Q1 2021 Tenable Holdings Inc Earnings Call
Greetings and welcome to the Tenable first quarter earnings Conference call. At this time, all participants are in a listen only mode.
The question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder of this conference is being recorded and there's no.
Now my pleasure to introduce your host Erin Carney. Thank you you may begin.
Thank you operator, and thank you all for joining us on today's conference call to discuss tenable as the first quarter 2021 financial result.
With me on the call today Army, Iran, Tenable, Chief Executive Officer, and Steven <unk>, Chief Financial Officer. Prior to this call we issued a press release announcing our financial results for the quarter you can find the press release on the IR website at Tenable dotcom.
Before we begin let me remind you that we will make forward looking statements. During the course of this call including statements relating to <unk> 10 of both guidance and expectations for the second quarter and full year 2021.
Growth and drivers and tenable business.
Changes and the threat landscape and the security industry, and our competitive position and the market.
Growth in our customer and demand for and adoption of our solution the.
The potential benefits of the acquisition of all said planned innovation and new products and services tenable expectations regarding our long term profitability and the impact of COVID-19 on our business and on the global economy.
These forward looking statements involve risks and uncertainties some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements you should not rely upon forward looking statements as of prediction of future events forward looking statements represent our management's beliefs.
And the assumptions only as of today and should not be considered representative of our views as of 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 most recent annual report on form 10-K, and subsequent reports that we file with the SEC, which are available on the yes. The website at SEC Doc up.
In addition, during today's call we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for or superior to the measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus.
Their closest GAAP equivalents.
Our earnings release that we issued today includes GAAP to non-GAAP reconciliation for these measures and is also available on the Investor Relations section of our website.
Before I turn the call over to Amit I want to quickly bring to your attention and the corporate social responsibility report, we recently published the support our environmental social and governance initiatives. The report can be found on our Investor Relations website with the direction of our board of directors executive leadership and other relevant parties, we pulled in.
Turner and external sources to do a deep dive into our ESG practices.
We're very excited about the results and encourage you to take a look at the published report I'll now turn the call over to me.
Thank you Eric and thank you all for joining us today.
First I want to say the we're very pleased to announce the closing of our acquisition of Austin and welcome. The also the teams accountable.
We'll talk more about also the after a quick review of the quarter.
So the I'll highlight our strong Q1 results.
The rising importance of cyber exposure and our holistic approach to our portfolio, including tenable EP and our new active directory solution set and believe me.
And.
New partnerships. We've added the we think further validate our market leadership and strengthen our ability to assist customers with rapid remediation.
With that let me first touch our Q1 results.
We are off to a great start for the year as reflected in the compelling Q1 results.
Calculated current billings and revenue each grew 20% year over year driven in part by recent cyber incidents and the acceleration of ships of Quad and growing cross sell opportunities. We also had strong free cash flow in the quarter, So and expansion of our non-GAAP operating margin and had an eight and it would be in EPS.
Steve will discuss the quarter and greater detail, but we feel these results put us on solid footing top of very successful year and a reflection of the growing demand for our solutions and our attractive business model.
Recent high profile breaches of highlighted the need for comprehensive vulnerability management, and and understanding of where exposure exists to enable the attack disruption and facilitate informed and sort of response the M.
And cyber exposure play a central role and providing broad visibility into the attack surface.
With tenable offers the continuous dynamic monitoring of assets and use the permissions and along with the means to prioritize remediation based on risk is more important than ever.
Key highlights from the quarter, our continued traction and cloud and cross sell including contribution from trouble IL and the launch of Federal E. P.
Tenable E. P is the new go to market motion across our platform of products that includes tenable Io lumen without the security and container security.
In addition, with the closing of Boston, we are fine.
Simultaneously launched Tenable AG a solution designed to audit and monitor active directory securities and interest.
Identity and attack pod and both advanced persistent threats and common hacks.
Our customers recognize without the attack surface continues to expand holistic approach of cyber exposure is the most effective ways to measure per hour.
The ties and manage risk.
I'd like now to talk about total E P.
Given the momentum of our solutions, we're looking for new ways to deliver more leverage to our customers and make it easier for them to benefit from the full suite of our capabilities.
And Q1, we announced tenable E P, enabling customers to use more of a ton of those capabilities and combination as a unified platform.
E P enables our customers to effectively assess the modern attack surface by combining via.
What about.
Container and looming and a unified platform and allows customers to dynamically allocate licenses across all asset types of according to their needs and modify other environment changes.
This gives customers flexibility to take a holistic rather and piecemeal approach to assessing exposure.
As part of the types of results through lumen to obtain recommended actions based on risk.
Tenable U P was made available for sale and <unk>.
Late February and I'm very happy to say, the we're seeing really good adoption and interest from our customers.
A great example of this is the competitive takeaway with the global customer this customer and have been actively seeking the combination of tenable Io container and wipe out the security to improve visibility. In addition, we were able to show the value of blooming, which became the key differentiator from a technology perspective.
The P provided the unified platform they needed for both the short and long term. The result was the six figure Tenable E P win.
We are enthusiastic about the meaningful early wins and the growing pipeline, we are seeing with E. P.
In addition to momentum and tenable Io and expansions from Frictionless assessment, we expect credible E P to advance our role and securing our customers cloud deployments.
Now onto a very exciting acquisition of Allison, we're thrilled to announce the closing of the asset and simultaneously launched tenable and <unk> are do active directory security solution.
The solution is designed to secure active directory environments and disrupt adversary attack paths.
A the environments are incredibly complex and our top concern for many of the <unk> as we speak with.
Total AG provides insights into the weaknesses and the active directory deployment and identifies the miss configurations that can be used to elevate permissions and.
And the persistent access.
And as the basis for managing user permissions across on Prem and hybrid cloud deployments.
It is foundational to the security of cloud workloads.
Security of remote work and adopting zero Trust architectures, we're excited to expand our cyber exposure solution and Advair.
Most of our cross sell opportunities to include this capability.
In summary, we see strong momentum and expand the use cases for our broader platform of products recent events, such as the security breaches and water facilities, and Florida, and Kansas highlight the need for proper cyber risk management, especially and the operational technology sector.
This is the further up the size by the recent presidential executive order and understand and vulnerabilities and securing book power systems.
Part of the critical infrastructure supporting the global pandemic and large multinational medical device manufacturer required visibility into their production assets to better understand and manage the risk.
Partnering with the global Advisory Tenable offer a unique differentiator across both I T and Oh Gee.
And we remain excited about the opportunity to help enterprises understand and manage throughout the U S.
Across our portfolio of products our platform enables customers to take a holistic continuous approach to managing risk our offerings deliver differentiated solutions designed to answer the fundamental question of how exposed of my how at risk and I and what should I do about it.
No it's out of and we talked a lot of about the importance of being best of breed this'll.
And this approach and differentiated capabilities help us forge stronger partnerships and and expansive ecosystem.
We have two particularly exciting partnership solidified during the first quarter.
We're excited about our new partnership with IBM, where we are a preferred partner for fully integrated vulnerability insights needed within Ibs M.
B M chose tenable as the preferred partner due to our technology leadership include.
Including covering more of vulnerabilities and providing both on Prem and cloud based offerings ease of transition and our market leadership.
We also announced our new partnership with Hcl Big fix of leading endpoint management platform, making it easier for our customers to automate remediation using the infrastructure platforms they've already selected.
In summary, we're off to a great start for the year and we're excited about our outlook.
Our portfolio creates a compelling way to measure and manage risk.
We believe foundational drivers like digital transformation the shift of cloud and zero Trust will continue to fuel long term success and our business.
I will now turn the call over to Steve.
Thanks, Amit is the meat mentioned earlier, we're very pleased with our results for the first quarter highlighted by attractive top line growth the sizable beat and non-GAAP EPS and exceptional free cash flow, which is a testament to the inherent operating leverage and a recurring revenue model.
I'll discuss our results from the corner momentarily, but first please note that all financial results. We will discuss today are on the non-GAAP financial measure basis with the exception of revenue.
As Aaron mentioned that the started and this call GAAP to non-GAAP reconciliations may be found in the earnings release issued earlier today, which is posted on our website.
Now onto our results revenue for the quarter was $123 2 million, which represents 20% year over year growth.
Revenue in the quarter exceeded the midpoint of our guided range by approximately $4 million.
Our percentage of recurring revenue remained high at 94%, which is primarily a result of our annual prepaid subscription model.
Revenue in the quarter was aided by strong demand for both new and renewal business.
In terms of of new business, we added 331, new enterprise platform customers, which is up from the 319, we at it Q1 of last year.
Of particular note. This is the first quarter since the start of the pandemic and which new enterprise platform and are up on the year over year basis.
In terms of large deals we added 29 net new six figure customers and the quarter, which is also up year over year. This brings the total number of customers spending in excess of $100000 annually. The 866 30 per cent increase year over year.
And this demand is also reflected and our calculated current billings GCB and find us the change in deferred revenue plus revenue recognized in the quarter grew 20% year over year to $119 5 million.
And to meet highlighted earlier, we attribute the shrimp and the top line the growing importance of cyber exposure.
Other accentuated by recent solar wind and Microsoft attacks.
Cyber exposure is also a key component of digital transformation, which continues to be a top priority from any organizations.
While some of our customers took a measured pace of investment last year as a result of the pandemic.
We are starting to see early indications of a stronger spending environment attributed to pent up demand.
Some early indications of this demand surface and Q1, and our middle market business, where sales cycles tend to be much shorter compared to those and the.
Large enterprise market.
The good news here is that enterprise performance was strong and the first quarter and as healthy pipeline and activity levels that could potentially further benefit from this trend.
It's also worth noting that we're seeing and accelerating the adoption of tenable Io and associated add on modules and is positively impacting our cross sell efforts, which will be further aided by the launch of tenable E T, which commands and notably higher selling price versus our core VM offering.
And it's also positively impacted our net dollar renewal rate.
I'll now turn the operating expenses, which include incremental investments offset in part by continued efficiencies and our business.
I'll start with gross margin, which was 83 per cent this quarter and 84 per cent last quarter.
Our gross margin continues to be very healthy and reflects increased investment and our public cloud infrastructure to support a broader set of predictive analytics and a more expansive data lake.
As a reminder, we plan to continue to make incremental cloud investments throughout the year, including all SAP related costs and.
As such we expect our gross margin for the full year of 2021 to moderate by approximately 100 basis points, reflecting higher cloud adoption.
Sales and marketing expenses for the quarter was $52 3 million, which is up from $50 8 million last quarter.
Sales and marketing to increase sequentially, primarily due to incremental investment and demand generation activities and sales head count related costs, including an increased number of quota carrying sales reps.
This quarter represents the second consecutive quarter of increased sales and marketing investment, which we attribute to the increasing confidence and our business.
And the broader base of demand with the pandemic starting to abate.
Despite the higher levels of investment sales and marketing expense as the percentage of revenue was approximately 42% of 50 basis points better than last quarter.
R&D expense for the quarter was $22 7 million.
It's up from $20 4 million last quarter.
As a percentage of revenue R&D expense was 18 per cent compared to 17% last quarter.
Given our best of breed approach innovation remains a top priority and we plan to continue to invest throughout the year.
G&A expense was $13 7 million compared to $12 5 million last quarter.
As a percentage of revenue G&A expense was 11% this quarter, which is flat compared to last quarter.
Income from operations was $13 9 million and Q1 compared to $15 4 million last quarter operating margin was positive 11 per cent for Q1 compared to a pause of 13% last quarter.
I'd also like to provide some commentary regarding the tax provision as a reminder, our Q1 outlook provided in February assumed and non-GAAP tax provision of $1 5 million. However.
However, discrete benefits recognized in the corner and foreign jurisdictions that were previously not contemplated actually swung us toward the non-GAAP tax benefit of approximately $1 million.
Now all of this resulted in significant EPS upside for the first quarter as our non-GAAP earnings per share was <unk> 13 cents.
Which was <unk> <unk> better than the midpoint of our guided range.
The beat was the combination of better than expected top line results good cost management, despite the incremental investments and our business and the discrete tax items I just mentioned.
Now, let's turn to the balance sheet.
And finished the quarter with $340 million and cash and cash equivalents and short term investments.
And increase of approximately 48 million compared to last quarter.
Total deferred revenue at March 31, 2021 was approximately $429 million.
And given us a lot of visibility into revenue of headed into Q2 and the remainder of the year.
Turning to cash flow, we generated $37 6 million of positive free cash flow and the quarter, which compares quite favorably to free cash flow of $3 99, and Q1 last year.
Over the last 12 months, we've generated approximately $78 million of positive free cash flow.
With high recurring revenue high gross margins and high renewal rates, we feel confident that we can continue to generate attractive levels of free cash flow, while continuing to invest and the business.
That said Q1 does tend to have higher collections, given the seasonally strong bookings and Q4. So free cash flow is expected to moderate in Q2, plus we will have the acquisition related costs and the incremental opex associated with all sand.
This is all expected to result, and modestly positive free cash flow and Q2 with higher levels and the second half of the year.
Okay.
With the results of the quarter behind Us I liked the discuss our outlook for the second quarter and full year 2021.
Well, our assumption is that the health crisis will continue to create some uncertainty our strong start to the year gives us greater confidence and the business environment now versus last quarter.
Also like to provide some commentary on all of a sudden which closed yesterday.
When we announced the acquisition of February we indicated at all some of that one point of incremental see Phoebe and revenue growth and 15 to 20 million of incremental opex for the remainder of the year.
And our outlook for all said today has not changed.
And Q2, all said is expected to have minimal seafood being revenue impact given sales cycles and the write down of the acquired deferred revenue while operating expenses will include two months of activity.
With that said I will review the outlook for Q2, and the full year 2021.
With the second quarter, we currently expect revenue to be and the range of $124 million to $126 million.
Non-GAAP income from operations to be and the range of $7 million to $8 million.
Non-GAAP net income to be and the range of five to 6 million.
Assuming the provision for income taxes of $1.5 million.
Non-GAAP diluted earnings per share to be and the range of four cents of five cents of <unk>.
I mean of $114 5 million and fully diluted weighted average shares outstanding.
And for the full year, we currently expect.
Calculated current billings to be and the range of $575 million to $585 million.
Revenue to be and the range of $520 million to $524 million.
Non-GAAP income from operations to be and the range of 34, the $38 million.
And non-GAAP net income to be in the range of $28 million to $32 million, assuming a provision for income taxes of $3 5 million.
Non-GAAP diluted earnings per share to be and the range of 24 cents. The 28 cents, assuming a $115 5 million fully diluted weighted average shares outstanding.
As a matter of clarity the guidance, we're providing today reflects not only the expected contribution from all of that.
But also our Q1 beat and the million dollar improvement in revenue and the two penny raised and EPS for tenable on a standalone basis.
In summary.
We're pleased with the results of the corner, which gives us increasing confidence that we remain well positioned to deliver compelling growth and profitability over the long term.
And now I'll turn the call back to of meat for some closing comments.
Thanks, Steve as I stated earlier and the call recent security events and digital transformation of raised the profile of cyber exposure.
These events true that we can't rely of strong perimeter defenses and.
All of the need for assessing risk across the entire enterprise. Our message has been very consistent for tenable, our core strength and understand the cypress has driven our success.
And at no natural expansion across the surface of attack into of proving the security posture for cloud and Ot deployments.
Our strikes on the platform of capabilities positions us for long term success as our customers shift from hybrid and cloud environments.
And you'll just see many of you virtually at the Jpmorgan Needham and William Blair conferences, and the coming weeks.
We now like to open the call up for questions.
Thank you we will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad and the confirmation tone will indicate the line is and the question queue and you May Press star two if he would like in terms of your question from the queue.
And for participants using speaker equipment, and maybe not the theory of pickup your handset before pressing the star of Q1.
One moment, please while we poll for questions.
Yeah.
Thank you. Our first question comes from Brian Essex with Goldman Sachs. Please proceed with your question.
Hi, good afternoon, and thank you for taking the question and and and you know.
And congrats on the some nice results.
And meet I was wondering if maybe you could start with a little bit of color I think Steve pointed to and.
And his prepared remarks strong momentum and expanding use cases, and some pent up demand.
And where exactly are you seeing that and maybe the outlook as you know, particularly with regard to change and the velocity of the sales cycle.
And and how things might change given the return to office of some of your enterprise customers.
Okay.
Thanks, Brian.
And we're seeing demand I'd say, primarily as a result of digital transformation right. So we've seen earlier in the pandemic the whole shift to work from home we've seen the acceleration of.
The cloud adoption and the recognition that this is the new operating and.
Environment, and and and so as part of that security teams now trying to get up to speed trying to get their arms around what the risk associated with operating in these environments looked.
It looked like so.
And that's resulted in the.
And.
Just the the broader increase healthier spending environment result in and some of the acceleration that we're seeing and believes that the.
It also accounts for the strong and over the last couple of quarters the stuff.
The increase of the strength of some of the cross sell that we're seeing across product lines, where it's not.
And just the traditional V M.
Or even risk basically and they are really embracing.
Leveraging our technology set to really understand exposure and risk.
Got it and maybe can you point to the the sales cycles, how they might be changing and it looks like you know sales and marketing was quite a bit more efficient the weird anticipated in the quarter.
What are the greater efficiency come from I guess in spite of perhaps.
The incremental sales head ads.
Hey, Brian This is Steve.
Yeah.
A couple of things I mentioned, there first and foremost we're delighted with the results from the first quarter grossing television by 20% as well as revenue and deliver sizable beats and EPS and.
And it had a record levels of free cash flow.
In terms of the man and we did see isn't me commented earlier strength across the board of both domestically and abroad.
And the large market as well as the mid market, where we called out and if that wasn't area.
The performance, we previously disclosed that the.
And the mid market represents about 25 per cent of our total sales and.
As a reminder, we have a very compelling and go to market model, where we have.
Product and assets that has brought adoption and use across the mid market as well as large and.
Because of this nature of NASA has created a cost effect of one ramp for us and Q1, we saw some really good pull through and the mid market from a flywheel effect of mass.
Channel and M. S. S. P. Also played a role and contributed.
Sales cycles are more modest in the mid market versus that and the large and so some of the things that we're seeing here out of the gate and Q1.
But well not only from the mid market, but we also think it's encouraging potentially.
For for other larger deals down the road. So please that the performance all in the med, but also large and Q1 and there are some really early signs of.
And that demand will potentially remained healthy throughout the year and you've given us the confidence to.
And to raise our outlook for both GCB and <unk>.
For the full year to day.
Alright helpful color. Thank you so much.
Okay.
Thank you. Our next question comes from Sterling Auty with J P. Morgan. Please proceed with your question.
Yeah, Thanks, Hi, guys.
So it's very clear that the tone has changed dramatically since last quarter and you've highlighted a number of factors to it and including your answers to Brian, but maybe can you just kind of rank order. What you think the the biggest differences are from what we were talking about just a quarter ago in terms of.
And the pent up demand and all the other reasons just what are having the biggest influences and the change.
Okay Sterling great great to hear from you I would just characterize.
Characterize it slightly differently and say, yeah, we definitely had a a fairly bullish tone, even let you know.
Going into the year, saying, Hey, you know, there's a lot of potential here.
Have a lot of indicators that that it could be a very strong year, but were still earn the in the midst of a global pandemic with lots of uncertainty political climate, and and and a lot of selling off of a year and so.
We're very pleased that the quarter played out as it did we did see continued strength building throughout the quarter.
Driven primarily by.
And I called digital transformation, but really customers operating in this new environment, where they've got a more complex set of technologies to deal with where they recognize the they've got to not only embraced V. M to have the agility of it took to risk.
All of the high profile of incidents, but also start getting their arms around.
The the accomplished infrastructure of the web applications.
The the Dev ops environments and ultimately.
You know that over the last couple of quarters and started accounting for what we're seeing and in terms of a stronger and stronger costs all of of new products and and ultimately we believe will we will continue to accelerate with the foundations that we're that we're winning with the with tenable EEP.
That makes sense and then one quick follow up you mentioned the E P. The pricing and has potential for larger deals any sense, even with some of the couple of early wins that you had how much different should we think about the average deal size and revenue run rate from customers on E P versus your traditional deals.
Yeah sure so.
Go ahead Thursday.
I just comment that.
And.
And maybe you can provide further context, but just in terms of the pricing. There's a notable uplift with EEP and it's very much of an enterprise solution and.
And so E T as price at a premium relative to core V M as well as core VM, plus lumen and and includes.
A broader set of capabilities to address that.
Rest of Holistically across the enterprise includes VM loom and container and whereas in the.
And of the gate.
We're very pleased with our progress.
Activity levels and interest remains very high and we think this is certainly going to be helpful and our efforts to sell.
Our very broad product suite into the enterprise.
And of more effective way.
Great. Thank you.
The 60% uplift relative to what we see the core V M to answering the question.
Perfect. Thank you.
Thank you. Our next question comes from Hamzah Prouder of wallet with Morgan Stanley. Please proceed with your question.
Yeah.
Hey, guys.
The first question for you you mentioned, some pretty strong momentum of tenable Io and I was wondering if you could give some color on some of the early momentum with the.
The frictionless assessment since you announced the debt for AWS, how's that been sort of trending and you know what do you see some of the you know, perhaps the white space sort of opportunity here versus some of the traditional V M spend that you've seen in the past.
Yeah, I think we're very encouraged by what I'll characterize as you know.
Early wins and strong interest frictionless really plays well.
Complement to how people think about securing the cloud workloads, so and in many cloud environments you have.
Very assemble assets you have.
And if things that may last.
Hours days weeks, but you don't manage those types of systems and the same way.
As you do.
You know your long term your long term peak.
Use of infrastructure so.
And a lot of these environments it doesn't make sense to deploy agents and and this kind of frictionless approach is really the best way to get a much deeper understanding of what you've got and and the level of exposure. So we think and if it's really hand in glove with what we're doing with respect to the the container security.
The product the web App scanning.
And the the sort of cloud native Naved.
The connector so.
And some parts of the environment and makes sense to the play agents and other parts of frictionless is providing a very quick zero touch way too to understand exposure and risk and so we've got a number of early wins and our momentum continues to build and with that product and we're up where we're quite enthusiastic about where it could go over.
Fine.
Yeah, and just a brief follow up on that.
And for Steve I.
I guess that you guys sort of smokers on an expanding number of assets within your existing enterprise base I'm wondering what are the dollar retention rates been looking like in Q1 relative to.
You know what you've seen in the past think of sort of been 110% plus of any of any sort of change there.
Yes, the cross sell of the strong quarter and drove our net dollar renewal rate higher.
And something that I commented on earlier.
Comes on the heels of a very strong cross sell effort and Q4 and.
And the lumen and and O T and and and a lot of our products are really a big part of the story here.
And we're not only selling those on the stand alone basis, but were also as part of our core VM offering, but also part of the broader.
Exposure platform that we discussed earlier.
And of the Gateway.
We're pleased with the levels of cross sell.
The cross sell of truck it comes to us and the way of product, but also greater asset coverage and we did talk about performance and the mid market.
And we've talked about the flywheel effect of Nessus and you know a lot of that was the only upsell from message and to the enterprise platform, but also our efforts and the mid market were also aided by broader asset covered total so both appear to be no.
And moving in the right direction for us out of the gate and Q1, and we're off to a good start.
Yeah.
Okay. Thank you.
Thank you. Our next question comes from Daniel Ives with Wedbush Securities. Please proceed with your question.
Oh, yes. Thanks.
So can you just walk through your view and the federal side, especially given everything we've seen there and your exposure I mean, what are you seeing from a pipeline perspective, and just view of deals going in to the next few quarters.
Okay. Thanks, Dan.
And as you know, we have and exceptionally strong position in the federal market and federal market and it's always been a very healthy part of our business.
And we see very positive signs with respect to the overall.
Federal approach to cyber we've seen.
And the presidential executive order recently the called out.
Assessing vulnerabilities and securing bulk.
Bulk power.
And we've seen the increase in funding for not only our T modernization.
And which which obviously you know tumble can play a role and but also.
Funding specifically for Cisco.
There the CDM program and intervals of significant participant and a significant component of the CDM program.
The funding there so we're encouraged by what.
What we see nothing.
And nothing I think of the federal space moves extremely fast, but we have of <unk>.
<unk> installed base, we of the strategic relationships, where we're providing of vital function and I believe that they will continue to be strong opportunities for us to.
And to grow and the and the federal space and in the coming periods.
Yeah.
Great and then.
And when you're talking about zoom in and you know obviously.
I think we've seen and the last few quarters and it just become more and more of the driver is.
And does that change, even who you're selling into within the organization. So I guess that is it that much of a door opener and now there is really start and H right.
Yeah, absolutely, whereas you know if you rewind a couple of years back it was largely tenable delivering.
Our superior vulnerability management experience, so better coverage better accuracy.
Better outcomes for customers and we've embarked on this hey, it's not just providing better data, it's doing better analytics. So working with the prioritizing vulnerabilities and then and then ultimately and and we embedded that into the core products. So the customers would start understanding the tenable.
Can be of strategic.
The partner in there and the programs are.
Not just delivering insightful tactical information with lumen, we really up level of the conversation to be able to start talking with enterprises about not just exposure, but about risk.
About how their hygiene compares to peer group about.
And how mature the program looks relative to their peer group and all of the things that start getting that question and sort of standards of care and negligence and ultimately those are.
C. So but those are also our audit and risk Committee CEO.
Risk office or the types of questions and so it's really enabled us to have much more strategic conversations with all of our customers and and we think also of sort of natural pre positioning to what we're starting to do now with with E P which is <unk>.
Which is really expand this this the visibility into those types of insights beyond just traditional infrastructure and really.
Across a much larger swath of of their capture for us.
Awesome. Thanks.
Thank you. Our next question comes from Jonathan Ho with William Blair. Please proceed with your book.
Hi, good afternoon, and congrats on the strong quarter I just wanted to start out with some of your comments around recent breaches and how is this may be translating into either deal activity of pipelines.
[laughter].
And I started and started talking just said.
So part of it.
Okay.
And this is Steve I'll jump in here.
Look it's.
And we are very encouraged with what we're seeing.
And of the gate and Charlie we're seeing some clear indications of some of our customers are leaning into digital transformation of this year with greater focus and investment. We do believe this has been further accentuated by high profile.
The kitted the attacks.
And the more complex threat environment.
So.
And we're all of there's also some early signs that.
Now, there's some pent up.
Demand for certain Oh for sure for certain segments of our customers. So for example last year when the pandemic from surface.
The investments in digital transformation, but perhaps first on connectivity and cala.
Collaboration and all of the of central things to communicate and work from home.
And as the pandemic has played out and started to abate, we're seeing a lot of our customers.
Bring a renewed focus and digital transformation and resuming some of those activities at the Pat perhaps put on hold or perhaps where.
And temporarily pause so again, it's one quarter, it's out of the gate, there's some encouraging signs here.
And we think the demand at Nymex and in Q1, and a healthy and incentives up potentially for a good.
The 2021.
Yeah.
Got it and then just relative to the tenable and <unk> product can you talk about how this maybe it fits within the portfolio and you just tenable EDI also help you to sell your existing products and as well.
Yeah.
So sort of tenable 80 definitely fits into the.
The the existing vision right. If you go back and rewind.
You know the message and what we're trying to deliver to our customers and helping them understand what the attack surface looks like and where and how that attack surface has exposed but ultimately for the purpose of helping them.
Identify the the level of risk and which actions they can take to most efficiently reduce risk.
During the attack surface active directory.
It has become one of the primary targets for adversaries, whether they're sophisticated attackers.
Foreign intelligence services and as we've seen recently or.
Or something.
The lower scale and and ultimately that's because once you gain access you want to.
Escalate your privileged level, you want to get moving.
Moving to be able to move laterally within the organization you won't be able to established persistence and so active directory, which is extremely difficult to secure well of the enterprise has become a go to target for for adversary, so being able to assess to audit and it's and.
And then.
Incredibly detailed way the surface.
Takeda and active directory deployment to help identify where the exposures are and how they can be tightened down is absolutely critical and also to be able to provide ongoing monitoring as new high risk activities are identified things that might be indicators of of and attack. The the creation of privileged accounts sort of.
New trust relationships and and so on and so forth. So there's.
And it's definitely a.
And the integral part of the strategy and the natural leverage point, where you can look and see not only which systems are exposed but the system will then has the exposures and the house vulnerabilities. The there's also a system the day domain administrator.
System administrator comes in from could be to be up can be prioritized could be of higher of shorter attack path. If you will and so those of the types of insights that we can help our customers with and we're really excited there's a.
A significant need and the real shortage of of capability to help enterprises security of data and we're excited about the opportunity.
Thank you.
Thank you. Our next question comes from Andrew No Winski with D. A Davidson. Please proceed with your question.
Alright, thanks, and congrats on the nice quarter. So I've got a just a question on competition and then a follow up so.
So we did notice and uptick and rapid seven displacements are this quarter and our channel survey, which seems to align with your comments on the performance of the mid market business. So I'm wondering if you could just.
Give us any more color on the competitive landscape and if youre seeing any sort of shift in the win rates and the with regard to the competition.
Okay.
Right and you pointed out yeah, we called out a strong performance our strong performance in the a and the commercial market.
We didn't see any notable change.
We believe we've always competed.
Competed favorably.
With both wrap itself and and quality and continue to do so so there was no real notable change of fuel, but we did see an uptick in AR.
And in the <unk> and.
And sales and the commercial market.
This quarter and.
Part of it I think and in part due to.
<unk> response and and.
And sort of recognition of need which and and perhaps under spending during the pandemic.
Okay got it and.
And then maybe a question for Steve You know you had very consistent.
We're very very consistent growth and your.
Current quarter billings and.
And it was very consistent with revenue growth of them I would say if you look ahead to Q2 Q3 and Q4, you've got relatively easy comps from the remainder of the year. So what are you factoring into your guidance for the full year that implies that C. C. B growth will not remain at or above the 20% level you just generated in Q1.
But what I will say is if you look at.
Rep revenue.
Flowing through of beat in Q1, the film to arrays and obviously the contribution from all set so the net.
The point of our previously provided range on the full year basis. It was like.
The $512 million and today, it's like 522 and again at the midpoint that's over.
A $10 million raise and while we don't guide this ECB on a quarter to quarter basis. If you look at the full year.
It's a similar story midpoint of the guided range was $5 70.
Today, the midpoint of $5 80 of flex and a beat and raise and Q1 and then relative to all of our expectations and then obviously the contribution from all set.
So pleased to see both revenue and CCP golf bromine at 20%.
The drilling in the air Oh, we're encouraged with what we say and the.
The activity levels remain healthy and our.
Expectations and confidence and the business.
And to use the graph as a result.
Okay fair enough. Thanks.
As a reminder, if you would like to ask a question. Please press star one on your telephone keypad.
And if you would like to remove your question the press Star two.
Our next question comes from the Cat <unk> with Barclays. Please proceed with your question.
Okay, Great Hey, guys. Thanks for taking my questions and for having me on the call here.
I mean, maybe maybe first for you maybe just a little bit of a different angle I was wondering if you could talk a little bit about some of the partnerships you announced this quarter.
And particularly with big fix and.
And I'm wondering.
How do you feel that that partnership could help tenable competitively and do you feel like especially the big fix of sort of.
And our presence and the endpoint management space do you feel like customers were pulling you that way in terms of working with and endpoint tool or just talk a little bit about what sort of drove that and how do you feel like and kind of helps tenable competitively.
Yeah, I think it's a it's a it's a great question, it's the natural progression for us.
Our focus has always been non providing the visibility and and and the accuracy.
And then you know.
And with broader asset types, and and improved analytics. So that it's not just you know visibility and accuracy, but it's the helping people to prioritize.
What what these exposures.
Moving to them from a risk perspective and.
And what are the actions they can take to the most impactful so the the natural progression for the from there is to is to help them take the the those actions and and so from our perspective, we remain laser focused on being the best of breed provider and and as part of that working well and the other.
Apprise means through open Apis and open the integrations working with.
Other.
Best of breed technologies, and other technologies, which enterprises of already deployed to.
To accomplish their systems management function and and so and the enterprise Big fix is a.
Tried and true and preferred.
Systems management tool and so integrating and automating.
All of that workflow with big fix.
Can can help make our customers' lives and here and.
And the sort of aligns with what we've been doing with SCM and and other other other configuration management technologies.
And we think it's a it's a natural progression and.
Definitely can help drive value for our customers.
Got it very helpful. Steve maybe from my follow up for you and you've touched on limit of couple of times and the prepared comments and Q&A, but I was wondering if you could just digging a little bit more whether thats through the lens of and attach rate or just sort of you know and.
Any sense of size in terms of PCB contribution and anything you could talk about lumen and sort of how it's how it's become the.
A bigger part of the business potentially.
Yes.
And attach rates continue to grow with lumina, obviously, the seasonal patterns to our business.
But our expectation and directionally over the course of time is that the woman attach rates and I and I and I Wanna be careful about my comments because the lumen is a big part of the value prop for our exposure platform E P and probably going forward.
A lot of what we sell and mom and walk com more likely through the exposure of platform, but we expect the attach rates continue to climb we don't provide disclosures for individual products. We have a lot of everything from Ot to lumen, two whereas and containers.
But we do talk about cross sell more broadly strong in Q4 offshore when they could start in Q1 ticked up the net caliber and alright and.
On the LTM basis in Q1 and.
And.
And and take a.
Big part of the offering here so happy to continue to provide more updates on.
Our cross sell efforts and and the momentum of right around the soldier platform throughout the rest of the year.
Very helpful. Thanks, guys.
Yeah.
Thank you. Our next question comes from Joshua Tilton with <unk> capital markets. Please proceed with your question.
Yeah, Hi, guys. Thanks for taking my question.
From my first one that I kind of just wanted to touch on the billings guidance from a different perspective.
You mentioned that in Q1, and you're starting to see signs of a better demand environment relative to last year.
And this continues throughout the year, how much of this improving demand environment is baked into the full year guidance.
Hi, Josh this is Steve.
And I Wanna be.
Clear and you know I'd rather.
And that's probably the.
The best way to see this.
We guided to.
510 to <unk> 15 on the last call our guidance today is $5 20.
24.
At the high end of the guided range, that's 19% and even at the midpoint.
What the revenue reflects as well as the higher <unk> guide because of both similar the flex the beat in Q1.
The flex of race and reflects the contribution from all said I think it's fair to say that the raise is probably more modest relative to the beat.
And it certainly is a race and reflects our increasing confidence and the business reflects the incremental contribution from all of that and obviously, the the beat and the first quarter out of the gate.
And and if I could just follow up real quick.
And that's it from the customer perspective, what is the benefit of adopting E T versus adopting these offerings and the Standalone solution is there of pricing benefit or is it like and integration single pane of glass type benefit any color there would be helpful. Thanks.
Yeah and it is.
And its simplest form there is <unk>.
<unk> benefit.
And there's license benefit and that you can allocate license the the lessons are a.
Valuable between products and platforms. So as your environment changes it becomes easier to scale up scale down check asset types.
From from here to there.
And the increasingly also the analytics and the platform itself. So.
And I called out of examples earlier, leveraging the insight of identity when looking at exposures.
<unk>.
And.
Items like the other identifying.
Web App services out of host when assessing the host and and being able to kick off and automate.
What about the web application security assessment and whatnot.
Application specific security assessment.
In addition to assessing the the whole so there's there's natural points of leverage between the products the.
And that will be taking advantage of in the and the tunnel the P. A.
Platform.
Well, thanks, guys congrats on the quarter.
Thank you. Thank you.
Thank you. Our next question comes from Brad Reback with Stifel. Please proceed with your question.
Great. Thanks, very much given the 60 per ton price uplift with tenable E. P. Can you give us a sense of what type of tailwind we should get the net dollar expansion rate.
The product gains momentum.
Hi, Brad.
And I think it's difficult to predict the impact it will have a net dollar expansion rate and one of the reasons why is because.
The first we don't optimize the business for a single metric pipelines can vary from quarter to quarter.
As the mix between new opportunities upsell opportunities can can vary.
And we do believe though that EEP is going to be a far more compelling way for us to sell the broader product suite into a larger customer base that continues to struggle with understanding the risk.
And and the heightened threat environment and a zero trust environment So for.
And for US, it's a natural evolution.
Of our product strategy and go to market and <unk>.
Keep in mind, you know years ago, we had a handful of customers spending in excess of 100 Grand we've made tremendous progress over the years today, we have over 800, and that's up 30% year over year. So we're doing more enterprise deals more larger deals.
And the way, we go to market and sell that.
And it's part of a broader offering and.
And we think is really important and EPS the first step out of the gate.
Back to us to continue to of all of our thinking and our efforts there because you know what.
We have made good progress over the years and we.
Think of our best days are still ahead.
Given the innovation that we brought to market over the past couple of quarters and couple of years on the product side.
Great. Thanks very much.
Yes.
Thank you our last question comes from.
Gray Powell with <unk>. Please proceed with your question.
Okay, great congratulations on the quarter and thanks for taking the question so I'll be quick.
I know you don't want to give an exact number but I just would be curious.
Roughly speaking, what's the mix of new business, that's being driven by tenable Io versus S. C. And then I think you hinted at it or I think you said it and the prepared remarks, but how should we think about the net expansion rates for customers on on the Io versus the SC and and and just ballpark how much of upside is there for customers.
The better on Io.
Well in terms of mix of business and also.
As a reminder, we launched tenable Io and 2017, and we said.
And the year, following our expectations and Io, but with the.
With represent the majority of our new enterprise sales I think it's very fair to say that we're pleased with the progress we've made over that time.
And certainly the pandemic and the shift of home has traded heightened demand for.
And for cloud and greater demand for IL.
And so.
And so.
Q1, and we saw a record level.
Our new business coming from from IL, and that's no surprise just given some of them some of the secular trends and thinking of that we're seeing play out and the market. So I O.
Well and is exceeding our expectations at the preposition to selling other products that we've talked about specifically and EP and with regard to wise and container security and it and of course.
And but etsy is a very important part of what we do and if you look at most customers compute environments, they're not 100 per cent of on Prem and are 100% and cloud the hybrid and one of the.
The few companies and the only companies and the vacant space of addresses.
Both the cloud and on Prem.
And.
And both traditional and modern assets. So both are really important to us.
And.
And and both come how has the ability for us the pull through other products and connection with it and with regard to the cross sell and net dollar expansion rate.
And we mentioned here last year it did.
The rate a little bit because of the pandemic.
But what we're seeing in Q4 and even in Q1 is very encouraging.
And as it continues to.
C and uptick in the right direction and and we're very pleased with our cross sell efforts and there'll be continued and area of focus for us, but not to go and notice here is our ability to add new customers right.
And so we added a lot of new customers this quarter of lot of larger deals.
As for the important going forward, both are going to be important both levers and we have to go to market model and the installed base. The do it both transact new business and by new customers as well as the sell more into the into the account base and we're super excited about a day here.
And having close it here yesterday and announcing here today, it's going to the important part of what we do and it'll be another.
The way for us the drive deeper penetration into and to our enterprise customers.
Got it okay. Thank you very much.
This concludes today's conference you may disconnect. Your lines at this time. Thank you for your participation and have a wonderful evening.
Yeah.
Okay.
That was really long.