Q1 2020 Earnings Call
Greetings and welcome to the Hannibal first quarter 2020 earnings conference call.
I'm all participants are named listen only mode. A brief question and answer session will follow the oral presentation. If anyone should require operator systems. During the conference. Please press star zero on your telephone keypad. As a reminder, this conference is being recorded and is now my pleasure to introduce your host Ms., Andrea Markel, Vice President Investor Relations and strategy.
Thank you you may begin thank you operator, and thank you all for joining us on today's conference call to discuss tenable. Its first quarter 2020 financial results with me on the call today Army Gran Tenable, Chief Executive Officer.
You bet Chief Financial Officer.
Prior to this call we issued a press release announcing our first quarter financial results you can find the press release on the IR website, it kind of whole dotcom.
Well, we began that room I remind you that we will make forward looking statements. During the course of this call.
Including statements relating to technical guidance expectations for the second quarter.
Growth in drivers incredible business changes in the threat landscape in the security industry and our competitive position in the market growth in our customer demand for it and adoption of our solution.
<unk> expectations regarding long term profitability the impact of cobot 19, our business.
And on the global economy, and planned innovation and new products and services.
These forward looking statements involve risks and uncertainties some of which are beyond our control, which could cause actual results could differ materially from those anticipated by these statements you should not rely upon forward looking statements as a prediction of future events.
Forward looking statements represent our management's beliefs and assumptions only as of today and should not be considered represent our views as any subsequent date.
We disclaim any obligation to update any forward looking statements or outlook for further discussion of the material risks and other important factors that could affect our actual results. Please refer to those contained in our annual report form 10-K filed with the FCC February 28 2020.
Yeah. The subsequent reports that we filed with the FTC, which are available on the Fccs web site SBC dockets.
In addition, during today's call we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to would not a substitute or superior to measures of financial performance prepared in accordance with gap. There's a number limitations related to the use of these non-GAAP financial measures versus their closest GAAP equivalent.
Our earnings release that we issued today includes GAAP to non-GAAP reconciliations for these measures and is also available on the Investor Relations section of our websites I'll now turn the call over to him.
Thank you Andrea Thank you all for joining us today.
I thought your with those are being affected by the cope with Nike pandemic can you help everyone same shakes our top priority is insurance health and safety of our employees partners and customers around the world.
There's a lot of ground whatever today.
I'd like to pick up on what your share what I've seen a ton of over the past five to six weeks.
And this unprecedented times tangible that's had an incredibly resilient too.
Many employees, we're already working remotely so as a team we're able to adapt quickly continued to deliver on our mission.
We have an amazing company and I'd like to personally. Thank all the employees accountable for their unwavering dedication to helping our customers manage and measure their cyber risk through this environment.
What we've accomplished.
A multifaceted go to market approach helps us maintain dialogue with customers.
With the quick ship to work from home Enterprises must now manage a more distributed network and broader attack surface.
Customer engagement has remains very high as they come to understand risk in this new operating paradigm.
Our customers have to automate and prioritize how they assess unsecured remote laptops, while the entire workforces distributors and what employees begin to return.
Remote systems to the office reassessing their school be an ongoing activity.
It continues to be customers focus on robust vulnerability management programs with an increased attention what applications storefront web sites and cloud environments.
Before her sister customers with remote workforce transition, we immediately extended kind of liar licenses for additional coverage of assets through June 15th.
For kind of let's see enough is professional customers, we offer to tenable I O license with our agent based capabilities.
We're also excited to announce a new major release of our web application assessment platform.
We've already seen some of the benefits starting from our teams agility and commitment to customers during the quarter. In one instance, large food processing company augmented their on premise tubeless see deployment are using agents deployed work from home computers reporting directly to tableau.
Another example, domestic children's hospital worked with search licenses to secure their mobile workforce.
Cyber security remains a foundational part of our customers business continuity planning, we continue to deploy our solutions and serve our customers.
For the first quarter calculated current billings grew 22% year over year and revenue grew 28%.
It was a solid quarter given the environment.
I also want to note that we significantly improved or operating margin I became free cash flow positive in Q1.
We'll continue our balanced approach thoughtfully navigating between improved profitability and investing in growth initiatives. Overall, we remain confident durability achieve positive free cash flow for the year 2020, and believe that free cash flow test systems for the business long term a very attractive.
He will cover the results in greater detail, but I'd like to talk about how we're managing the business through the challenging times.
We continue to see positive improvements in type one size and maturity.
However, the timing of won new business and to some extent renewal transaction will close it's very difficult to gauge right now due to the uncertainty created by Koby 19.
We expected the current dynamics will impact our growth rate for the year.
As a result.
Actively taking measures to ensure we realize art tended operating leverage specifically, we are reducing discretionary spend until we have better clarity on the macro environment.
Doing so well be careful not to impact key areas more business such as sales capacity.
And the levels of Resourcing around innovation and other strategic areas that contribute to our long term growth.
The steps, we take today will enable tunnel to become a significantly larger and more profitable company over time.
We continue to believe that our best of breed focus will continue to fuel attractive growth and profitability.
Dynamics that are propelling our business still remain and we believe we'll continue to striking overtime.
No doubt the next few quarters will be a challenging period for many organizations. We believe our unique business model can help to moderate the impact to us.
Four key attributes to our model one.
Recurring revenue model provides a level of top log visibility.
Two we have diversified land and expand bottle with a focus on large enterprise customers with high retention rates three we have a scalable and efficient business model with high gross margins capable of great operating leverage and lastly before.
Our disciplined cost management approach, we remain on track to achieve positive free cash flow in fiscal year.
2020.
We also have over $225 million in cash and investments and no debt.
These characteristics provides us significant financial and operational strike.
We see a path to manage through the near term challenges presented by Tobin 19, and maintain focus on our long term opportunity, which we believe remains compelling.
We've heard from many customers and measuring and managing Cyberisk remains a key priority.
Vulnerability management assessments automation privatization data integration Du Leman web application scanning and Oh Gee all remain critical to their efforts.
Let me share a few six figure customer examples that demonstrate our strategic value and our commitment to our customers as they navigate these unprecedented times.
First customer nested upsells.
It's also a competitive enterprise platform just displacement with large international automotive manufacturer.
This customer is looking for scalable vulnerability management solution to the play across almost 1 million assets globally.
Customer indicated they chose trying to both because of the accuracy of our products and our trusted brands.
Well the Q1 purchase is intended to cover the I T systems are I T. O T integration provides a longer term OTI opportunity for us.
And to expand into their manufacturing facilities.
The next one is an I.T.O.G. convergence example, large financial institution, an existing kind of let's see and audio customer.
This customers seeking to reduce cyberisk across their data centers, including not just the servers, but also the monitoring of the H.C. systems and other parts of the infrastructure the customer told us that they chose total OTI.
To ensure proper security of operations in the integration of OATI and I T risk with an opportunity to expand to more sites overtime.
And lastly, I'd like to share an exciting cross sell expansion customer domestic software company.
This customer was a heavy cloud user and migrated from let's see the Io and also web and also added web application assessment and live.
He's comfortable and it's a great example of how we can help our customers as they transition to cloud. It also highlights what we can accomplish with customers remotely as we conducted to evolve and pitched Newman all remotely.
We believe there's a lot of evidence that our best of breed strategy in enterprise vulnerability management continues to generate momentum in the market.
Strategic opportunities around the M. continue to present themselves.
Tax surface continues to widen and customers demand more automation and prioritization.
Understanding cyberisk is becoming increasingly important to C level executives boards and audit Committee excuse me exceptional confidence in our future.
Now I'll turn it over to Steve.
Thanks to me.
As he mentioned we're pleased with our results for the first quarter I remain excited about our long term opportunity for cyber exposure.
However, we are currently cautious around the near term environment and macro uncertainty created by the Cobot 19 pandemic.
Let's talk about our results for the quarter, then turned our attention to guidance.
First please note that with the exception of revenue all financial results, we will discuss today, our non-GAAP financial measures unless otherwise stated.
As Andrew mentioned at the start of this call GAAP to non-GAAP reconciliations maybe found in our earnings release issued earlier today and posted on our website.
Now onto <unk>, our results for the quarter.
Revenue for the quarter was 102.6 million, which represents 20% growth over the same period last year.
Revenue in the quarter exceeded the midpoint of our guided range by approximately 2 million.
Revenue was aided by strong execution across the globe, notably in EMEA, and some large deals and they back.
As a reminder, tenable has a very sizable international footprint with operations in over 30 countries and customers in over 160.
This gives us a very broad go to market capability that is not dependent upon closing a few large individual transactions in the quarter to achieve growth overtime, we've been able to achieve growth on our customer base to over 30000 by selling annual pre paid subscriptions, which has resulted in 93% recurring revenue.
Calculated current going to find that's the change in current deferred revenue plus total revenue recognized in the quarter grew 22% year over year, the 99.2 million.
We added 319, new enterprise platform customers this quarter and 24 net new six figure customers.
This brings the total number of customer spending in excess of $100000 annually to 665.
The takeaway here, we achieve solid growth in new enterprise platform customers, but less of a new logo deals were large six figure deals.
Activity levels remain healthy in the quarter and there was a good customer engagement, but the uncertain economic environment did impact our ability to close some deals in the quarter.
However, we were pleased to see the conversion on many new opportunities that we're advancing our pipeline across various industries and geographies.
I'll now turn to expenses and profitability well, we have seen significant reduction in non-GAAP loss.
Gross margin was 83% this quarter down from 85% in Q1 last year and up from 82% last quarter.
Our gross margin reflects increased demand for a cloud based tenable I O platform, which we are delivering more efficiently as we scale.
Let's turn to operating expenses.
Sales and marketing was 55.4 million this quarter compared to 49.3 million in the first quarter last year and 57.7 million last quarter.
This represents 54% of revenue for the quarter, which was down from 61% Q1 2019, 59% in Q4 2019.
It's worth noting that the first quarter reflects continued investment in sales primarily related to hiring more quota carrying sales reps as well as cost for a worldwide sales kickoff and industry events such as ourselves.
I was offset.
And lower non Capitalizable sales commissions relative to seasonally strong fourth quarter sales and to a lesser degree lower spend on travel.
Are there and perhaps more importantly, we realize leverage in the quarter from the optimization of sales overhead and our target markets, which we expect to be a source of leverage in the future.
R&D was 23.9 million compared to 19.99 in the first quarter last year and 20.4 million last quarter.
As a percent of revenue R&D was 23% compared to 25% in the same period last year and 21% last quarter.
Sequentially higher spend reflects the full quarter impact of our investment in or operational technology offerings via the acquisition of energy as well as further development activities to enhance woman and other cloud native products.
GNS was 13.8 million compared to 11.9 million in the first quarter last year and 12.6 million in Q4 2019.
As a percent of revenue GE and he was 13% this quarter and last quarter and down from 15% last year.
Non-GAAP loss from operations was 7.7 million compared to a loss of 13.2 million. The Q1 last year and 11.1 million last quarter.
Non-GAAP operating margin was negative acres that compared to negative 16% for the first quarter last year and make it up 11% last quarter.
Overall, we're very pleased with a significant progress we've made and our operating margin, which reflects our ability to officially scale our business and we believe positions us well for continued improvement for the remainder of the here.
Oh this translate it to significantly P.S. upside as or non-GAAP net loss per share for the first quarter was nine cents, which was nine to 10 cents better than expected.
To summarize two to three cents of the beat was attributed to better than expected revenue, while approximately seven cents resulted from better operational efficiency and lower costs.
Now, let's turn to the balance sheet, we finished the quarter with 226.7 million in cash cash equivalents and short term investments.
Turning to cash flow, we achieved 3.9 billion a positive free cash flow, which is our first quarter a positive cash flow as a public company.
This compares favorably to a free cash flow burn a 3.2 million in Q1 of last year.
That's a side note the construction of our new headquarters is progressing and nearing completion with an estimated 5 million of net capex remaining across Q2 and Q3.
With the results of the quarter behind us I like to discuss our outlook for Q2 and the rest of the year.
I'll start by echoing I meet comments with over 90% recurring revenue, 80% gross margin.
Hi, renewal rates and strong unit economics were confident in our progress towards becoming a little a 40 company.
Leading indicator the strategy is that we turned free cash flow positive this quarter and expect to generate positive cash flow for the whole year and beyond.
Given the fluidity of the current environment, we will continue to manage the business in a disciplined way and we'll make changes that's necessary.
With that as a backdrop, let's turn the guidance for the second quarter. We currently expect revenue to be in the range of 101 million to 103 million.
Non-GAAP loss from operations to be in the range of 5.5 million to 3.5 million.
Non-GAAP net loss to be in the range of 6 million to 4 million.
Non-GAAP net loss per share to be in the range of six cents, a four cents, assuming 99.8 million weighted average common shares outstanding.
Well, we're able to provide this outlook for Q2, we have noticeably less visibility for the full year, especially for calculator current builds.
TCB, it's not only a reflection of new HCV bookings in the quarter, but also early renewals and multiyear prepaid deals.
Since the crisis began.
We have been stress testing, our model and running a number of scenarios based on various assumptions.
Given the level of uncertainty around the duration of the health crisis, and the rate and pace of economic recovery and the extent to which all of these factors will affect our customers and the industries in which they operate there's a wide range of outcomes for the full year, which we are confident we're prepared for however, assigning I got it range for the full year, just does not feel appropriate.
Our expectation for a business in the current environment is as follows growth in new logos will likely be lower.
I've sells into our installed base is also expected to be slower, but feel less of an impact.
Renewal rates are expected to remain healthy, but we'll likely experience a modest decrease from our high historical levels.
Well, there's uncertainty created by the current environment. What we do know is that we will remain nimble and deploy our go to market resources, where we see opportunity as a global recovery unfolds.
We'll also continue to revisit the efficacy of our cost base to ensure we strike the right balance between investment in our desired operating leverage.
Before turning.
Back to me I want to provide some perspective of what we're seeing so far in the second quarter. Overall, we're pleased with the size of maturity of a pipeline activity levels.
But keep in mind like many software companies, we are backend loaded in our performance will depend on how we yield against those opportunities.
In summary, kind of it remains well positioned to deliver strong growth and profitability over the long term.
With develop comprehensive foundational cyber exposure platform that provides significant value to our customers.
We are presently managing the business because the current challenging macroeconomic environment continued to execute on our long term strategy. We believe our ability to remain on track to generate positive cash flow for the full year is a sign of the strength in our business and now I'll turn the call back to meet for some closing comments.
Thanks, Steve.
It was a tough decision to withdraw guidance, but we believe it's appropriate given the circumstances.
There's a difference between the ability to accurately predict CCB annual revenue or earnings per share and the confidence that we have in our business over the longer term I considered have great confidence in our business.
We believe our cyber exposure platform will become even more critical enterprises consider the cyber risk in combination with business context, as a critical piece of their business risk management.
Regardless of the macro environment, we believe the combination of our differentiated technology striking product portfolio did it integration capabilities and breast agreed strategy position us for long term success.
We hope to see many of you virtually at the J.P. Morgan Conference on May 14th and the William Blair growth Stock Conference on June time.
I'd now like to open the call up for questions.
Thank you will not be conducting a question and answer session and they answer at this time, we ask that you. Please limit yourself to one question and one follow up and we invite you to rejoin the queue for any additional.
He would like that's the question. Please press star one on your telephone keypad confirmation, telling one indicate your line is in the question can you make prestart too. If you like you move your question from the Q CWIP I, just don't speaker equipment, maybe not married to pick up your hands that before passing the Starkey what we call for your question.
Our first question comes from the line of Sterling Audi with JP Morgan. Please proceed with your question.
Hey, guys. This insight on for Sterling. Thank you for taking my question. So given that the margins so much better than become corridor and even in the outlook.
What has changed in the capital structure or are you seeing the Tianjin piece of fighting or is there any other factor behind that.
Hi, This is Steve Thanks for your question.
We and this is something we mentioned on the Cogs specifically in areas such as sales and marketing we had a quota carrying reps in the quarter, it's something that we plan to continue to do throughout the year.
But I also think it's fair to say the the pace in which we hire those reps will probably be more moderate moderate than initially expected or we're going to wait and see how the global crisis unfolds, we'll remain nimble and quick and reevaluate, but continuing to hire is really important to us.
You know I think being the other side of that is why we plan to to make investments I think we want to do so in a very efficient way and so we're going to continue to evaluate non quota.
Related had a investments in costs.
And evaluate what we call to tell ratios and with emphasis on more tooth, which are quota carrying sales reps and driving greater efficiency and and the rest of the areas of the sales and marketing organization.
<unk>, Thank you Buck and <unk> and one follow up so what are you didn't from or what are you getting from the customers in terms of <unk>.
There's enough B M. In that environment are you seeing any <unk> demand and the scenario.
No I think it's premature to say, there's a pull for demand in a week. We we were actually very pleased with the print the quarter hopefully that is apparent we added a good number up new enterprise customers as well as a a number of new.
Net net new six figure customers. So overall you know were please what we saw in Q1, but.
No.
Global crisis really started the last three weeks of the quarter they happened to be the busiest times.
Our software called me last few weeks decoder are always very busy.
We're dealing with us for a full quarter in Q2, so for US I don't you know I don't I wouldn't characterize is saying that we saw a pull forward of the man.
We were busy at the other quarter busy closing deals were actually used with the right in which we did so but we obviously have a have a cautious outlook the rest of the or just given some of the uncertainty surrounding it.
That's helpful. Thanks, guys.
Thank you. Our next question comes from the line of Melissa Gorham, France, <unk> with Morgan Stanley. Please proceed with your question.
Thank you and I hope you all are doing well I understand why you would pull the guidance for the full year, just given the uncertainty which is not unique to tangible but I mean, you have a lot of conversations I'm sure I with customers and so I'm wondering if you could maybe just provide a little bit more color around what you.
We're hearing from those customer conversations, particularly you know how csos are viewing vulnerability management.
And and they're spending incrementally on V. I'm for the rest of the year just recognizing there still is a lot of uncertainty, but what are the conversations today, suggesting.
Yeah.
Great question more so thank you I think a you know we have not seen a significant shifts.
From a security prioritization standpoint, so you know security remains a I would say sacrosanct, but it remains you know high priority for enterprises.
And we see that within the security budget within security spend that GE I'm understanding risk.
And how to more efficiently manage risk remains.
A key high priority for for the she says that we talk to.
I think what is reflected in our decision to pull guidance is.
In increased.
Sort of uncertainty if you will in the process for close you know we know that that Ah you know budgets can be shifting budgets are gonna be changing there'll be more closely scrutinizing process to close transactions will be more closely scrutinized and that may cause.
For some delays.
And in certain segments of market, you know uncertainty around what those budgets are looked like it how they'll shifts. So I think with that we're trying to just say well look to pick one is healthy continues to grow at a healthy clip. We just want to we just don't have the type of the you know the precise visibility into the close process that we've had.
I think in previous quarters.
Okay that makes a lot of sense and and Steve you talked about upsell activity, you're anticipating upsell activity to be healthy, but maybe not as robust when we spoke to you all on a quarter ago, you weren't very enthusiastic and and bullish I guess on on the lumen early adoption.
And just wondering what you saw in Q1 and whether this current environment, maybe puts a little bit if a pause on the momentum that you were seeing an early days.
Yeah, I think with regard to momentum overall.
I think it's hard work, we're happy with how the quarter played out I think we acknowledge we were like to close a few more deals and specifically if you more larger deals than maybe what we've seen in quarters past, but adding over 300, new enterprise platform customers 24, net new six figure customers.
And to be able to continue to do that especially in a market like this I I think it certainly notable we launched loom ending Q4.
Last year and Illumina products, we sell primarily the enterprise customer so given enterprise sales cycles, you know our expectations at low then we'll be more contributor the second half a year, but the first half.
Werent work, we're very pleased with the pipeline for lumen and very pleased with the pipeline just more broadly I think a fair to say that the size and the maturity of the pipeline are very strong and there's really good customer engagement and we're continuing to move deals.
Ah you know its new deals throughout the throughout the pipeline and then the question Mark is the yield against those opportunities in a market like desk, but overall, we're pleased with what we see but we're obviously, taking a more cautious outlook and you think the value prop of you know VM and cyber social more broadly aluminum particular Albert.
James strong even in a market like this.
Sounds good thank you.
Thank you. Our next question comes from the line upgrades Helpouts with Stifel. Please proceed with your question.
Okay, great. Thanks for taking my question I mean, I kind of core VM, you mentioned, a handful of pretty interesting OATI and the Illumina win.
Can you talk about the view on appetite for these solutions recognizing the term uncertainty and looking well beyond that just the mix of the conversations you're having in how you think about just the bill maybe looking even didnt into 21.
Yeah, we're a great great to hear from your we you know we continue to see very healthy <unk> healthy pipeline build in OTN lumen. Yeah. I think in addition to the comments he was making about Ah you know sort of Lumens relevant you know the more complex the environment.
The more distributed and top lucky attack surface, the more of an opportunity exists for lumen to come in and help.
Csos, an enterprise is really understand risk and understand the prioritization of how they can most efficiently reduce risk. So I think as we've seen the changes in attack surface Morphin T cells are trying to figure out okay. What does this mean to me now they've got a bunch of remote workstations and I have no. Some changes in compute behaviors, what does that mean from a.
I think lumen can help them get get their arms around that it you know me and really the.
The fundamental your requirement to understand cyber risk in core business processes as well there you know sort of manufacturing critical infrastructure retail inventory management. All these things remain absolutely critical and so you know the timing.
We have of deals is certainly a challenging to understand in this environment, but.
You know, we've we've seen no change no notable change in our ability to add pipeline.
You know at opportunities to the pipeline and I think the sales teams.
Enthusiasm that Ah you know that these are the types of transactions that they can they close which need to to get our arms around what what the macro environment means from a from a transaction timing perspective.
That's a that's helpful and maybe one for you Steve you've made the point to the stress if you're going to be Scf positive first for the year is there anything here that could happen over the next few quarters like an ultimate leads to buy your a your your for you you are pretty stretched sitting here to say that you're going to be FCF positive. Despite the uncertainty.
[noise] no not that we anticipate Gore a matter of fact made a point the called that out we talked about becoming cash flow positive on our last call even with some of the uncertainty surrounding it.
We remain committed to becoming cash flow positive there's a lot of natural leverage in our business I think you're starting to see that.
Given the PSB given the fact that we are we turn cash flow positive almost three to four coders earlier than expected when we talked about on one or more public.
So we said our our intention is to become free cash flow positive by the time, we exit.
2020, and here, we are doing it really in the first quarter. So we're pleased to see it we think there's a lot of leverage in the business. We're excited about the long term opportunity and we're going to continue to invest but balance those investments a in a way that also creates operational efficiency for it for us all.
That's great. Thank you.
Thank you. Our next question comes you know line of Jonathan Ho with William Blair. Please proceed with your question.
Good afternoon, Yeah can you maybe quantify for us so some of the benefits that you saw I guess from organizations that maybe accelerate that some of their buying activity and where maybe dressing things like work from home technology is buying your laptops and outfitting them and how do you think about that that opportunity, particularly.
You know ER and with regard to how recurring it is are you seeing that persist into April and and it could this be and your normal about that adds to your your opportunity set.
You know I didn't know that I would characterize it sort of an acceleration of business I think that there's a you know the change in computing environments and the way enterprises are are supporting their employees as of <unk> has evolved and I think that to somebody you know sionyx that plays to our strengths are we've always.
You know touted the you know that would bring the sort of greatest flexibility of how to assess for reston. So in this environment, where there's more work from home you I think there's various methods and techniques, including you know agent to cloud based deployments or you know that we've seen.
Are you know customers adopting we've made some more flexible licensing seems available to them. So they can.
Leverage.
Yeah. This part of our technology. So it's really always seemed a little bit of a morphing of the business.
More so than an acceleration in terms of how.
You know you know whether or not we anticipate this to you know to sort of sustained itself going forward.
Yeah, the macro environment will largely dictate that and you know we've seen all sorts of different approaches.
From different states in fact around the globe to the returned to work from home and Yeah. We think yeah that'll sort of create another wave of security requirements for enterprises as these remote.
Systems now come back into enterprise environments, with all the applications and the downloads and the potential malware and everything else.
It is going to mean that assessing vulnerability assessing risk assessing exposure to the enterprise.
It's just gonna have to be done in a more mature fashion than has historically and yeah. We think that you think that could be I could bode well for business that said you know the macro environment is is getting also dictate.
The pace business as well.
Got it and can you talk a little bit about your exposure based on industry vertical I mean, clearly you guys have you know a large U.S. government business and yeah, we would assume that's less impacted but there's other industry. The but potentially are more can you can you maybe give us a little bit of color around maybe what you're seeing and assuming on the around the industry piece of this.
Hi, Jonathan this is Steve.
Yes the.
Good news here is that we're fairly diversified we have over 30000 customers I think one of the largest customer bases of any public security company.
And we transact sales in 160 different countries with offices in an over 30, so a with a sizable and very diverse customer base. If you look at.
Areas, such as retail hospitality.
Transportation, SaaS travel and aggregate us less than 10%.
Of our total south so the good news as we don't have significant vertical concentrations.
With exception of the U.S. cover we talked about how it's Joe it's on average about 15% of art of our total sales and we think that's actually a good place to be at a market liked us. So overall, we feel like we're pretty broad pretty diversified and with no significant concentrations and we think that's that's that's good in the market like does.
Great. Thank you [laughter].
Thank you. Our next question comes from the line of Dan I with Wedbush. Please proceed with your question.
Hi, this construct romford Dan.
Can you just talk about when you're seeing on the federal spending from a month what are your views from a deal environmental monitoring what's been done optimum from or what are the opportunities as well as challenges all their business is that sustainable. Thanks.
Oh, we haven't seen any notable change in the federal environment I'd say, it's largely consistent with what we've seen.
In a in terms of buying behaviors from from years past as you know we have a very strong position in the in the federal government that.
Yeah, I believe that that will continue to be the case, we're servicing those customers and helping them make an adjustment to work from home.
Capability in terms of how.
This is impacting or changing.
You know the.
You know the broader market or or deal flow.
I said earlier I think.
Your security remains high.
Top and priority list for folks and and within that.
Yeah, I think vulnerability management to understand your level of exposure in cyber risk.
Means fairly high so while we have some uncertainty around the process to deal closes what how customer buying behaviors, you're going to change we continue to have a high level of engagement with our customers for federal land.
And a in the private sector and we're seeing good no good customer engagement and continued pipeline creation.
There seems to be.
A lot of demand out there just trying to understand.
What.
But closes will look like relative to the macro environments in how company purchasing practices will evolve.
Thank you.
Thank you next question comes from the line of Nick Yulico with Cowen and company. Please proceed with your question.
Hey, guys. Thanks for taking my question I just wanted to ask about the decision to extend extend the licenses to cover additional assets coming online into June is the plan to go back to those customers in June and convert those into Upsells and then just how confident do you are you feeling in the.
Ability to do that.
I think the initial outreach here was to make sure that we're engaging with our customers and were assisting them.
In whatever fashion, we came during something that's ultimately you know a crisis for them to manage through.
They're dealing with massive shift in how they operated work from home environments.
Yeah. This is one of those things, where we could draw line and and Ah you know restrict our customers use our technology.
But we wanted to make sure that they feel like Weve, but we've got a great partnership with them like were strategic partners, helping them with technology, when we're learning a jamming and helping them strategically assessing I understand the you know the data that's coming out of those technologies and what it means for their business from a risk perspective. So.
Yeah, I ultimately a you know will we extend that beyond June I think depends on on a number of factors, where we'd be able to convert.
Some of those extended licenses into into sales.
I think will depend on a number of factors and I think this is one of those.
One of those Ah you know times in life, where you want to short your made over the company and as a partner and you know.
That does not to jump people up there, but make sure we provide them capability and.
We've also that they'll be with us for the long term and though expand their deployment with us as they see us as a strategic and good company to do business with.
Right. Okay helpful. And then maybe just a follow up around around lumen any color around the contribution from looming in the quarter and then just just looking forward does this new environment change how you guys you're thinking about the opportunity for looming going forward.
Nick This is Steve.
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No. We have we don't provide a sales bye bye bye product, but what we did say that where we're pleased with.
The strong start for lumen.
In Q4, but also in Q1 trial. The gate, we think we're coming out really strong pipeline activities are very healthy and are continuing to build and.
You know in a market like this the value prop for VM and cyber exposure and limit in particular, we think is strong. So we'll continue to keep you updated throughout the year and I keep in mind weren't enterprise software companies. So the expectation is that you see more contribution from some of these newer products.
Second half of the year versus really good that's the first half.
Thanks, guys.
Thank you next question comes from the line of Brian Essex with Goldman Sachs. Please proceed with your question.
Hi, Good afternoon. Thank you for taking my question and I hope everyone as well I mean I just wanted to follow up on some of the commentary that you had with regard to it sounds like you know things in the demand environment still are I guess relatively reasonably healthy is there anything that I guess, one is that is that a fair assess.
I want to make and it seems as though the the conservatism is mostly around that <unk>. The the demand environment and then or is there anything is there anything that we need to consider from a business process perspective, so internally inside your company, how you're managing the situation or is anything materially changed over the course of the past.
[music] months with the remote workforce and and how you need to remain engaged with your customers, maybe a little bit of color there could be helpful.
Yeah. Thanks, Brian. So I said, you know I I like the way you differentiate those I think the demand environment remains healthy.
We continue to see.
Opportunities new opportunities be identified.
Pipeline created.
Things under the forecast and feel like you know there there's there's absolutely no indication at this point that.
Vulnerability management is lessening.
From a priority from a priority perspective or from a budget perspective from you know any number of of different fronts, what we have.
So you know I think what we're trying to call out on the calls it there's just more.
ER uncertainty, we don't have I guess the visibility you have a certainty.
Spilling into the path and what's required to close transactions.
Within the customer base that we've had historically and that we.
I've come to rely on from a guidance perspective so.
You know many.
In many engagements, where we're having active conversations with our where our customers and even our customers don't exactly know.
What's required to move purchases forward with the degree of certainty that they've had in previous quarters and in a more normal operating environment. So I think it's important to differentiate those too and it does <unk> or you know it caused me to remain extremely confident in the.
Long term business opportunity in front of lessened the fundamentals of tenable as a business law, there might be a little bit of turbulence here.
Until we understand exactly what the buying behaviors look like in a in the Colgate.
Tom in terms in terms of how we're engaging with our customers you know we have a.
And largely remote.
Workforce already about two thirds of our staff working from home.
Prior to.
Prior to a you know to recent times and so it's certainly embedded into the culture.
Many of our.
Sales reps are reporting that they have you know just as high level of engagement lesson person engagement, but in many cases, it's you know it's easier to get customers to agree to a 15 or 30 minutes zoom than it is to take an hour or 90 minute type of type of meeting. So we do see continued healthy engagement from the Salesforce weekend.
Could you just see a new opportunities identified for marketing and and turned into sales opportunities are assessed qualified leads in the salesforce want to enter the enter the pipeline and.
ER and so we feel good about the overall business you know again recognizing that the there's this uncertainty around what's required to close.
Close transactions as customer budgets continue to evolve and procurement processes evolve.
Got it that's really helpful and maybe just a follow up or Steve Steve on the on the cash flow do you have levers at your disposal, where you can you think you can remain sustainably cash flow positive or should we anticipate a little bit of movement around cash flow breakeven until you go through you know maybe the stronger back ended.
A year.
Yeah.
Nick.
So yeah, we're delighted that we you know where cash flow positive this quarter and of course, we know we expect that to be so for the full year.
The cash flow characteristics of the business is very strong so we see real leverage in the business.
Cash flow quarter to quarter is always a tricky thing because specifically if you look at art we continue to.
Work on the construction of our new headquarters you know that will be completed in Q3. So we are actively paying contractors and getting reimbursed and so notwithstanding that we feel really good about cash flow or on a yearly basis.
And you know how it moves throughout the year on a quarter to quarter basis may vary, but we'll keep you posted but overall, we're very pleased with the cash flow characteristics of the business. Please with the significant leverage that we're demonstrating here, though in the first quarter, but but we're also showing and our Q2.
Got it as well.
Alright very helpful. Thank you very much.
Thank you will reach the end of our question and answer session and the conclusion of todays call. Thank you for your participation. You may now disconnect your lines that have a wonderful day.
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