Q1 2022 Tenable Holdings Inc Earnings Call
Greetings and welcome to the Q1 2022 earnings conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.
Anyone should require operator assistance during the conference. Please press star zero on your telephone keypad. Please.
Please note this conference is being recorded.
I will now turn the conference over to your host Erin Karney Senior director and Investor Relations you may begin.
Thank you operator, and thank you all for joining us on today's conference call to discuss chemicals first quarter 2022 financial result.
With me on the call today are our.
Our Chief Executive Officer, and Steve <unk>, our 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 our guidance and expectations for the second quarter and full year 2022, gross and drivers in our business changes in the threat landscape and the security industry and our competitive position in the market.
And our customer demand for and adoption of our solutions.
The potential benefits and financial impact of our acquisitions, including our recent acquisition of symptoms and the expected acquisition of that discovery planned innovation and new products and services, our expectations regarding long term profitability and our ability to attract and retain employees and its impact on our business.
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 a prediction of future events forward looking statements represent our management's beliefs and 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 website at SEC Gov.
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 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.
I'll now turn the call over to Nate.
Thank you Erez today I'll discuss our outstanding financial performance in Q1, our accelerating momentum exciting product enhancements, including our agreement to acquire the discovery.
And the continued progress of our cyber exposure management platform.
With that let me first touch on our Q1 results.
We saw tremendous strength in the first quarter driven by contributions from all products and theaters or CCP growth for the quarter was 31%, which we believe positions us well for a strong 2022.
Additionally, the health of our market and the durability of our business provides us with the confidence to continue to invest in our products and our people.
Momentum across cyber security is accelerating as increased threats are driving a healthy spending environment the need for customers to understand their true exposure and risk is at an all time high.
We're seeing that momentum translate across our entire portfolio core VM and exposure solutions, particularly in our identity and cloud security offerings. We're leveraging this momentum and have plans to add significant new capabilities to our cloud offerings as well as create unique differentiation for VM customers.
These enhancements include expanding our exposure platform Tenable E. P to include Tenable, a D and tenable C. S. E T customers can deploy these new capabilities immediately and take advantage of our single unified licensee model to secure their cloud environments and active directory.
Once you are cloud native application security platform tenable see us to address.
Cyber risks from build through run time.
We delivered seamlessly integrated cloud native web application and container exposure data into tenable Io. This allows organizations to analyze cloud and web app exposures alongside other assets and take advantage of the rich platforms capabilities, such as advanced search streamline reporting comprehensive role based access control.
And the single sign off for easy access unified ERP eyes and other capabilities.
We also delivered important updates to tumble, a D and tenable Ot to detect new indicators of attack used to escalate privileges.
Ransomware and nation state exports and attempts to exploit Oh Gee devices.
Our investments in product development over the last few years highlight our commitment to best in class security assessment across a customer's attack surface. We think our timing couldn't be better increased threats larger consequences for business and to helping spending environment for Ciber. We believe we're moving into the Golden age of via.
More than ever customers must understand every aspect of their digital footprint. So they can reduce their cyber exposure and this is reflected in a larger tam that we discussed on our Investor day.
In conjunction with earnings we announced that we've reached an agreement to acquire a bit discovery and external attack surface management leader with a differentiated internet facing asset discovery attribution and monitoring capability.
Problem for many organizations is that they're largely blind to full and ever changing scope of their internet facing assets and services. These systems serve as high priority exposure points for attackers and important starting points for Tac paths into critical systems, discovering and gaining insight into every part of our businesses.
Digital footprint are a central steps for any effective cyber security program.
In concert with our Tech pathway, Suffolk technology. This new capability will allow us to tie the artificially fragmented parts of security.
One view that shows how attackers from the Internet can ultimately gain access to any specific high value system, regardless of where it fits for C. So this analysis, it's a knockout punch of what is top priority.
Once integrated the automated discovery of external attack surface will be native in the new and upgraded version of Memphis.
Automated attack surface discovery will also be included in many of our enterprise products, including Tenable SC Tenable Io tunnel, both E P and our cloud security solution.
This insight will drive great value for our customers and increase adoption of our cyber exposure solutions.
Be honest basic discovery offered to many of our existing customers. We will also have a new SKU with advanced attribution functionality that help customers understand the broader set of contacts and exposure of these assets.
We're incredibly excited about adding these new capabilities and big discovery is a very natural and tightly allied motion for our go to market team attacks.
Attack surface management data is absolutely critical exposure data.
<unk> has the same buyer and the same go to market motion as the V M buyer.
A highly compatible messaging.
Which will provide very fast time to value for our customers.
Let me talk a little bit about tenable E T. During the quarter, we extended tenable E. P beyond vulnerability management web application security and lumen by adding assets in security findings across identity and Claudia the inclusion of Tenable Lady intangibles, yes.
Cloud assets include systems, and software vulnerabilities and cloud security posture management across workloads, but also kubernetes clusters and containers.
D. P. Now offers customers a comprehensive cyber exposure management platform that assesses hybrid I E. The full lifecycle of cloud and cloud native environments active directory.
And following closing of the acquisition and integration of bit discovery and in facing assets such as web applications cloud resources, hoping gateways.
Bringing these solutions into one unified platform enables us to identify evaluate and prioritize risk across the entire digital footprint for our customers.
In addition, we saw continued traction in the quarter for Tenable E P and it's quickly becoming a rapidly growing portion of our new sales were.
We're leading with tenable E T and the commercial sector, where sales cycles are shorter.
And we're seeing dramatic adoption.
Also occurring in large enterprises as they embrace E P as well.
For years, we've been pioneering cyber exposure and the role tenable plays and it's incredibly important and emerging discipline well.
When we introduced this category it was a new concept to many investors despite its rather than eating with T cells.
Since then we've expanded exposure beyond traditional assets to include cloud assets call. It infrastructures.
Native architectures into identities and operational technologies and web applications.
And more importantly, we've expanded analytic insights between these datasets and a form of attack pathways benchmarking and other methods to prioritize risk.
We believe gardeners recent recommendation that organizations need to look beyond vulnerability patching and to manage a wider set of security exposures is spot on.
Further we see Gartner as newly defined discipline of exposure management, which includes some mature markets like vulnerability management and emerging markets such as cloud Native security attack surface management is very well aligned with the definition of cyber exposure and the strategy, we've been pursuing and talking about for.
A years.
We believe strongly in this opportunity and then we are early market leader as it continues to mature and grow.
We'll continue to invest including the planned acquisition of bit discovery to deliver on our vision for an exposure management platform that enables our customers to better assess and manage risk.
Now before I hand, the call over to Steve I want to talk a bit about the people side of our business.
The software company, our greatest long term asset is our people. It's an area that we spend a lot of time and effort on.
Coming out of the pandemic. Many investors have asked about our ability to continue the hiring necessary to fuel growth.
Candidly, how we will fare in the great resignation.
We always strive to nurture a culture of innovation and transparency, while building a diverse thriving workforce.
Our investments in our people continue to pay off and I'm happy to report that in Q1, we had exceptional results in our recruiting efforts hiring and onboarding.
We're also seeing strong retention levels. This year people want to work at tenable.
New talent and lower attrition will translate directly into increased efficiency and an increased pace of innovation.
Annabelle has become a market recognized destination employer of choice with a great culture and compelling products and a very exciting market.
I'll now turn the call over to Steve for further commentary on our financial results.
Thanks, Amit as Hamid mentioned earlier, we are delighted with our results for the first quarter highlighted by 31% growth in calculated current billings B E. T S and continued investment in innovation and distribution.
I will provide more commentary on each of these points momentarily, but first please note that all financial results. We discuss today are non-GAAP financial measures with the exception of revenue.
As Aaron mentioned at the start of this call GAAP to non-GAAP reconciliations may be found in our earnings release issued earlier today, which is posted on our website.
Now onto the results for the quarter.
Revenue for the quarter was $159 4 million, which represents 29% year over year growth, which is up from 20% growth Q1 last year and 26% growth last quarter.
Revenue in the quarter exceeded the midpoint of our guided range by $6.4 million.
We are delighted with the results for the quarter and the various size won't be revenue.
Please note that approximately 1.4 million of revenue recognized in the quarter was due to the early termination of customer contracts in Russia, and Belarus, as a result of sanctions and export restrictions imposed by the U S government.
This is revenue that largely would have been recognized over the ensuing quarters. This year, but had little impact on seafood beat this quarter. That's the value of these contracts were already reflected in the current portion of deferred revenue.
Visibility remains high as our percentage of recurring revenue was 95%.
Which is primarily a result of our annual prepaid subscription model.
The outperformance in revenue as a result of continued accelerating growth in calculated current billings.
D C D defined as the change in current portion of deferred revenue plus revenue recognized in the quarter grew 31% year over year to $156 5 million.
This is our fourth consecutive quarter of accelerating TCP graph, which started from a base of 20% <unk> growth in Q1 last year.
We attribute this inflection and growth to our market leadership in P. M expand their product portfolio and increased innovation and go to market activities.
More specifically our heightened threat environment has highlighted the need for our customers to continuously map and measure their cyber exposure across the attack surface.
This is evidenced by the strength of new business this quarter as new enterprise platform customers grew 39% year over year.
In particular demand was very strong in North America as well as internationally in both large and mid market.
In terms of product mix, our exposure platform tenable that E P.
Which now includes cloud and identity security benefit it from customers seeking broader awareness of risk across their attack surface.
Upsell from existing customers was also a substantial in the quarter, which combined with robust renewals resulted in an LTM net dollar expansion rate that was notably above our historical rates over the last two years. This was aided in part by log for Jay although to a lesser extent than what we experienced in Q4.
I'll now turn to expenses, which include incremental investments in growth and the additional operating expenses related to the symptom acquisition that we closed in February .
I'll start with gross margin, which was 81% this quarter compared to 82% last quarter.
Cost of sales increased sequentially due to higher public cloud costs associated with increased usage from our products and incremental investment in infrastructure to support new analytics for our exposure platform.
And Jimmy mentioned earlier, we plan to launch a more expansive set of cyber exposure analytics, which we currently expect to be in the second half of the year.
This will include attack path analysis via newly acquired symptom.
And unified analytics, unimproved benchmarking and contractual duration of vulnerabilities all of which will help customers better visualize and efficiently manage risk across their hybrid environments.
As we've indicated in the past we expect these investments a portion of which are upfront costs to modestly impact gross margin short term, but provide increase scalability to support future growth.
Long term, we still expect gross margins to be in the high 70 to low 80% range.
Sales and marketing expense for the quarter was $71 5 million, which was up from $69 5 million last quarter.
Sales and marketing expense includes higher wages draws and benefits related to hiring more quota carrying sales reps and other head count in the quarter as well as higher commissions attributed to our strong sales performance in the quarter.
Sales and marketing expense as a percent of revenue was 45% in Q1 compared to 47% last quarter.
R&D expense for the quarter was $27 8 million, which is up from $24 9 million last quarter.
It should be noted that we added a team of engineers in connection with the symptom acquisition and made incremental investments in engineering and support of our expanding product portfolio, which was offset in part by capitalized software development costs in the quarter.
R&D expense as a percentage of revenue was 17% in Q1, which is consistent with last quarter.
G&A expense was $16 6 million compared to $15 8 million last quarter.
We are continuing to make investments in information technology and human resources recruiting in particular.
With the growth and scale of our business.
As a percent of revenue G&A expense was 10% this quarter compared to 11% last quarter as well as for the full year 2021.
Income from operations was $12 5 million compared to $11 9 million last quarter, which reflects the items I just highlighted.
Operating margin was 8% for Q1 and last quarter.
EPS in the first quarter was six cents, which is one penny better than the high end of our guided range.
And this is after absorbing approximately one penny of expense related to FX re measurement, which is included in other expense in the income statement.
Now, let's turn to the balance sheet.
We finished the quarter with $526 1 million in cash and short term investments.
Accounts receivable was $96 4 million.
Total deferred revenue was $527 5 million <unk>.
Including.
$404 8 million of current deferred revenue, which gives us a lot of visibility heading into 2022.
Now I'd like to discuss cash flow, we paid $4 1 million of cash interest on our credit facility in the first quarter.
Looking ahead, we are assuming a higher interest rate environment, which will increase the interest expense on our floating rate debt facility when it resets at the end of July .
Sequentially, our full year guidance reflects $15 7 million of interest expense, which is $1 7 million higher than our previously provided guidance.
That said our term lumpy continues to provide a low cost of capital, which has allowed us to fund acquisitions without the equity dilution to our shareholders.
In Q1, we generated $32 1 million of Unlevered free cash flow.
With 95% recurring revenue.
Attractive gross margins and high renewal rates, we feel confident that we can continue to generate attractive levels of cash flow, while continuing to invest in the business.
Striking the right balance between growth and profitability, it's always been and will continue to be an area of focus for us.
Last year, we became a rule of 40 company and we are well on our way to achieving the rule of 50 target we outlined at our Investor day in December .
With the results of the quarter behind us I'd like to discuss our outlook in the second quarter.
And the full year of 2022.
For the second quarter, we currently expect revenue to be in the range of $160 million to $264 million.
non-GAAP income from operations to be in the range of six to 7 million.
non-GAAP net income to be in the range of $1 million to $2 million.
Interest expense of $3 5 million and a provision for income taxes of $1 6 million.
non-GAAP diluted earnings per share to be in the range of one to two cents, assuming $119 5 million fully diluted weighted average shares outstanding.
And for the full year. We currently expect calculated current billings to be in the range of 764 million to $772 million.
Revenue to be in the range of 673 million to $679 million.
non-GAAP income from operations to be in the range of $44 million to $48 million.
non-GAAP net income to be in the range of 19, five to $23 5 million, assuming interest expense of $15 7 million and a provision for income taxes of $8 million.
non-GAAP diluted earnings per share to be in the range of 16 to 20 cents.
Assuming a $119 5 million fully diluted weighted average shares outstanding.
I'd like to discuss a few remarks regarding our guidance today.
In terms of topline growth our guidance contemplates a more normalized spending environment.
Flipping the reduced impact from tailwind such as log project.
As a reminder, hiring and investment for US is typically weighted towards the first half of the year.
Which results in lower operating margins in Q2, and higher operating margins in the second half of the year.
This seasonal expense flow with something we discussed on our last call and it's reflected in the outlook for the second quarter.
Also as announced today in a separate press release, we entered into a definitive agreement to acquire a bit discovery and attack surface management company.
The acquisition is not expected to close until later in the quarter and is therefore, not expect it to have a significant impact on our financial outlook for Q2.
For the second half of the year revenue is not expected to be significant but we expect bit discovery to add too.
$2 million to $3 million of C. C. B, most notably in the latter part of the year and 2 million to $3 million of non-GAAP net loss.
The impact of the acquisition a bit discovery is not reflected in our outlook today.
In summary, we are delighted with the results for the quarter.
Off to a great start to the year and we feel really good about the outlook, we're providing today.
I'll now turn the call back to Amit for some closing comments.
Thanks, Steve.
Do you see increasing levels of differentiation, our core capabilities across our solutions. This is particularly exciting given the strategic role that many organizations are increasingly placing onvia with.
We're thrilled about the momentum we have in our business enabled by the strategic investments that we've made and continue to make.
We believe that bringing our invaluable solutions and datasets into a unified cyber exposure management platform with differentiated analytics, such as attack path analysis, and others positions us incredibly well for the long term.
We delivered strong results in Q1 and are excited about the road ahead.
We hope to see many of you at the J P. Morgan William Blair and RSA conferences in the coming weeks.
We'd now like to open the call up for questions.
At this time, we will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue for participants using speaker equipment. It may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
And our first question comes from the line of Hamzah Heart of water with Morgan Stanley . Please proceed with your question.
Hey, guys. Thanks for taking my question and Steve It's good to know that the $2 million to $3 million from that discovery is not included in your <unk> guidance.
I want to clarify that.
Correct.
Right Okay.
Sure.
So I'm just maybe one question for me for me.
You know theres been a lot of talk about.
Securing critical infrastructure. These days I know you've been talking more about it can you give us an update on on what you're seeing on the Ot security side, because I know in the past that's been you know.
Fairly long sales cycle product and it's been a more of an evangelical sale are you seeing those sales cycles start to shorten and your are you really are you starting to see it contribute the topline at this point.
We are we're seeing a great question, we are seeing in over the last couple of quarters, we've seen.
Increased adoption of the O T platform and I think just as importantly, we're starting to see greater level of confidence in the sales team engaging with customers on Ot and understanding the customers have Oh T requirements, we believe very strongly in the.
Long term potential of this market and you know as we've said all along this is just the market.
That moves very deliberately and it doesn't move at the speed of the speed of cloud. So the indications are good.
And certainly the moment momentum has been building in recent quarters.
Thank you.
Okay.
Our next question comes from the line of Brian Essex with Goldman Sachs. Please proceed with your question.
Hi, good afternoon, and thank you for taking the question and great to see the acceleration in C C B and revenue.
I will continue the trend with one question.
Steve can you help us understand.
With regard to sales and marketing and R&D and what to expect for spending for the year. If we take the prior commentary that you had I think last quarter expected sales and marketing to be about the same.
<unk> rate as a percentage of revenue in R&D expected to ramp.
How should we think about where that investment is coming from where potential upside might be plowed back into the business and how much of that spend is.
Momentum driven versus other items.
Like our wage inflation, how that might impact.
Sure Brian .
First and foremost we are you know we are investing this year and as a reminder, our hiring and investment plans for US typically is weighted towards the first half of the year.
And so theres some seasonal clubs in the business, which will result in.
You know more modest margins in Q2, and then higher operating margins in the second half of the year as they meet commented earlier on the call. We are seeing great success.
Adding and head count and competing in this market. So hiring certainly is ahead of our expectation and retention is trending lower.
We've added sales capacity the first early part of the year, we're also adding.
Engineers as well.
That's boding well for our ability to continue to add new products.
Continue our pace of innovation.
So going forward I think the leverage will come from the second half of the year. The fact that we're doing the early onset of the hiring in the first half of the year that'll drive more margin leverage throughout the year and then obviously, we expect continued growth in revenue and T. C. B. So overall very confident in the outlook. Please with the print for Q1 and feel good about the investments that we're making.
The state long term growth.
Very helpful color. Thank you.
Yeah.
Okay.
Our next question comes from the line of Rob Owens with Piper Sandler. Please proceed with your question.
Great and thank you are sticking to the one question thing kind of like and this can.
Can you guys speak to the composition of the quarter overall it seemed like there was strong velocity in low days billings outstanding just just curious how things played out your velocity business versus large deals because it's one of your smaller net add quarters in terms of over 100000 HCV customers. So just the composition of what Youre seeing in the pipeline.
<unk>.
Well, it's important to note as you mentioned earlier, we're very we're very pleased with the results of the corner. This is our fourth consecutive quarter in which we accelerated CCP growth we grew over 31%.
We added over 400, new enterprise platform customers and we added 17 net new six figure customers.
The one comment I will make is that we don't optimize the company for any one metric and pipeline opportunities can carry.
From quarter to quarter between large and mid market deals and between new and upsell opportunities.
So overall, we're pleased with the results for the quarter were adding.
Lots of customers and we even have over 1006 figure customers that are actively expanding their subscriptions as well.
Yeah.
Safe to say, though from the metric Steve It was a very linear quarter.
Oh, yes, we got off to a really strong start for the year, but it sounds like any software company the last multiple quarters and represented over 50% of our total sales so I wouldn't characterize it as our typical flow for the quarter.
Thank you.
Our next question comes from the line of Mike vehicles with Needham. Please proceed with your question.
Hey, guys. Thanks for taking the questions here and just coming back to a couple of comments here in the Q&A regarding these customer is one of the things that struck me when we were talking about the velocity just now, but these new enterprise platform customers you added.
Historically have declined quarter to quarter from Q4 to Q1 by about 140 830 customers. So good to see that it only declined by about 100 and I think that's one of the things that struck me as far as customer additions this quarter I did.
And I guess separately wanted to ask you guys about the macro environment, you're seeing today, there's been a lot made about.
Europe I know that you guys have about 25% of your revenue base. There just curious what you are seeing on the frontline today, obviously, we have some good guidance coming from you, but just curious on your thoughts anything incremental especially as were now a month into Q2.
Yeah.
Yeah, Mike Great to hear from you.
We certainly have a high degree of confidence in in the quarter and continued progress we're seeing very strong demand.
We have were not taking any.
Fundamentally different a different approach.
But.
Again, you look at the Hyatt.
The headlines today.
Whether it's super high profile breaches, whether it's a number of proposed legislative initiatives, whether it's our alerts and warnings coming out of department of Homeland Security.
HQ and other governments around the world There's just a.
Tremendous amount happening around cyber, there's a heightened demand environment and in.
Almost every one of these Ah Ah Ah.
News happenings there is the inclusion of very specific information, highlighting which vulnerabilities are being exploited what organizations need you to do to protect and defend themselves to work we're super.
Constantly in the market and feel like we're very well positioned for continued growth going forward.
Terrific and if I could just cycled back I know that you guys have spoken about the hiring especially on the quota carrying reps.
Can you give us a sense at least directionally how have hires progressed for the quota carrying reps on a if we're comparing Q1 of this year versus Q1 of last year are we still accelerating that and then the follow up would be I think your sales reps typically mature over a 10 month process or time.
Frame, but how has the maturation of those sales hires progressed.
And I guess with E. P does that in any way streamline how quickly your sales reps.
Mature on the platform in and get out there and start producing for you.
<unk>.
Yes, so with regard to ramp our expectation is that when we hire sales rep that they would be fully ramped in Montana. So that is correct and I think it's also fair to say the rate much where hiring is notably faster than the levels that we saw in the first half of last year.
And that coincides obviously with a R.
And to note with the acceleration of growth last year.
CCP growth was 20% today reporting <unk> 31 per cent TCP Guelph.
We're seeing some acceleration throughout the year the product portfolio has expanded as well so it gives us the confidence to invest in it gives us the confidence.
<unk> two <unk>.
Continuing increases in productivity as well.
Great. Thank you.
Our next question comes from the line of from the second carrier with Barclays. Please proceed with your question.
Okay, Great Hey, guys. Thanks for taking my questions here.
I mean, maybe for you I'd love to talk about Tenable E. P. Just a little bit more deeply can you just talk about how <unk> is being received by by customers in and what additional products. Obviously, you know customers have a lot of products to choose from within E. P within that sort of easier licensing model what are you sort of.
Finding are the most commonly.
Attached or additional products that customers are using beyond VM.
Yeah.
Yeah, well a second great to hear from you. We are extremely excited about the momentum that we're seeing with with E. P E T as a.
Platform offering that only came out I think April of last year and we noted.
Out of the gate there was.
Both the sales force as well as our customer base, we're very rapidly gravitating toward.
EP as the preferred path for for procuring product as people want more flexibility.
It gives people really buy into the vision and the broader capability that we're bringing to the table.
No.
It's earlier iterations U P included.
Right.
Our core tenable Io capability, the vulnerability management capability.
Well as web application scanning container security.
Capability and alumina from an analytics perspective.
And we saw pretty broad uptake across those product lines, probably most notably between.
The and looming.
But but overall adoption was strong.
And.
In February we added or announce that we've added.
Active directory capability to loom in the.
<unk>.
Full cloud security offering capability to lumen.
And we announced the acquisition of a symptom in an EPA.
Attack path analysis would be added to two tenable EP. So I'd say right now the sales teams even more enthusiastic we're seeing continued traction.
Certainly in the mid market, but are seeing notable wins for tenable E. P. In the enterprise.
Now the usage will break down with the newer platforms being or the newer.
Closure solutions being added to E P.
Well, we'll keep a close eye on that over over the next couple of quarters.
Got it that's that's very helpful. Steve maybe for my follow up for you staying on the topic of V. P. Again to me. It's point, it's still early days, but can you just talk about <unk>.
Just broad brush I guess, how much of the new business is coming from E. P and more importantly, what sort of run rate increases are you seeing from from EP customers and what they spend versus non E&P customers if that makes sense.
Yes, absolutely socket.
We launched E P and Q1 of last year, that's important to note today, just 12 months later represents.
The double digit percentage of our total new enterprise sales exceeded our expectations here out of the gate and our expectation that that percentage will continue to grow overtime.
As I mentioned earlier as a unified <unk> platform and that includes coverage of multiple asset types. So customers are able to assess more areas of their attack surface. As a result, we're also seeing notably higher selling prices for it you pay for.
First is our standalone VM offering actually 60% higher selling prices to be specific.
And that could go higher and our expectations that will go higher as we continue to include more capabilities more offerings and EEP.
Very helpful. Thanks, guys.
And our next question comes from the line of Brad Reback Reback with Stifel. Please proceed with your question.
Great. Thanks, a lot I'm not sure who the question is for but Steve you had mentioned.
Paired remarks again about the analytics investment that you guys are making this year as we look forward should we expect the upward is there an opportunity there to directly monetize that or is it just going to be bundled with the platform and should help retention rates going forward. Thanks.
Okay.
Yeah I'll jump in there.
The answer is both.
We certainly are including a lot of analytic capability in the platform itself. We think is a key differentiator so having core aluminum functionality being part of <unk>. We think is is.
Ah is a strategic differentiator unify reporting dashboard ing.
<unk> role based access control functionality all of those types of things. We are also adding new capability to our platform, which may be sold separately or may be sold as an add on analytics form.
And charged for separately specifically the much more in depth attack path analytic.
It's something that we anticipate charging separately for.
And then as we look at how we monetize and bring the attack surface management capabilities to market and we think that there's room for both discovery.
Externally facing assets, probably enable that to be embedded into our enterprise platforms.
On a sort of quarterly basis, and then to do it on a more real time basis and tap much more contact so much richer context around.
Every asset.
That is externally facing we think that that is something.
They will be charging for separately.
That's great thanks very much.
Our next question comes from the line of Andrew Nowinski with Wells Fargo. Please proceed with your question.
Alright, Thank you and congrats on a good quarter, but it looks like one of the largest beats you've had relative to the high end of your guidance in the last two plus years that you said that log for Jay needed less than it did in Q4, which which I'd say, it's pretty consistent with the feedback we received from our reseller community.
And now you have spring for a show, which seems pretty similar to award for a day vulnerability.
Just wondering if these vulnerabilities or not necessarily.
Contributing to the inflection you're seeing in your growth do you think you are.
Relative advantages over the competition may have widened given that you have a much broader portfolio than than all the other competitors that are out there.
I think that's I think that's fair.
So we certainly think that each one of these higher profile vulnerabilities.
It does.
Incrementally add to our raise awareness around the requirements for professional VM capability.
But we're pursuing a much broader opportunity.
So we see our continued investment in R&D, our continued ability to differentiate our product capabilities, both in core VM as well as a broader understanding of what's happening.
With the customers' attack surface.
Specifically, helping them around cloud native assets and workloads the protection of identities in active directory.
For structures, and helping them assess and understand risk more holistically sores as understanding cyber exposure and risk becomes a more urgent practice for enterprises, we feel like we're going to be able to continue to differentiate ourselves and distancing sorry, just since ourselves.
And have you seen actually or do you have examples of improvements in your win rates versus the competition relative to maybe where they were last year.
Hi, This is Steve.
The short answer is yes and.
When we we know when we're first in on an opportunity our close rates in our wins rates go dramatically higher so some of the investments that youre seeing today and go to market.
Includes not only added quota capacity increase.
Marketing efforts to.
Continuing to generate higher levels of demand and create new opportunities for us. So overall, we're very pleased I think this is playing out you know when the story over the past couple of quarters and it's also playing a role in our in our growth and our and our revised outlook for the year.
Great. Thanks, guys.
Our next question comes from the line of Gray Powell with <unk>. Please proceed with your question.
Great. Thanks for.
Taking the questions and congratulations on the quarter.
Just a couple on my side.
So I.
What are the trends that we've been hearing about just developer security or a shift left or whatever you want to call. It just seems like a bigger theme this year than last.
Now that you have infrastructure S code in C. S. P M with C within C S.
How should we think about demand there and are you seeing an inflection in that product set.
Well I guess first of all we're early in our in that market and early and bringing our product to market to.
Did the <unk> acquisition in Q4, we launched the product.
Integrated to Tenable is tenable cloud security in.
And in Q1, so caveat everything by saying.
Early in the in the product's lifecycle.
We continue to see great momentum with it in terms of pipeline.
Pipeline growth in terms of customer engagement in terms of growth.
Gross.
And usage of Terror stand, which is the open source.
Piece of software that of Keryx operates and brings to the table. So all indicators are that you know that.
The product lines on the right track and that as that market matures.
We have high expectations.
Alright, It makes sense and then just the other question would be what are your expectations for the U S. Fed over the next six months and just how do you feel about the opportunity today versus this time last year.
I think we feel really good about our public sector opportunity as you know, we're the market leader and approximately 15%.
Our revenue comes from.
Public sector, which is predominately U S federal.
The spending environment is very healthy and we're making a lot of investments.
This year to sustain and even increase our footprint. There and then we also have some newly authorized products that we can tell back into the fed IL.
I L. A specifically and then O T and so also on the list of products that we can tell.
This quarter, we didn't we didn't benefit this quarter from closing like a really large sizable deal sometimes the business and public sector can be very chunky.
This quarter, we didn't see that but there's a lot of opportunities in the pipeline will be working hard to close those are over the quarter.
Alright, Thank you very much.
Yeah.
Our next question comes from the line of Jonathan Ho with William Blair. Please proceed with your question.
Hi, Good afternoon, I, just wanted to understand a little bit more about how you're thinking about the a S. M area. I mean, clearly this is a hot space with a number of private companies that are doing quite well and a few acquisitions as well can you talk a little bit about maybe what this could mean from a differentiation standpoint as well as how are you.
The differentiated from the rest of the competitive group. Thank you.
Yeah, Great Great question, Jonathan Great to hear from you.
We believe that the.
Attack surface management market is very.
Tightly intertwined with VM and cyber exposure management is a disciplined and so we think the types of folks that use V M.
And the types of folks that are interested in the attack surface management.
Very closely intertwined we see a tremendous.
Alignment of messaging positioning and go to market resources as.
As well as technology leverage.
If you're looking at high priority vulnerability and exposure.
There are not a particular assays is exposed to the Internet is obviously one critical factor. We also believe that it fits.
Very well and I'm very tightly with our.
Todd path analysis capability that we are.
Since the last quarter, so not only looking at a high value asset, but then looking at what are the what are the possible entry way exposure points, which could lead you to do.
To that high value assets. So we think it's tightly aligned we're particularly excited about.
The discovery for a number of reasons, including the accuracy of their their attribution capabilities. So looking at all internet assets.
And being able to accurately.
Ascribe particular assets to particular organizations, but as you might imagine is.
Quite a complex task, we really believe strongly in what the discovery team.
Have have done.
And their ability to achieve.
Achieve scale as we bring this type of capability of 40000.
40000 customers and still have the ability to upsell.
A much deeper context around.
Those assets are.
Just their discovery so, but we think this is the right asset we think it's the right asset for US we think we're extremely well positioned to.
Radically disrupt.
The dynamic that exists today in the U S M C.
Base.
Thank you and just as a follow up just given the new capabilities that you are adding to the portfolio do you see this as a potential to add maybe some new tips of the spear to help you break into you know maybe some incumbent accounts or to maybe go at it from.
It's a different direction as you start to leverage. These are these new capabilities that maybe your competitors don't have.
We definitely think about it that way and we definitely see early indicators.
Lighthouse accounts, if you will which have come to us from some of our newer.
Exposure solution areas, specifically O T. A L E D have enabled and active directory he'd been able to two to achieve this in in recent periods and we believe.
But over time, we'll be able to lead with cloud or lead with.
ASM or or or other functionality.
And generate pull through for.
Other product lines or before.
B M capabilities.
Ted.
The broad swath of our customers and the fastest calling for monetization would be to bring some of these newer capabilities to the existing 40000, plus 40000 plus customers. So we're looking at is as the primary track for the near future.
We believe that these other product lines can be tips of the spear for us.
Great. Thank you.
Our next question comes from the line of Joshua Tilton with Wolfe Research. Please proceed with your question.
Hey, guys and thanks for taking my questions I understand that we're kind of playing for a bit of a different tenable business here given the recent acquisitions and you also mentioned that the log for shell vulnerability was a benefit this quarter, but that the benefits should kind of subside throughout the rest of the year. So is there any way you can maybe just help us understand how we should think.
About the quarterly CCP seasonality throughout the rest of the year, maybe versus the previous typical tenable here.
Yeah.
Yes, so with regard to log for Jay.
That is correct. We did see some benefit in Q1 Q1, although to a lesser extent than what we saw in the fourth quarter.
Acceleration of growth obviously this quarter is due to the strength of our overall market.
And I think our execution has given us the confidence to raise our outlook for C. C. B this year as well.
And our expectation is that we'll follow the normal seasonal patterns of our business right.
Alright, the fourth quarter tends to be seasonally our strongest quarter in terms of the level of business that we transact both new and renewal.
And so our expectations that it will follow a typical she's.
Seasonal flow and what we've seen in prior years.
So if you look at the guidance this year.
On the last call, we guided to 22% to 23% PCB growth on this call are guiding.
24% to 25% growth I think it's an increase of $13 million in CCP, China that we delivered in Q1 3 million is with regard to the race that excludes any contribution from.
From bit discovery, which we specifically called out in the press release today. So overall, we feel really good about the business and there is nothing unusual with regard to the seasonal pattern of our business that we that we want to comment on.
Now.
Great and then when we think about the CCP guidance for the year I know, it's still early in the exposure solution story, but given we are almost five months into this year are you guys thinking any differently about what those businesses will contribute to the full year C. C V number relative to when you may be first gave guidance at the end of <unk>.
Yeah, I think it's some of these things it's important to know if you look at the case of.
Like our care accent, and even symptom you know they're still in ramp mode.
Case for carrots, we're just starting to sell the Infrastructure's code capability, and then symptom, which is the attack kind of analysis, we haven't even launched the products that will happen in the second half of the year.
So our expectation is that some of those projects will contribute to growth the second half of the year.
More towards the latter part of the year and it's factored into our guidance and our outlook this year.
And then obviously our hope is that that will continue to grow going forward.
And we feel really good about our ability to monetize some of the new Tech and also bring new products to market organically and sell that as well. So I think youre seeing that in the top line today and the continued acceleration of growth.
Thanks, guys and congrats on the Florida.
Thank you.
Our next question comes from the line of Rudy passenger with D. A Davidson. Please proceed with your question.
Hey, guys. Thanks for taking my questions.
I wanted to ask on the diet, a $6 4 million ahead of the revenue in the quarter. I know you had $1 4 million of pull forward from the rest of the risk contracts, but even if you exclude that still 5 million revenue beat in the quarter, which is one of your largest again looking back of the last couple of years, but you only raised the revenue outlook by $10 million for the.
Year, you did raise GCB by $13 million a bit more but it seems like the flow through of the beat a bit less than in past.
Q1 is there any additional color or puts and takes you can give on what went into the revenue guidance.
I know you did mention we are we've got a beat in race and we raised our outlook for CCP by $13 million and we raised revenue back to the tune of $10 million. So most of what we saw we are flowing through keep in mind that every there is sometimes a delay in terms of deals you can close.
And the commencement of revenue.
And so that can that can be a little bit of a timing difference there.
But overall, we feel really good about the beat in race, but flowing a lot of that through on the revenue side. It's still very early in the year and we feel good about the outlook, we're giving today as well.
Got it and just a follow up is there any way you can quantify the incremental sales capacity that you added I guess, both last year and plan to add this year.
We don't.
Disclose the number of quota carrying sales reps, but what we do say is you know where.
Oh that their hiring plans are more weighted towards the front of the year. We feel good about the investments we've made in go to market over the past couple of quarters. We do think it's having an impact on our graph.
And obviously, it's also driving higher levels of productivity.
And that happened to coincide with a much broader product portfolio and that's the success success of our exposure platform.
So our expectation going forward is that we're going to continue to hire we're hiring at levels at or even exceeded our expectations.
Not a lot of that it's weighted towards the front half of the year as I discussed and that will moderate in the second half and then well look to 2023 to make decisions about levels of hiring as we get closer towards the latter part of the year.
Yeah.
Yeah.
It sounds like we're done.
Okay.
Hello.
This concludes our call.
[laughter] I don't know where the.
We're the operator went perfect.
Sure.
Oh, we're.
Don on time anyway look forward to seeing folks.
At any of the upcoming events I appreciate your time and look forward to continuing.
Discussion.
Ladies and gentlemen, there still on the call we do apologize for the technical difficulties that just happened.
Unfortunately, this does end the Q&A session and also concludes today's conference you may disconnect. Your lines at this time, we thank you for your participation and once again, we do apologize for the technical difficulties that has occurred.
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