these rules and regulations increases our legal and financial compliance costs, makes some activities more difficult, time-consuming or costly and increases demand on our systems and resources, particularly after we are no longer an “emerging growth company” as defined in the JOBS Act. Among other things, the Exchange Act requires that we file annual, quarterly and current reports with respect to our business and results of operations and maintain effective disclosure controls and procedures and internal control over financial reporting. In order to improve our disclosure controls and procedures and internal control over financial reporting to meet this standard, significant resources and management oversight may be required. As a result, management’s attention may be diverted from other business concerns, which could harm our business, financial condition, results of operations and prospects. Although we have already hired and are in the process of hiring, additional personnel to help comply with these requirements, we may need to further expand our legal and finance departments in the future, which will increase our costs and expenses.

In addition, changing laws, regulations and standards relating to corporate governance and public disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards arewe have filed registration statements on Form S-8 under the Securities Act registering the issuance of shares of common stock subject to ~~varying interpretations, in many cases due~~options and other equity awards issued or reserved for future issuance under our equity incentive plans. Shares registered under these registration statements, and under additional registration statements on Form S-8 that we may file to ~~their lack~~register additional shares of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and higher costs necessitated by ongoing revisionscommon stock pursuant to disclosure and governance practices. We intend to invest resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and administrative expense and a diversionprovisions of ~~management’s time and attention from revenue-generating activities to compliance activities. If~~ our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory or governing bodies, regulatory authorities may initiate legal proceedings against us and our business and prospects may be harmed. As a result of disclosure of informationequity incentive plans that provide for an automatic increase in the ~~filings required~~number of a

shares reserved and available for issuance each year, are available for sale in the public ~~company, our business~~market subject to vesting arrangements and financial condition will become more visible, which may result in threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, financial condition, resultsexercise of ~~operations and prospects could be materially harmed, and even if the claims do not result in litigation or are resolved in our favor, these claims,~~options and the ~~time and resources necessary to resolve them, could divert~~restrictions of Rule 144 under the ~~resources~~Securities Act in the case of our ~~management and materially harm our business, financial condition, results of operations and prospects.~~

We also expect that being a public company and these new rules and regulations will make it more expensive for us to obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified executive officers and members of our board of directors, particularly to serve on our audit committee and compensation committee.

In addition, as a result of our disclosure obligations as a public company, we will have reduced strategic flexibility and will be under pressure to focus on short-term results, which may materially and adversely affect our ability to achieve long-term profitability.affiliates.

We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our ~~board~~Board of ~~directors.~~Directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments. In addition, our ~~loan and security agreement with Silicon Valley Bank~~Credit Agreement contains restrictive covenants that prohibit us, subject to certain exceptions, from paying dividends on our common stock.

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Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove members of our Board of Directors and our current management and could negatively impact the market price of our common stock.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our Board of Directors or take other corporate actions, including effecting changes in our management. These provisions include:

•a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors;

•the ability of our Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

•the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors;

•a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;

•the requirement that a special meeting of stockholders may be called only by the chairperson of our Board of Directors, Chief Executive Officer or president (in the absence of a chief executive officer) or a majority vote of our Board of Directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

•the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our amended and restated bylaws, which may inhibit the ability of an acquirer to affect such amendments to facilitate an unsolicited takeover attempt;

•the ability of our Board of Directors, by majority vote, to amend our amended and restated bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our amended and restated bylaws to facilitate an unsolicited takeover attempt; and

•advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware or the U.S. federal district courts will be the exclusive forums for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for the following types of actions or proceedings under Delaware statutory or common law:

•any derivative action or proceeding brought on our behalf;

•any action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders;

•any action asserting a claim against us arising pursuant to any provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; or

•any action asserting a claim against us that is governed by the internal affairs doctrine.

This provision would not apply to suits brought to enforce a duty or liability created by the Exchange Act. Furthermore, Section 22 of the Securities Act creates concurrent jurisdiction for federal and state courts over all such Securities Act

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actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. To prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our amended and restated certificate of incorporation further provides that the federal district courts of the United States of America will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. While the Delaware courts have determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation. This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

These exclusive forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers or other employees. If a court were to find either exclusive forum provision in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur significant additional costs associated with resolving the dispute in other jurisdictions, all of which could seriously harm our business.

General Risks

We are subject to the anti-bribery laws of the jurisdictions in which we operate. These include the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the U.K. Bribery Act 2010, and other anti-corruption laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit our company from authorizing, offering, or providing, directly or indirectly, improper payments or benefits in order to gain or maintain business, including payments to recipients in the public or private sector. We use third-party law firms, accountants, and other representatives for regulatory compliance, sales, and other purposes in several countries. We sell directly and indirectly, via third-party representatives, to both private and government sectors in the United States and in other jurisdictions. Our employees and third-party representatives interact with these customers, which may include government officials. We can be held liable for the corrupt or other illegal activities of these third-party representatives, our employees, contractors, and other agents, even if we do not explicitly authorize such activities. Noncompliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our reputation, business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of ~~being~~management’s attention and resources and significant defense costs and other professional fees. Enforcement actions and sanctions could further harm our business, results of operations, and financial condition. Moreover, as an issuer of securities, we also are subject to the accounting and internal controls provisions of the FCPA. These provisions require us to maintain accurate books and records and a ~~public company,~~system of internal controls sufficient to detect and prevent corrupt conduct. Failure to abide by these provisions may have an adverse effect on our business, operations or financial condition.

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the possible loss of export or import privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees or managers. Obtaining the necessary authorizations, including any required license, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. In addition, changes in our solutions, or changes in applicable export or import laws and regulations may create delays in the introduction and sale of our products in international markets or, in some cases, prevent the export or import of our solutions to certain countries, governments or persons altogether. Any change in export or import laws and regulations or economic or trade sanctions, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations could also result in decreased use of our products, or in our decreased ability to export or sell our products to existing or potential customers. Any decreased use of our products or limitation on our ability to export or sell our products would likely adversely affect our business, financial condition, and results of operations.

Uncertainties in the interpretation and application of existing, new and proposed tax laws could materially affect our tax obligations and effective tax rate. Our operating results may be negatively affected if we are required to pay additional taxes, including sales and use tax, value added tax, or other transaction taxes, and we could be subject to liability with respect to all or a portion of past or future sales.

The tax regimes to which we are subject or under which we operate, including income and non-income taxes, are unsettled and may be subject to significant change. For example, the 2017 Tax Cuts and Jobs Act, or the Tax Act, as modified in 2020 by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, made broad and complex changes to the U.S. tax code, including changes to U.S. federal tax rates, additional limitations on the deductibility of interest, both positive and negative changes to the utilization of future net operating loss, or NOL, carryforwards, allowing for the expensing of certain capital expenditures, and adopting a modified territorial system. The issuance of additional regulatory or accounting guidance related to the Tax Act, or changes proposed or implemented by the current U.S. administration or otherwise, could materially affect our tax obligations and effective tax rate.

In addition, forecasts of our income tax position and effective tax rate for financial accounting purposes are complex and subject to uncertainty because our income tax position for each year combines the effects of a mix of profits earned and losses incurred by us in various tax jurisdictions with a broad range of income tax rates, as well as changes in the valuation of deferred tax assets and liabilities, the impact of various accounting rules and changes to these rules and tax laws, the results of examinations by various tax authorities, and the impact of any acquisition, business combination or other reorganization or financing transaction. To forecast our global tax rate, we estimate our pre-tax profits and losses and tax expense by jurisdiction. If the mix of profits and losses, our ability to use tax assets and attributes, our assessment of the need for valuation allowances, effective tax rates by jurisdiction or other factors are different than those estimated, our actual tax rate could be materially different than forecasted, which could have a material impact on our business, financial condition and results of operations.

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some jurisdictions in which we do business, we do not believe that we owe such taxes, and therefore we currently do not collect and remit such taxes in those jurisdictions or record contingent tax liabilities in respect of those jurisdictions. A successful assertion that we are required to pay additional taxes in connection with sales of our solutions, or the imposition of new laws or regulations or the interpretation of existing laws and regulations requiring the payment of additional taxes, would create increased costs and administrative burdens for us. If we are subject to additional taxes and determine to offset such increased costs by collecting and remitting such taxes from our customers, or otherwise passing those costs through to our customers, companies may be discouraged from using our solutions. Any increased tax burden may decrease our ability or willingness to compete in relatively burdensome tax jurisdictions, result in substantial tax liabilities related to past or future sales or otherwise harm our business and operating results.

Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2020 we had U.S. federal, state and foreign NOLs, of $254.7 million, $188.5 million, and $209.8 million, respectively, available to offset future taxable income, some of which begin to expire in 2030. Federal NOLs incurred in taxable years beginning after December 31, 2017 can be carried forward indefinitely, but the deductibility of federal NOLs in taxable years beginning after December 31, 2020, is subject to certain limitations. A lack of future taxable income would adversely affect our ability to utilize these NOLs before they expire.

In addition, under the provisions of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, substantial changes in our ownership may limit the amount of pre-change NOLs that can be utilized annually in the future to offset taxable income. Section 382 of the Internal Revenue Code imposes limitations on a company’s ability to use its NOLs if one or more stockholders or groups of stockholders that own at least 5% of the company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Similar rules may apply under state tax laws. Based upon an analysis as of December 31, 2020, we determined that we do not expect these limitations to materially impair our ability to use our NOLs prior to expiration. However, if changes in our ownership occurred after such date, or occur in the future, our ability to use our NOLs may be further limited. Subsequent statutory or regulatory changes in respect of the utilization of NOLs for federal or state purposes, such as suspensions on the use of NOLs or limitations on the deductibility of NOLs carried forward, or other unforeseen reasons, may result in our existing NOLs expiring or otherwise being unavailable to offset future income tax liabilities. For these reasons, we may not be able to utilize a material portion of the NOLs, even if we achieve profitability.

We are obligated to ~~develop and~~ maintain proper and effective internal controls over financial reporting, and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act, or Section 404, to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting ~~for the year ending December 31, 2019.~~on an annual basis. This assessment ~~will need to include~~includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date weWe are ~~no longer an “emerging growth company.” We will be~~also required to disclose significant changes made in our internal control procedures on a quarterly basis.

We have commenced the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404, and we may not be able to complete our evaluation, testing and any required remediation in a timely fashion. Our compliance with Section 404 will require that we incur substantial accounting expense and expend significant management efforts. We currently do not have an internal audit group, and we will need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.

During the evaluation and testing process of our internal controls, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. We cannot assure you that there will not be material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations. If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq, the SEC or other regulatory authorities. Failure to remedy any material weakness in our internal control over financial reporting, or to

~~implement or~~ maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

~~Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition~~

Table of us more difficult, limit attempts by our stockholders to replace or remove members of our board of directors and our current management and could negatively impact the market price of our common stock.Contents

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change in control of our company. These provisions could also make it difficult for stockholders to elect directors that are not nominated by the current members of our board of directors or take other corporate actions, including effecting changes in our management. These provisions include:

~~a classified board of directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our board of directors;~~

the ability of our board of directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer;

the exclusive right of our board of directors to elect a director to fill a vacancy created by the expansion of our board of directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of directors;

~~a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders;~~

the requirement that a special meeting of stockholders may be called only by the chairperson of our board of directors, chief executive officer or president (in the absence of a chief executive officer) or a majority vote of our board of directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors;

the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our amended and restated bylaws, which may inhibit the ability of an acquirer to affect such amendments to facilitate an unsolicited takeover attempt;

the ability of our board of directors, by majority vote, to amend our amended and restated bylaws, which may allow our board of directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our amended and restated bylaws to facilitate an unsolicited takeover attempt; and

advance notice procedures with which stockholders must comply to nominate candidates to our board of directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

~~These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time.~~

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, any action asserting a claim against us arising pursuant to any provisions of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. Our amended and restated certificate of incorporation further provides that the U.S. federal district courts will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act. These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits. Some companies that adopted a similar federal district court forum selection provision are currently subject to a suit in the Chancery Court of Delaware by stockholders who assert that the provision is not enforceable. If a court were to find either choice of forum provision contained in our amended and

restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our results of operations and financial condition.

We are an “emerging growth company” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our common stock less attractive to investors.

We are an “emerging growth company,” as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies” including, but not limited to, the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions until we are no longer an emerging growth company. We would cease to be an emerging growth company upon the earliest to occur of: (1) the first fiscal year following the fifth anniversary of our IPO; (2) the first fiscal year after our annual gross revenue is $1.07 billion or more; (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (4) as of the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700.0 million as of the end of the second quarter of that fiscal year. We cannot predict if investors will find our common stock less attractive if we choose to rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less active trading market for our common stock and our stock price may be more volatile.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Unregistered Sales of Equity Securities

From April 1, 2018 through June 30, 2018, we have granted under our 2016 Stock Incentive Plan options to purchase an aggregate of 4,748,648 shares of our common stock to a total of 159 employees, consultants and directors, having exercise prices ranging from $14.06 to $16.21 per share. In the same period, we granted 973,800 restricted stock units to a total of 932 employees with a weighted average grant date fair value of $16.21 per share. We did not grant any restricted stock awards during the period.

The offers, sales and issuances of the securities described in this section were exempt from registration either under Rule 701 promulgated under the Securities Act, in that the transactions were under written compensatory benefit plans and contracts relating to compensation, or under Section 4(a)(2) of the Securities Act or Regulation D promulgated under the Securities Act in that the transactions did not involve any public offering within the meaning of Section 4(a)(2) or, in certain cases, were acquired by accredited investors. The recipients of such securities were our employees or directors and received the securities under our equity incentive plans. Appropriate legends were affixed to the securities issued in these transactions.None.

Use of Proceeds

On July 30, 2018,, we completed our IPO, in which we issued and sold 12,535,000 shares of common stock at a price to the public of $23.00 per share, including 1,635,000 shares of common stock purchased by our underwriters pursuant to the full exercise of their over-allotment option to purchase additional shares. The offer and sale of all of the shares in the IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-226002), which was declared effective by the SEC on July 25, 2018.

Morgan Stanley & Co. LLC, J.P. Morgan Securities LLC, Allen & Company LLC and Deutsche Bank Securities Inc. acted as active book-running managers for the offering. Stifel, Nicolaus & Company, Incorporated acted as passive book-running manager for the offering, and William Blair & Company, L.L.C. and BTIG, LLC acted as co-managers for the offering. The offering commenced on July 25, 2018 and did not terminate before all securities registered inon the registration statement were sold.

We received net proceeds of ~~$265~~$264.6 million after deducting underwriting discounts and commissions and offering expenses. No offering expenses incurred by us were paid directly or indirectly to any of our directors, officers or persons owning ten percent or more of our capital stock (or their associates or affiliates).

There has been no material change in the planned use of the IPO proceeds as described in our ~~Prospectus.~~

~~Repurchase~~final prospectus for our IPO dated as of ~~Shares of Equity Securities~~

~~In May~~July 25, 2018 ~~we purchased 6,737 shares of common stock from an employee for $10.97 per share~~and filed with the SEC pursuant to ~~a right of first offer~~Rule 424(b)(4) under ~~a right of first refusal agreement in effect prior to~~ the IPO, which terminated in connection with the IPO. We purchased the shares from the employee at a price per share equal to fair market value as determined by a third-party valuation as of a recent date.Securities Act on July 26, 2018.

Items 3, 4 and 5 are not applicable and have been omitted.

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Item 6. Exhibits

The following is a list of Exhibits filed as part of this Quarterly Report on Form 10-Q:

Exhibit Number

Description

Location

~~Exhibit Number~~3.1

~~Description~~

~~Location~~

~~3.1~~

Amended and Restated Certificate of Incorporation of Tenable Holdings, Inc.

Previously filed as Exhibit 3.1 to the Company's Current Report on Form 8-K (File No. 001-38600) on July 30, 2018

3.2

Amended and Restated Bylaws of Tenable Holdings, Inc.

Previously filed as Exhibit 3.4 to the Company's Registration Statement on Form S-1 (File No. 333-226002) on June 29, 2018

4.1

Common Stock Certificate of Tenable Holdings, Inc.

Previously filed as Exhibit 4.1 to the Company's Registration Statement on Form S-1 (File No. 333-226002) on July 16, 2018

10.1

~~2018 Equity Incentive Plan~~Share Purchase Agreement, dated as of February 10, 2021, by and ~~Forms~~among Tenable Network Security Ireland Limited, Alsid SAS, the shareholders and warrantholders of ~~Stock Option Grant Notice and~~Alsid identified in the Purchase Agreement ~~and Restricted Stock Unit Grant Notice and Agreement thereunder~~

~~Previously filed as Exhibit 10.4~~or joined to the ~~Company's Registration Statement on Form S-8 (File No. 333-226347) on July 26, 2018~~

~~10.2~~

~~2016 Stock Incentive Plan~~Purchase Agreement pursuant to a joinder agreement, and ~~Irish Supplement~~Shareholder Representative Services LLC, as the representative of Alsid’s shareholders and ~~Forms of Option Grant Notice and Agreement and Exercise Notice and Form of Restricted Stock Grant Notice and Agreement thereunder, as amended to date~~warrantholders thereunder.

Previously filed as Exhibit 10.1 to the Company's ~~Registration Statement~~Current Report on Form ~~S-8~~8-K (File No. ~~333-226347)~~001-38600) on ~~July 26, 2018~~February 10, 2021

~~10.3~~10.2

~~2012 Stock Incentive Plan~~Cred it Agreement ,dated as of July 7, 2021 ,by and ~~Form of Notice of Stock Option Grant, Form of Stock Option Agreement,~~among Tenable, Inc., the lenders party thereto and ~~Notice of Exercise~~JPMorgan Chase Bank, N.A., as administrative agent and ~~Common Stock Purchase Agreement thereunder, as amended to date~~collateral agent.

~~Previously filed as Exhibit 10.2 to the Company's Registration Statement on Form S-8 (File No. 333-226347) on July 26, 2018~~Filed herewith

~~10.4~~31.1

~~2002 Stock Incentive Plan and Form of Notice of Option Grant, Form of Stock Option Agreement, Form of Notice of Stock Option Exercise and Form of Stock Award Agreement thereunder, as amended to date~~

~~Previously filed as Exhibit 10.3 to the Company's Registration Statement on Form S-8 (File No. 333-226347) on July 26, 2018~~

~~10.5~~

~~2018 Employee Stock Purchase Plan~~

~~Previously filed as Exhibit 10.5 to the Company's Registration Statement on Form S-8 (File No. 333-226347) on July 26, 2018~~

~~31.1~~

Certification of the Principal Executive Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

31.2

Certification of the Principal Financial Officer pursuant to Rules 13a-14(a) and 15d-14(a) under the Exchange Act, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Filed herewith

32.1*

Certification of the Principal Executive Officer and the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

~~Filed~~Furnished herewith

101.SCH

Inline XBRL Taxonomy Extension Schema ~~Document.~~Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase ~~Document.~~Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase ~~Document.~~Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase ~~Document.~~Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase ~~Document.~~Document

104

Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101.SCH, 101.CAL, 101.DEF, 101.LAB and 101.PRE)

________________

(*) This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TENABLE HOLDINGS, INC.

Date:

~~September 7, 2018~~July 30, 2021

By:

/s/ Amit Y. Yoran

Amit Y. Yoran

~~President,~~Chairman and Chief Executive Officer ~~and Chairman~~

(On Behalf of the Registrant and as Principal Executive Officer)

Date:

~~September 7, 2018~~July 30, 2021

By:

/s/ Stephen A. Vintz

Stephen A. Vintz

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)



	Redeemable Convertible Preferred Stock											Additional						Total
	Series A			Series B			Common Stock					Paid-in			Accumulated			Stockholders’
(in thousands)	Shares	Amount		Shares	Amount		Shares		Amount			Capital			Deficit			Deficit
Balance at December 31, 2017	15,848	$	49,935	39,538	$	227,800	24,472		$	246		$	20,676		$	(392,587	)	$	(371,665	)
Accretion of Series A and B redeemable convertible preferred stock	—	11		—	368		—		—			(379		)	—			(379		)
Exercise of stock options	—	—		—	—		486		5			1,005			—			1,010
Repurchase of common stock	—	—		—	—		(7	)	(1		)	(74		)	—			(75		)
Stock-based compensation	—	—		—	—		—		—			5,423			—			5,423
Net loss	—	—		—	—		—		—			—			(33,038		)	(33,038		)
Balance at June 30, 2018	15,848	$	49,946	39,538	$	228,168	24,951		$	250		$	26,651		$	(425,625	)	$	(398,724	)



(in thousands)
Years ending December 31:
2018	$	2,914
2019	5,035
2020	3,909
2021	7,440
2022	6,187
Thereafter	58,301
Total future minimum lease payments	$	83,786



	Three and Six Months Ended June 30,
(in thousands)	2018	2017
Redeemable convertible preferred stock	55,386	55,386
Stock options	19,521	13,939
Restricted shares	1,088	1,583
Restricted stock units	971	—
Total	76,966	70,908



	June 30, 2018
(in thousands)	Actual			Pro Forma Adjustments			Pro Forma
Assets
Total current assets	$	105,987		$	266,515		$	372,502
Total noncurrent assets	63,371			(2,683		)	60,688
Total assets	$	169,358		$	263,832		$	433,190
Liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity
Total liabilities	$	289,968		$	(1,168	)	$	288,800
Redeemable convertible Series A preferred stock	49,946			(49,946		)	—
Redeemable convertible Series B preferred stock	228,168			(228,168		)	—
Stockholders' (deficit) equity
Common stock	250			679			929
Additional paid-in capital	26,651			542,435			569,086
Accumulated deficit	(425,625		)	—			(425,625		)
Total stockholders' (deficit) equity	(398,724		)	543,114			144,390
Total liabilities, redeemable convertible preferred stock and stockholders' (deficit) equity	$	169,358		$	263,832		$	433,190