TENB - Earnings call transcript Q2 2019

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Operator

Greetings and welcome to the Tenable Second Quarter Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the conference over to your host, Andrea DiMarco, Vice President Investor Relations and Strategy. Please go ahead.

Andrea DiMarco

Thank you, operator, and thank you all for joining us on today's conference call to discuss Tenable's second quarter financial results.

call Vintz, Yoran, Chief the Officer; Chief on Steve and Financial me today Tenable's Amit Executive With Officer. on results, Prior our to is financial website. earnings issued Relations available which release for of this the second call, our the Investor we section quarter

threat Let the and will competitive market, forward-looking expectations year in third and in and the that business, products for statements the statements relating XXXX, we call, full drivers our our of and the in for and changes industry and solutions new the including landscape position security you demand in innovation our in growth growth to in adoption me during remind services. make planned course Tenable's Tenable's the of and guidance quarter customer

involve and beyond to differ of which statements which cause by forward-looking anticipated those some risk these actual are could uncertainties, statements. materially results control, our These from

upon should forward-looking statements rely prediction events. a as You not of future

our disclaim assumptions of our beliefs represent any representative of subsequent any Forward-looking and as outlook. obligation considered of We to or date. only today should forward-looking update be views statements management's any and not statements as

we filed actual those at the important annual further material on the please a the affect with with subsequent Form website XX-K risks SEC, filed results, on that contained SEC the on sec.gov. report to our XX-Q and SEC that report For refer in Form of our could which recent other are discussion factors most quarterly reports available and and

will discuss during non-GAAP we financial In addition, today's call, measures.

these reconciliations includes today that measures. Our GAAP we issued earnings non-GAAP for to release

over And to now call turn let Amit. me the

Amit Yoran

you the us thank on call joining today. Thank you, Andrea, and for

guidance profit quarter, revenue to year grew are all and our and our grew outlook. we raising improving across revenue current exceeded metrics target $XX to $XX For full for billings million, million. the for and year-over-year We second quarter, the XX% year-over-year calculated XX% the

we our among America, with in financial energy In sectors a enterprise Latin including of business enterprise we seeing and across outlook continued range year global services, transactions, a are in current We India, broader strength our enterprise conjunction healthcare resulting others. billings. are for Japan, also saw and larger cycles, calculated sales and the including more multiple our geos applying which longer to complex

million Exposure is the This I'd With now interest that, vulnerability current color million in strong. for Customer market. to for some reflected seeing calculated remains provide in XXXX very $XXX $XXX on and guidance to what demand and Cyber like we're the management of billings.

with experiencing. environments. sales to to demand are pleased and able address across very we we the complex broader are technology activities cases are of generation We turning set Tenable Organizations the use uniquely are because

remain very ads, deployments by and particular, are prospects sizable We net quarter the a which in evidenced we for and the are our the interest XX risk-based the This from of positive great enterprise evaluating new strategy of In Tenable. record a about need Cyber is Exposure solutions X-figure is vulnerability management new that Tenable. new the in for for us. demonstrates high This validation platform number seeing growing significant the of represent market. outlook wins XXX customer

growing a best-of-breed that portfolio opportunity. developed solutions address strategic large, differentiated have We highly market of a highly and

market. This that clear path are our the scale adds continues again, And We indication in the on to for provide in shift solutions and compliance-based reinforced well the customers right platform adds be are confident risk-based increased we that traction we landing future. a experiencing to positioned and at from are new the enterprise X-figure marketplace.

been mitigating which Cyber this providing manages for challenge technology of Prioritization and assets, risk metrics prioritize for reminder, head-on. Prioritization exposure Exposure, Tenable Tenable's management Predictive is has addresses the identifying of and market. a and level recommendations vulnerability huge foundation accurately investigating challenge a reducing As and risk. measures the

with multiple vulnerability learning own correlate threat data our across to data machine sources. leverage We data

that Our leading efforts we to conference assessment In of vulnerabilities focusing how Predictive and a most. exploitable both Tenable.io. launched a particular user matter up capabilities vulnerability activities Edge, remediation our dramatically month in Tenable.sc on the on improves QX, Prioritization by

new of A with talked adopter few their months on later, about some customers our got experience up early stage and this capability.

we CISO vulnerability. healthcare of of Prioritization provides patch insights One the about into over shared about real-world awareness a threat how particular what context churn of first. potential our sending talked critical constant a customers deciding and prioritization, Their importance stressed of Predictive large do the

IT engagement enhanced significantly technology and Prioritization across security teams. their Predictive operations Our

process Predictive customer that productive. The and efficient indicated much Prioritization patching made more the

our Another mentioned pleased to is platform. say Cyber for at powerful how saving them. of I'm staff Prioritization the time customer, only capability needs remediated. midsized on a it's a said what analytics Tenable we to tremendous of very Lumin, Predictive information focusing a They Exposure amount be demo services unveiled their company, Edge,

will by to approach adds Prioritization together the vulnerabilities our of a Lumin Cyber with Lumin innovation criticality, Exposure. to Initially, many measure the Predictive correlate first approach. the metrics bring shifting risk-based from enhances threat-centric analysis asset to

the participating on organizations broadening trend the and impacted asset. benchmark currently we a business is criticality the being feedback select group accurately great score, their that we'll the are likelihood can by Cyber in vulnerability Based customers eval. be particular customers. on would be the Lumin, Lumin getting; of of exploited of number Exposure With based evaluated and the significantly

from now just vulnerability to highlight like the growing I'd management's as that, wins a quarter strategic importance. of evidence X-figure few With

Cyber Exposure. securing role investments in Our the continued cloud and in

also audit a wins, inventory which security and information infrastructure for had One to They the of secure our to an their environments multiple division company, spanning multiple had secure needed cloud vendors. countries. team logo public asset a formed global cloud technology heterogeneous newly new across

their Tenable.sc connectors AWS customer, integration with cloud other along For and asset for Splunk, solved with our with this discovery needs technologies.

example the our decision-maker new reputation brand sc used a is This rapidly a for as and us customer assets. cloud prior the logo expanding a equity told win brand addition, helped company. In that Tenable's at coverage of great this win

was company. win, capabilities the VM partners with new integration logo better maturity accelerating ServiceNow. win, of and and a API reporting customer such XXX was better a Another very and their needed as Fortune competitive prioritization This program healthcare

This Tenable.sc a days. is customer example point great which Tenable.io as of cross-sell web scanning, made and and X combination chose scanning with a This X competitor a accuracy took performance products. and suite in our container, to Tenable ability of part Tenable's services. a the unified application hours, turnkey improved full multiple products PCI capabilities professional platform. of

approach cyber risk, evidence go-to-solution continues understanding this positioning market wins are the best-of-breed as critical the to Tenable of these All that strategic in prioritize category. the to

at I'm Feringa we public extensive of Worldwide such as to Sales. as have that also excited announce has running appointed sales Dave experience software companies high-growth FX. Dave Head

has During strategic tenure he with Dave enterprise oversaw sale. has since experience of at with growth tremendous the billion and larger, his from beginning the more FX, Tenable million $XXX to been $X.X year.

Steve, John to acknowledge our John Before departure the the Negron, Officer, from Revenue growth. for his I of want to call I contribution Chief turn to organization Tenable's the over and thank

our quarter call turn and now to for year. With over through walk to Steve like results the financial to the for that, the I'd

Steve Vintz

you, Thank Amit.

our results. measures, we unless will guidance financial non-GAAP year full of you and momentarily, except today otherwise. financial by reminding review for revenue, begin but discuss are with I'll results QX stated our discuss that will QX I'll a start I all

GAAP on the the may earnings reconciliations As earlier our posted today start Andrea found of release mentioned, non-GAAP website. in at call, to issued be and our

same over recognized $XX.X Now the representing our quarter subscription quarter the the was quarter second a that last worth of of the noting revenue results in model. was onto the XX% recurring, million, approximately for is quarter. benefit growth which It's for year. Revenue our XX%

current plus million revenue the Calculated in quarter, grew in year-over-year current to of recognized billings, the deferred defined XX% change as the $XX.X quarter second total XXXX. revenue in

investment customers momentum. of One the customer $XXX,XXX total generate is we in of customer quarter XX rate highlights and higher added continued the focus in of including bringing market, a the number land resources, named This of customers spending adding of enterprise expand. account We the result annually our healthy to new X-figure quarter, of in to reps, X-figure the in $XXX,XXX. excess is are new where

a we VM-wide program. enterprise quarter, platform from enterprise opportunity to customers. see new Another XXX important greenfield added point to continue second we make without formal still a is the In customers that robust

a any given As in and we much as reminder, can vulnerability quarter Exposure adds as as spending X/X of from priorities. X/X logo new our management Cyber come increasingly more opportunities, to strategic this greenfield continue broadly become and to expect

be note to continue want also that to strong. renewals I

quarter-to-quarter. mind, Our net Keep upsell from include XXX%. fluctuations was in license XXX%. rate dollar rate quarter this the And there the when rate will be natural was perpetual you in customers, for retention

on cloud is with profitability. I'll Gross expected we now is XX% last as XXXX. of was par our and QX our more delivery to than in infrastructure which that turn QX year expenses This making are offers margin requirements. of with platform adoption efficiently. and in deployment public better investments Tenable.io are QX, the and gross globally, enjoy demand on margins product customers' all Overall, platform based Tenable.io increasing providing attractive Tenable hybrid for scaling a while options continues on to

additional and add presence points new to globally. continue We of functionality

expenses. to turning operating Now

focused QX. down This from represents QX on expense quarter natural and XX% million some in XX% term QX in quarter. $XX.X Sales improving in in essentially to with XXXX compared quarter, long marketing of are to the and last revenue the flat was million $XX.X over continue We business the leverage second operating see business the in leverage prior our in and for year. the

capacity, $XX.X time. to percentage first number as year events in the R&D over and QX expense, of of the As incremental a higher last year. other marketing in half sales as expense was a leverage QX a reminder, sales to compared of expected due typically well which was as of in produce industry is million in to million and revenue, large $XX.X investment

remains $XX a R&D in year paradigm and across IoT, science, As quarter products $X.X in down million expense compared the QX QX data but including of year. of analytics versus and percent last revenue, XX% from Innovation around XX% priority to coverage for of all our last was us QX. assets, the for XX% top and especially cloud in G&A containers. OT, new was million of

being largely XX%, percent which a with is of As G&A from and quarter. new XX% XXXX costs public last revenue, of from was increase company. QX flat down associated The year-over-year reflects a

in $X.XX last second year. share. was a quarter negative QX. loss loss guided non-GAAP of which year, negative to XX% loss in range a loss was per Pro a above the Non-GAAP compared million the XX% share of for of our which per in QX $X.XX, is to forma of non-GAAP operating loss to $XX.X was $XX.X quarter, and XX% negative operations onto $X.XX from million Now margin compared last $X.XX

with revenue overall remainder better-than-expected Approximately, to and operational due to margins the efficiency. better $X.XX beat of the was attributed gross

Our as the approximately year full to in the increased EPS for realize guidance operating has leverage $X.XX we model. continue

sheet. quarter burn free Now for equivalents compared We $X.X investments. to cash first to in on for cash million the burn flow a balance was million and second with quarter quarter $XXX cash focusing In $X.X the the flows, of regard and finished the short-term million cash of XXXX.

employee stock purchased included plan shares are received in flows activity cash benefited $X.X subsequent activities. are as flow operating free The million related QX quarter. financing by amounts the reclassed as from employees in will purchase a be cash Such the from when contributions

net Since and of expenditures a XXXX. on $XX landlord. from of ESPP capital reminder, basis. million topic consists impact for we're of on second cash flow headquarters of continue offset expect $XX not total expected in movement a this Notwithstanding a of significant an to new allowance improvements construction by build-out, use as the on a we equipment to the the in half the approximately to cash the flow, that on for be have cash will million This free is basis, of leasehold primarily million annual quarterly $XX

in the approximately of XX timing to new the the million and half terms in and towards fourth $XX more half of approximately weighted In CapEx XXXX. is XXXX second be anticipated quarter HQ heavily million first of

become our million $XX we still cash exit what with have consistent are out expected new for costs. which only addition amounts headquarters to to is of be the XXXX. to just incurred this The related normal project, is targeting in as We're CapEx. previously on So to clear, to of flow positive be pocket build-out our free our discussed we

to turn let's guidance. Now

share in weighted shares and million the non-GAAP average range the of For to currently net million. loss net $XX.X third million of million, XXXX, $XX.X to quarter of of revenue range in assuming operations the loss range Non-GAAP $XX.X we to in expect to the non-GAAP of million loss from $X.XX be pro in be outstanding of the XX million XX range to common per to million. XX forma XX $X.XX

million For the the $X.XX loss billings non-GAAP in of we XX in shares from current full loss million of of million, $XX.X to of million expect assuming revenue XX operations range and year non-GAAP $XXX million. common $XXX range currently to million calculated to XXXX, million of XX $XXX million net Non-GAAP $XXX the outstanding to XX million. per share net pro to $X.XX loss of average range in weighted the forma

success As discussed leadership strategy. seeing sales year This in our and makes opportunities calculated an outlook, profit revenue pipeline. with Well, With our earlier, continued current complex a potentially raising full evolution large this change variable. we are go-to-market more outlook. of our the to positive is we the targets the more are in improving our combines billings, larger, of with mix regard increasing for enterprises in

a As our in billings the wider appropriate worth It's guide we Calculated for both current quarter new seasonally business largest and to reminding business. is seasonal calculated believe range represents also quarter renewals. previously for fourth billing the then result, it's provided. a patterns and you of our strongest to of current

while QX In growth. summary, results progress market larger enterprise and particular of with in our delivering the we're pleased opportunities, we're making and traction leverage continued the in

closing And Amit for I'll call now the back to turn some comments.

Amit Yoran

Thanks Steve.

be to opportunity management vulnerability and the excited cyber continue pioneering exposure. about We and

increasing the strategic of the playing now VM our with technology predictive pleased to combination is in believe differentiated We are We stronger very market. prioritization. even the see role

our to successfully their strategic in Our to data our and aid secure to approach position capabilities digital integration VM Tenable customers journey transformation. their

joining today. many events. for during forward the to all look seeing call you our you We Thank of upcoming

X. Citi's in again in and Vegas appreciate also in Tenable. Deutsche to XX. you Black be interest will We hope Annual We’ll participating of New we’ll in year Technology Las York Bank's We at Annual on person. Conference many see this September be September be Conference in at Hat on We your Tech

to We now questions. open like the up call for

Operator

Our Sterling from question. proceed your [Operator the Instructions] Auty JPMorgan. question of comes Please with line with first

Unidentified Analyst

question. the for like my I with This about Sterling. is for on have wanted Thanks you that IoT Matt Siemens. partnerships seen the taking just traction to guys ask

If you guys could comment that? a bit on

Amit Yoran

highlighted the adoption in in early the operational we’re I transactions, IoT in seeing we've previous security But earnings system in notable Yes, technologies our and think interest it's several some technology control cycle. calls. of increased which

we're that positioned continue We to well extremely see start teams role momentum critical security and building, and we IT playing technology. in think CSOs a increasingly operational as securing

we're it's great It's but early opportunity. the in we market, we positioned. a So, think future think well

Operator

of from proceed the Stifel. Please with next comes Our line question question. Talpaz Gur your with

Gur Talpaz

on driven billings enterprise So in that. of sales current I guide. in of more you here Amit, could some coverage, the maybe more terms longer hoping here the why some wider perhaps more expansion bit or elaborate color being broader part in mentioned in complex end, inherently the give are to of was that you Is levels cycles becoming and driver being sales asset a incremental of in the complex? us part you're if seeing range just these the of as because

Amit Yoran

Yes, thanks Gur.

with taking their they and - enterprises exposure proof the cyber To maturity me there of think program. market. of to just have is seriousness risk of previously, increasing are it. cyber greater it's of I their this VM definitely core More assessment then that part the is security

in period, approaching exposure. digit evidenced six enterprise we're in that's we and the so, the seeing I as platform well more And wins VM see number how enterprises strategic cyber increase more as of by transactions. lot in new the being they're And a think

But this maturity enterprises And accelerating. of trend, so are and about VM the sales that's transactions. translating strategic also into we VM, see VM being involved more more with and just the where cycles of engagement around people process, complex more their in sort their larger

Gur Talpaz

of months this And seen of far of also alluded did as I to thus few a to the then for What's marketplace contributor could maybe you this to? us give kind you've hoping out a complexity, that has Lumin itself, but some increased launch value in strategic sort the response sort you like, sort also quarter being just you Lumin. in of with color was been what customer been increased now. the

Amit Yoran

the increasing Yes, a next And we on have - of Lumin customers sorry to available our population. sub-segment or will we customer number I'm be of the recently period short platform. - the

risk initial then we incredibly exposure. we've how this is their the has as several saying think elevating the - I response understanding about cases favorable and us. at conversation this changing And people's actually in looking think brought into been enterprises really of starts hey, CIOs it

And type large where looking are in enterprises, say, out and like other to we a instances similar this. been guys trying lens build organically of we've and hey, with you going

it think does cyber to we exposure. of more nature So, the speak strategic

Operator

Our question William from question. with Blair. Please comes your Jonathan with the Ho proceed of line next

Jonathan Ho

to us regards terms impact is there me, additional sales potential hiring Could give in that all? little well you the color change. of leadership be the to impact potentially whether could of with or Just any there give as as at bit a

Amit Yoran

think don't particular on there hiring. is Yes, I a impact

company's and over cycles scaling, the in tremendous years this think We in of increase year, size larger continued sales sales the growth. Feringa last over you - experience and in has quality and and Dave I couple brought transaction. enterprise seen who earlier of the complex organization

we evolution oriented more three, ago, the enterprise is partner. this of that So of four we years becoming next security focused, stage just enterprise think the began path

Jonathan Ho

or you're that whether product with augmentation? has seeing little what talk prioritization. regard that predictive impact to about or that then you reception for rates win customer And a maybe bit been Can

AmitYoran

some now. our time win of favorable and Yes, we've for had strong competitors fairly period against rates very

released, So not in case. but change we rate commitment Prioritization we the to and VM Exposure Cyber certainly win a that would haven't I'm use Predictive continued attribute aware to

that that as heard it's as a a method view their engages of the and changing pretty this using operations with security team differentiator of customers anecdotally this how strategic significant us. We've nature and are competitive for IT

it. haven't We quantified

Jonathan Ho

one sc terms composition? between anything of there me in the and And terms Was io. then one Tenable just in meaningful mix of there the last from

AmitYoran

was No, no a represent and and growing new percentage the sizable this continues Tenable sales io of our enterprise different. quarter to we're

Operator

the line Securities. Our from with question. next comes Dan your proceed question with of Please Wedbush Ives

Dan Ives

wins in deals? a that of and terms at as are of cycles you're into in consistently as changes Maybe as keep well these going non-competitive ones be even terms from as our enterprise, enterprise looking there perspective, in sales the any you're deals there seeing of who dues the some are you're competition

AmitYoran

focus I'd see in no market. is a past in enjoy our quarter No, say competitive on over continued we the we in most competitive change The and with in commensurate the notable the position landscape provider over favorable go-to-market think material I market recent R&D, thing the investment, and and our really quarters. best-in breed is just both

Dan Ives

as And billings go of the then year. we terms throughout just in

Thanks. just dig billing more the to the guidance. half over year point of as Just back into into maybe your the we side into the and some go of variability on

Steve Vintz

This is that Steve.

seeing seeing larger the are was first up positive having top accounts of funnel. for is commented So evolution the that success we're larger we filling as on deals. our deals around Amit and This time. the last mid-year coming It a hiring year of go-to-market named began strategy, we we're the of earlier, more anniversary

we companies we're necessitates today with creates the for XX wider the that and not leadership of our sales and range million potential that a size. unusual So range change wider variability combined that's given offering is think and the

Operator

with Please of Powell next comes Our Deutsche Bank. the line Gray from with your question question. proceed

Gray Powell

high to broader a do just the just Maybe changed is how XXXX? you at that relative few And last environment in anything view demand months? feel on level, about the XXXX your

AmitYoran

remains procurement's and demand of six nature enterprise the further as of increased if healthy anything, number and No, enterprise the seeing we're market the I the the increased number of increasing and that strengthening. validation exceptionally figure think remains strong platform the and lands transactions environment strategic

to Cyber we the and So excited remain demand with opportunity grow continues about Exposure.

Gray Powell

know, you I anything opportunity? guidance aren't change But guys you that then have of the on And long-term mean call. to I obviously your seen growth this like going view XXXX give would

AmitYoran

the But remain yes, answer guidance - provide Not drive ability Cyber as the to the that before, we're can growth don't long-term We beyond confident market we Exposure we say pioneering. what sustainable now in of given no. size current is the is that just than year. our fiscal especially

place well think positioned So the we're believe and a growth in we in strong all are for elements our we market.

Operator

from comes question Berenberg. of Tilton question. line next your with Our the with Joshua proceed Please

Joshua Tilton

me. Just two from quick ones

out shutdown? Fed one was in quarter little were first there The last to the but because benefit a from any quarter, closed deals over pushed of they the

AmitYoran

business No, Most the the QX. in in extent Fed QX, earlier in the very little. came a shutdown of to from year lesser

little. very So,

Joshua Tilton

just follow-up these involved in then there I in deployment transaction. the And as lot deals enterprise-wide but under be may bat a to to people been look a on sales we regards more asked the expect off assets their more management? land know larger cycle. be Should organizations in elongated it's the

AmitYoran

market. do I Exposure and more think security cyber that's segments other strategic than and see We think larger sales risk this Cyber of and and technologies complexities larger you strategically, are their treating than more of The point because of VM enterprises of are segments market. expands cycles the and security no different their consistent programs security other at procurement both I understanding the and lands definitely strategic with see in

Operator

question Please the next with line with proceed of question. Company. your Nick comes from Yako & Our Cowen Instructions] [Operator

Nick Yako

thinking overall we contribution when you're not model product. Lumin, then But just maybe in just the about revenue XXXX. get into talk you that curious if XXXX? could about pricing And for how

AmitYoran

it to take then and the over Steve. that I'll Yes, of first turn part

portfolio, requirements, number we anticipated have that the follow-up yet of increased and with Pricing model Lumin but a we finalized assets, And market the as Nick product customer to of hear anticipate model seems pricing or disclosed currently be the the aligned base. well as to have for pricing to question? not rest increased specifically asset We model expectations. that scale per price for a with

Nick Yako

maybe Lumin of I if key can in XXXX, areas Yes, the half road-map there's is back company beyond the just for in the big product around more focus but the investment guess of this a anything longer-term, area sort year you obviously in curious XXXX? Lumin and share

AmitYoran

I understanding Tenable's manage activity roadmap in in All perspective core specific use your think and around risk. Exposure risk around Yes, from remains Cyber assessing our three focused case areas. this and better that helping you

first there addition the cloud helping work Exposure So periods. visibility, their is the just of breadth helping workstation where we've compute OT server with lot done so their in you somatic where environment. reflect Their capabilities and really people around not desktop do environments, enterprises to DevOps recent a environments environments, of

team, most, our, Tenable prioritize, vulnerabilities prioritize is and The helping about that risk helping remediate. historically data what we're is most for them vulnerabilities the second been and area enterprises prioritize analytic there people, in in to doing which and roadmaps work understand most assets on matter focus a to which vulnerabilities of help volumes the what's matter translating critical

they analysis well as that to we'll those mature. other group forms capabilities benchmark As their as how be introducing of relative in peer

to really somatic ecosystem. third the to element focused roadmap theme our somatic The - on is

very a we've breed set of As a best of APIs. got provider open

believe AWS our other tight enterprise integrated providers with have technologies. with Splunk, market We providers, status. IT providers competitive and from with and a a breed the with we end also But best in overlap an as those enjoy integration partnership the a minimizes up strategic that perspective capabilities from with preferred perspective. go-to-market well with enterprise, We as strategic ServiceNow, approach of enjoying

Operator

session. conclude reached have And conference. the we gentlemen, the today's end does and question-and-answer Ladies this of

disconnect may this your at your You Thank participation. you for lines time.

Tenable (TENB) 30 Jul 192019 Q2 Earnings call transcript