Q1 2024 Tenable Holdings Inc Earnings Call

Operator: Greetings and welcome to the Tenable Q1 2024 Earnings Conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference call, please call 1-866-433-4332. Please press star zero on your telephone keypad.

Greetings and welcome to Tenable Q1, 'twenty 'twenty four earnings conference call. At this time all participants are in a listen only mode. A brief 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, this conference is being recorded it is now my pleasure to introduce your host Ms. Erin Connie Vice President Investor Relations. Thank you Ms. Connie you may begin.

Operator: As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ms. Erin Karney, Vice President, Investor Relations. Thank you, Ms. Karney. You may be seated.

Erin Karney: Thank you, operator. And thank you all for joining us on today's conference call to discuss Tenable's first quarter 2024 financial results. With me on the call today are Amit Yoran, our Chief Executive Officer, Ethan, our Chief Financial Officer, and Jason Merrick, Senior Vice President of Product. Prior to this call, we issued a press release announcing our financial results for the quarter. You can find the press release on our investor relations website at

Erin Karney: Thank you operator, and thank you all for joining us on today's conference call to discuss tenable first quarter 'twenty 'twenty four financial result.

Erin Karney: With me on the call today are meet your Anne <unk>, Our Chief Executive Officer, Ethan, Our Chief Financial Officer, and Jason marriage, Senior Vice President product prior to this call we issued a press release announcing our financial results for the quarter you can find the press release on our IR website at Tenable dotcom.

Erin Karney: 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 2024, growth and drivers in our business, changes in the threat landscape in the security industry and our competitive position in the market, growth in our customer demand for and adoption of our solutions, including Tenable One, planned innovation, and new products and services. The potential benefits and financial impact of our recent acquisition of Aramatic include expectations regarding the cost savings associated with optimizing our go-to-market efforts and our expectations regarding long-term profitability and free cash flow.

Erin Karney: 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 'twenty 'twenty four.

Erin Karney: And drivers in our business changes in the threat landscape and the security industry and our competitive position in the market.

Erin Karney: And our customer demand for and adoption of our solution, including Tenable, one planned innovation and new products and services.

Erin Karney: Potential benefits and financial impact of our recent acquisition of aromatic expectations regarding the cost savings associated with optimizing our go to market efforts and our expectations regarding long term profitability and free cash flow.

Erin Karney: 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 these forward-looking statements as predictions of future events. Forward-looking statements represent our beliefs and assumptions only as of today and should not be considered representative of our views as of any subsequent date, and we disclaim any obligation to update any forward-looking statements or outlook.

Erin Karney: 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 on forward looking statements as a prediction of future events forward looking statements represent our beliefs and assumptions only as of today.

Erin Karney: And should not be considered representative of our views as of any subsequent date and 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.

Erin Karney: For a 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. In addition, all of the financial results we will discuss today are non-GAAP financial measures, with the exception of revenue. 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.

Erin Karney: 10-K, and subsequent reports that we file with the SEC.

Erin Karney: In addition, all of the financial results, we will discuss today are non-GAAP financial measures with the exception of revenue.

Erin Karney: 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 equivalent.

Erin Karney: There are a number of limitations related to the use of these non-GAAP financial measures versus their closest GAAP equivalent. Our press release includes GAAP to non-GAAP reconciliations for these measures. I will now turn the call over to Amit.

Erin Karney: Press release includes GAAP to non-GAAP reconciliation for these measures I will now turn the call over to Tony.

Amit Yoran: Thank you, Erin. We're very pleased with our results in the quarter. CCB, revenue, operating income, and cash flow all came in better than expected. Our leadership and exposure management resulted in strong momentum in Tenable 1. In short, we're off to a good start for the year.

Tony: Thank you our we're very pleased with our results in the quarter PCB revenue operating income and cash flow all came in better than expected our leadership in exposure management resulted in strong momentum and tenable and.

Tony: In short we're off to a good start for the year.

Amit Yoran: There are two clear takeaways this quarter. First, exposure management, the category we pioneered over five years ago, is increasingly recognized as a crucial practice for security. Tenable is uniquely positioned to identify and mitigate risks across the attack surface, including cloud, identities, operational technology, applications, and ITI. And second, that the convergence of these categories onto a single platform is the most efficient way to truly understand and reduce risk.

Tony: There are two key takeaways this quarter first exposure management the category, we pioneered over five years ago is increasingly recognized as a crucial practice for security teams.

Tony: <unk> is uniquely positioned to identify and mitigate risks across the attack surface, including cloud identities operational technology applications and at your assets.

Tony: Second the convergence of these categories onto a single platform is the most efficient way to truly understand and reduce risk and we believe.

Amit Yoran: And we believe we are the only security vendor in the market providing these capabilities with Tenable 1. Let me go deeper on the first: exposure management is gaining widespread attention and validation from security practitioners, industry analysts, and vendors. In fact, Gardner predicts that by 2026, organizations prioritizing their security investments based on an exposure management program will suffer two-thirds fewer breaches. We believe there's no company better positioned than Tenable to seize this opportunity thanks to our early focus and ongoing commitment to delivering innovative exposure management solutions. And our focus is paying off, with these solutions now representing approximately half of our total new sales in the quarter, inclusive of Tenable 1.

Tony: We are the only security vendor in the market, providing these capabilities with carnival want.

Tony: Let me go deeper on the first part.

Exposure management is gaining widespread attention and validation from security practitioners industry analysts and vendors in fact, Gartner predicts that by 2026 organizations prioritizing their security investments based on an exposure management program will suffer two thirds fewer breaches.

Tony: We believe there is no company better positioned than accountable to seize this opportunity. Thanks to our early focus and ongoing commitment to delivering innovative exposure management solutions.

Tony: And our focus is paying off with these solutions now representing approximately half of our total new sales in the quarter inclusive of tenable one.

Amit Yoran: This momentum is a result of customers realizing that managing risk and silo programs is failing. Security products for identifying and closing exposures of different types are still very disjointed, forcing security teams to work in isolation, just like their tools. This approach to security makes it extremely difficult to defend against advanced threats or more sophisticated campaigns that leverage multiple attack methods and complex tool sets. For example, an attacker may gain access from an endpoint vulnerability, move laterally to an over-provisioned identity for privilege access, and from there, exploit a misconfigured service running in the cloud. Point solutions are simply not able to identify and remediate these risks across domains.

Tony: This momentum is a result of customers realizing that managing risks and solid programs scaling them.

Tony: Security products for identifying and closing exposures different types are still very disjointed, forcing security teams to work in isolation just like their tools.

Tony: This approach to security makes it extremely difficult to defend against advanced threats or more sophisticated campaigns. The leverage multiple attack methods complex tool sets. For example, an attacker may gain access from an endpoint vulnerability move laterally to an over provisioned identity to privilege access and from their exploit them.

Tony: Miss configured service running in the cloud.

Tony: Point solution simply are not able to identify and remediate these risks across domains.

Amit Yoran: A unified approach that consolidates visibility from assets, identities, and misconfigurations spanning across domains, from on-premises, to the cloud, to critical infrastructure, creates leverage and insights previously unattainable. This is exactly what Tenable One is designed to deliver. A great example of Tenable One's impact involves a multi-billion dollar automotive parts company that selected Tenable One in Q1. They are looking to gain a unified understanding of risk across their tax terms.

Tony: A unified approach that consolidates visibility from assets identities and Mr configurations spanning across domains from.

From on Prem to the cloud to critical infrastructure creates leverage and insights previously stove pipe.

Tony: This is exactly what tenable one is designed to deliver.

Tony: A great example is tenable one's impact involves a multibillion dollar automotive parts company that selected tenable one in Q1.

Tony: They are looking to gain a unified understanding of risks across our tap service recognizing the limitations of separate solutions. They replace a key incumbent and vulnerability management accountable.

Amit Yoran: Recognizing the limitations of separate solutions, they replaced a key incumbent in vulnerability management with Tenable, while also adopting Tenable OT and cloud security to extend their visibility and remediation. Notably, the customer opted for our cloud security solution because it outperformed several well-known pure play CNAP competitors in uncovering exposures in the cloud, and the fact that it integrates with the rest of their stack using Tenable One. We repeatedly encounter scenarios that underscore this new way of thinking.

Tony: Well also adopting tableau tea and cloud security to extend their visibility intermediation capabilities, notably the customer opted for our cloud security solution because it outperformed several well known pure play competitors and uncovering exposures in the cloud and the fact that it integrates with the rest of their stock using tenable.

Tony: Sure.

Tony: We repeatedly encounter scenarios that underscore this new way of thinking conversations with customers and prospects often lead them to realize the dangerous limitations of using separate products to manage risk.

Amit Yoran: Conversations with customers and prospects often lead them to realize the dangerous limitations of using separate products to manage risk, like using a specific control system security product that has no connection to the rest of their environment. Customers are coming to grips with the fundamental truth: you cannot fully understand the risk of an interconnected environment when your risk management practice is compartmentalized.

Tony: But using a specific control system security product that has no connection to the rest of their environment.

Tony: Customers are coming to grips with the fundamental truth, you cannot fully understand the risks of an interconnect environment. When your risk management practice is compartmentalize.

Amit Yoran: These scenarios are the reasons why solutions like our OT and our CNOT capabilities are gaining traction with our customers. Given the scope of our coverage, Tenable stands out in our capacity to identify and prioritize risk. We leverage the data lake built around exposure information that encompasses hundreds of billions of aspects of threat, vulnerability, entitlement, and configuration. This robust foundation underpins all of our products, from CNOT to vulnerability management, to identity to OT.

Tony: These scenarios are the reasons why solutions like R O T and our C&I capabilities are gaining traction with our customers.

Tony: Given the scope of our coverage carnival stance.

Tony: Our capacity to identify and prioritize risk.

Tony: We leverage the data lake built around exposure information that encompasses hundreds of billions of aspects of threat vulnerability entitlement and configuration data.

Tony: This robust foundation underpins all of our products from C not to vulnerability management to identity to Ot each product is strengthened by the deep insights gleaned from our entire portfolio.

Amit Yoran: Each product is strengthened by the deep insights gleaned from our entire portfolio. Last quarter, we continued to innovate aggressively in exposure management along many fronts, including the integration of more generative AI capabilities into Title I. These new advancements bring to life interactive attack path visualizations and offer an AI assistant that answers queries and delivers specific mitigation advice. This tool gives our customers real-time access to the latest exposure data tailored to their specific environment. In addition, it provides customized guidance for fixing these issues. In an era marked by huge cyber security talent shortages, our generative AI-driven enhancements help streamline work, enhance security insights, and boost productivity.

Tony: Last quarter, we continued to innovate aggressively and exposure management, along many fronts, including the integration.

Tony: Of more generative AI capabilities into tug of war.

Tony: These new advancements bring to life interactive attack path Visualizations and offer an AI assistant.

Tony: Answers queries and deliver specific mitigation advice. This tool gives our customers real time access to the latest exposure data tailored to their specific environment.

Tony: In addition, it provides customized guidance for fixing these issues.

Tony: In an era marked by huge cyber security talent shortages are generally.

Tony: Driven enhancements helped streamline workflows enhanced security insights and boost productivity and once again positioned carnival at the forefront of exposure management innovation.

Amit Yoran: And once again, position Tenable at the forefront of exposure management innovation. We have demonstrated an ability to differentiate our core products, as well as with our broader exposure management plan. Whether it's in identity, OT, cloud security, or a unified platform, we're delivering solutions that enable our customers to better understand and remediate risk, and we are doing it in a way that has delivered impressive margin expansion. Finally, on a personal note, thanks to everyone for the well wishes regarding my recent diagnosis.

Tony: We have demonstrated an ability to differentiate our core products.

Tony: As well as with our broader exposure management platform.

Tony: It's in identity.

Tony: For security or unified platform, we are delivering solutions that enable our customers to better understand and remediate risks.

Tony: And we're doing it in a way that has delivered impressive margin expansion.

Speaker Change: Finally on a personal note.

Speaker Change: Thanks to everyone for the well wishes regarding my recent diagnosis.

Amit Yoran: My treatment is going well, but my voice has been temporarily impacted. As a result, I will not be able to fully participate in the Q&A session today and apologize in advance for subjecting you to even more time with Steve. But I do look forward to speaking with you at the upcoming investor events in the near future. I'll now turn the call over to Steve for further commentary on our financial results, and out.

Speaker Change: Treatment is going well, but my voice has been temporarily impacted as a result, I will not be able to fully participate in the Q&A session today and apologize in advance for subjecting you even more time with Steve.

Speaker Change: But I do look forward to speaking with you in the upcoming investor events in the near future.

Speaker Change: I'll now turn the call over to Steve for further commentary on our financial results and outlook.

Steve: Thanks, Amit. I'm glad to see that you have not lost your sense of humor.

Steve: Thanks, Amit I'm glad to see that you have not lost your sense of humor now onto our results for the quarter, which reflects better than expected topline growth and operating income.

Steve: Now, on to our results for the quarter, which reflect better-than-expected top-line growth and operating income. Calculated current billings, defined as revenue recognized in the quarter plus change in current deferred revenue, grew 12% year over year to 197.8 million. CCB exceeded expectations for the quarter, and accordingly, we are increasing our annual CCB outlook today. As Amit commented earlier, Tenable 1 was a major highlight in the quarter and grew to 26% of total new enterprise sales, up from 22% last quarter. Exposure solutions, which includes Tenable One and standalone cloud security, identity security, and operational technology security, represented approximately 50% of our total new enterprise sales in the course. We believe this reflects the growing demand for exposure management solutions and the actionable insights it delivers to CISOs and their security teams. Turning to other highlights.

Steve: Calculated current billings defined as revenue recognized in the quarter plus change in current deferred revenue grew 12% year over year to 197 8 million.

Steve: C C P exceeded expectations for the quarter and accordingly, we are increasing our annual C. C b outlook today.

Steve: As Jay commented earlier Tenable, one was a major highlight in the quarter and grew to 26% of total new enterprise sales.

Steve: Up from 22% last quarter.

Steve: Exposure solutions, which includes tenable, one and Standalone cloud security identity security and operational technology security represented approximately 50% of our total new enterprise sales in the quarter.

Steve: We believe this reflects the growing demand for our exposure management solutions and the actionable insights it delivers to T cells and their security teams.

Turning to other highlights.

Steve: Sales to new customers actually works really well for us. During the quarter, we added 410 new enterprise platform customers, including a healthy number of six-figure LAMs. The strength in new logos resulted in nearly 30% year-over-year ACV growth from our newly acquired customers. To put matters in perspective, this was one of our best quarters for year-over-year ACV growth to new customers since 2022. This dynamic impacted our net dollar expansion rate, which was 109% this quarter compared to 111% last quarter, which we believe is a result of the natural variance in the mix of pipeline opportunities between new and expansion.

Steve: Sales to new customers works actually strong for us.

Steve: During the quarter, we added 410, new enterprise platform customers, including a healthy number of six figure lands.

The strength in new logos resulted in nearly 30% year over year ACB growth from our newly acquired customers to put batteries in perspective. This was one of our best quarters for year over year ACB growth to new customers since 2022.

Steve: This dynamic impacted our net dollar expansion rate, which was 109% this quarter compared to 111% last quarter, which we believe is a result of the natural variance in the mix of pipeline opportunities between new and expansion.

Steve: The takeaway here is that we saw strength in new logo sales and large territories, and we believe it's enabling us to win share in the exposure management market. Pipeline generation was also strong for us and is very encouraging.

Steve: Takeaway here is that we saw strength in new logo sales and large lands and we believe.

Steve: It's enabling us to win share in the exposure management market.

Steve: Pipeline generation was also strong for us and is very encouraging.

Steve: Our net new six-figure customers decreased by four in the quarter. This is a result of a higher than usual number of customers who dropped below the $100,000 threshold in Q1 of 2023, which impacts this metric now because these customers dropped out of the LTM Count-A-Square program. This was concentrated primarily in the financial services and tech and telecom verticals that were impacted by the regional banking crisis in March of last year. This dynamic more than offsets the strong number of new six-figure logo lands in the quarter. I would note that we always have some number of customers who dip below the $100,000 threshold at any given moment.

Steve: Our net new six figure customers decreased by four in the quarter.

Steve: This is a result of a higher than usual number of customers who dropped below the 100000 dollar threshold in Q1 of 2023.

Steve: Which impact this metric now because these customers dropped out of the L. T M count this quarter.

Steve: This was concentrated primarily in the financial services and Tech and telecom verticals that were impacted by the regional banking crisis in March of last year.

Steve: This dynamic more than offset the strong number of new six figure logo lands in the quarter.

Steve: I would note that we always have some number of customers who dipped below the 100000 dollar threshold in any given quarter.

Steve: Q1 of 'twenty three was an outlier last year and consequently, we do not expect this to be a headwind to the net new six figure customer calculation for the remainder of this year.

Steve: Q1 of 23 was an outlier last year, and consequently, we do not expect this to be a headwind to the net new six-figure customer calculation for the remainder of this year. Now, on to the P&L for the quarter. Revenue was $216 million, which represents 14% year-over-year growth. Revenue in the quarter exceeded the midpoint of our guided range by $3 million. Our percentage of recurring revenue remains high at 96% this quarter. I'll now turn to expenses.

Steve: Now on to the P&L for the quarter.

Steve: Revenue was $216 million, which represents 14% year over year growth.

Steve: Revenue in the quarter exceeded the midpoint of our guidance range by $3 million.

Steve: Our percentage of recurring revenue remains high at 96% this quarter.

Steve: I'll start with gross margin, which was 81% this quarter and last quarter and higher than our expectation. Gross margin benefited this quarter from the successful integration of our Medix public cloud infrastructure and the overall efficiency with which we have been able to scale our exposure management platform. Sales and marketing expense was $84.5 million, which was down from $88.5 million last quarter. Sales and marketing expenses, the percentage of revenue, were 39% compared to 41% last quarter. Sales and marketing expense was lower sequentially primarily due to reduced headcount from our cost optimization effort.

I'll now turn to expenses I'll start with gross margin, which was 81% this quarter and last quarter and higher than our expectations.

Steve: Gross margin benefited this quarter from the successful integration of our <unk> public cloud infrastructure and the overall efficiency with which we have been able to scale our exposure management platform.

Steve: Sales and marketing expense was $84 5 million, which was down from $88 5 million last quarter.

Steve: Sales and marketing expense as a percentage of revenue was 39% compared to 41% last quarter.

Steve: Sales and marketing expense was lower sequentially, primarily due to reduced head count from our cost optimization efforts.

Steve: Seasonally lower program spend and commission expense was partially offset by the cost associated with our annual sales kickoff conference in February. Overall, we are pleased with the improved efficiency in our go-to-market efforts this quarter and expect sales and marketing spend as a percentage of revenue to trend lower over the remainder of the year. R&D expense was $32.6 million, which was up from $27.8 million last quarter. R&D expenses as a percentage of revenue were 15% this quarter compared to 13% last quarter.

Steve: Seasonally lower program spend and commission expense and was partially offset by the cost associated with our annual sales kickoff conference in February.

Steve: Overall, we are pleased with the improved efficiency in our go to market efforts this quarter and expect sales and marketing spend as a percentage of revenue to trend lower over the remainder of the year.

Steve: R&D expense was $32 6 million, which was up from 27 8 million last quarter.

Steve: R&D expense as a percentage of revenue was 15% this quarter compared to 13% last quarter.

Steve: R&D expense increased sequentially, primarily due to increased personnel costs and other costs, largely in cloud, analytic, and VM as well as the foreign R&D tax credits that we received last quarter. G&A expense was $20.6 million, which was up from $19.5 million last quarter, primarily due to higher payroll taxes, which reset at the beginning of the year.

Steve: R&D expense increased sequentially, primarily due to increased personnel costs and other costs largely in cloud analytics and V M as well as the foreign R&D tax credits that we received last quarter.

Steve: G&A expense was $20 6 million, which was up from $19 5 million last quarter, primarily due to higher payroll taxes, which reset at the beginning of the year.

Steve: G&A expense as a percentage of revenue was 10% this quarter compared to 9% last quarter. Income from operations was $37 million, which was significantly better than expected and exceeded the midpoint of our guided range by $9 million. Operating margin for the quarter was 17%, which was 400 basis points better than the midpoint of our guidance.

Steve: G&A expense as a percentage of revenue was 10% this quarter compared to 9% last quarter.

Steve: Income from operations was $37 million, which was significantly better than expected and exceeded the midpoint of our guidance range by $9 million.

Steve: Operating margin for the quarter was 17%.

Steve: It was 400 basis points better than the midpoint of our guidance.

Steve: The outperformance in earnings this quarter reflects the timing of certain expenses and our ability to deliver profitable growth and drive leverage in the business while continuing to invest in our largest market opportunities. The sizable beaten-up income resulted in significant EPS upsides. EPS for the quarter was $0.25, $0.08 better than the midpoint of our guided range.

Steve: The outperformance in earnings this quarter reflects the timing of certain expenses and our ability to deliver profitable growth and drive leverage in the business, while continuing to invest in our largest market opportunities.

Steve: The sizable beaten up income resulted in significant EPS upside E.

Steve: P. S for the quarter was 25 cents, which is <unk> <unk> better than the midpoint of our guided range.

Steve: Now, let's turn to the balance sheet. We finished the quarter with $510.8 million in cash and short-term investments. Accounts receivable was $156.8 million, and total deferred revenue was $722.7 million. Current Deferred Revenue is $562.6 million, which gives us a lot of visibility into expected revenue over the next 12 months. We generated $54.7 million of unlevered free cash flow during the quarter, which is up from $43.3 million last quarter. With high recurring revenue, gross margins, and renewal rates, we feel confident that we can continue to expand our operating and free cash flow margins over the ensuing years.

Steve: Now, let's turn to the balance sheet.

Steve: We finished the quarter with $510 8 million in cash and short term investments.

Steve: Accounts receivable was $156 8 million and total deferred revenue was $722 7 million.

Steve: Current deferred revenue was $562 6 million, which gives us a lot of visibility into expected revenue over the next 12 months.

Steve: We generated $54 7 million of Unlevered free cash flow during the quarter, which is up from 43.3 million last quarter.

Steve: With high recurring revenue gross margin and renewal rates, we feel confident that we can continue to expand our operating and free cash flow margins over the ensuing years.

Steve: Our higher margin profile has also caught the attention of the rating agencies, as Moody's recently upgraded our issuer credit rating to BA3, as well as S&P's upgrade to BB- in late November. During the quarter, we repurchased 526,000 shares of our common stock for an aggregate purchase price of $25 million. That leaves $60.1 million of remaining authorization.

Steve: Our higher margin profile has also caught the attention of the rating agencies as Moody's recently upgraded our issuer credit rating to be a free as well as S&P upgrade the double b minus in late November.

Steve: During the quarter, we repurchased 526000 shares of our common stock for an aggregate purchase price of $25 million.

Steve: That leaves $60 1 million of remaining authorization.

Steve: Under our share repurchase program, we continue to take a programmatic approach to partially offsetting our share creep and will continue to evaluate the size of the program going forward based on the evaluation of our common stock as well as other factors. With the results of the quarter behind us, I'd like to discuss our outlook for Q2 and the remainder of the year. For the second quarter, we currently expect. Revenue is expected to be in the range of $217 to $219.

Steve: Our share repurchase program, we continue to take a programmatic approach to partially offsetting our share creep and we'll continue to evaluate the size of the program going forward based on valuation of our common stock as well as other factors.

Speaker Change: With the results of the quarter behind us I like to discuss our outlook for Q2 and the remainder of the year.

Steve: Nine Gap's income from operations is expected to be in the range of $34 to $36 million, non-GAAP net income to be in the range of $28 to $30 million, assuming interest expense of $8.2 million, interest income of $5.9 million, and a provision for income taxes of $3.1 million. Non-GAAP diluted earnings per share are expected to be in the range of $0.22 to $0.24, assuming 124.5 million fully And for the full year, we currently expect Calculator Current Billings to be in the range of $986 to $994 million.

Speaker Change: For the second quarter, we currently expect.

Revenue to be in the range of $217 million to $219 million.

Speaker Change: non-GAAP income from operations to be in the range of $34 million to $36 million.

Speaker Change: non-GAAP net income to be in the range of $28 million to $30 million.

Speaker Change: Assuming interest expense of $8 2 million interest income of $5 9 million and a provision for income taxes of $3 1 million.

Speaker Change: non-GAAP diluted earnings per share to be in the range of 22 to 24 cents, assuming $124 5 million fully diluted weighted average shares outstanding.

Speaker Change: And for the full year. We currently expect calculated current billings to be in the range of 986 and $994 million.

Steve: Revenue to be in the range of $900 to $908 million. Non-GAAP income from operations to be in the range of $158 to $163 million, non-gap net income to be in the range of $135 to $140 million, assuming interest expense of $32.8 million, interest income of $24.2 million, and a provision for income taxes of $12.3 million, non-GAF diluted earnings per share to be in the range of $1.08 to $1.12, assuming 125 million fully diluted weighted average shares outstanding, and on leveraged free cash flow to be in the range of $220 to $230 million.

Revenue to be in the range of $900 million to $908 million.

Speaker Change: non-GAAP income from operations to be in the range of $158 million to $163 million.

non-GAAP net income to be in the range of $135 million to $140 million, assuming interest expense of $32 8 million interest income of $24 2 million.

Speaker Change: Our provision for income taxes up $12 3 million.

Speaker Change: non-GAAP diluted earnings per share to be in the range of $1 eight to $1 12, assuming 125 million fully diluted weighted average shares outstanding.

Speaker Change: And unlevered free cash flow to be in the range of $220 million to $230 million.

Steve: I would like to provide some commentary regarding our increased outlook. Our CCB guide represents a range of 13 to 14% growth for the full year and reflects a $2 million beat in our expectations in Q1 and a $1 million raise at the midpoint. Similarly, revenue reflects a $3 million beat and a $1 million raise at the midpoint of the year. Consistent with the directional comments I provided on our last call, we expect CCB growth to accelerate modestly in the second half of the year as we continue to build pipeline opportunities in the first half of the year in connection with our more expansive CNAP offering and some of the newly acquired capabilities from Hermetic.

I would like to provide some commentary regarding our increased outlook today.

Speaker Change: Our C C. B guide represents a range of 13% to 14% growth for the full year and reflects a $2 million beat in our expectations in Q1, and a $1 million raised at the midpoint.

Similarly revenue reflects a $3 million beat and a $1 million raise at the midpoint of the range.

Consistent with the directional comments I provided on our last call, we expect CCP growth to accelerate modestly in the second half of the year as we continued to build pipeline opportunities in the first half of the year in connection with a more expansive seen app offering and some of the newly acquired capabilities from her matter.

Steve: Our guidance today also reflects a full-year operating margin of 18% at the midpoint, which is a 50 basis point improvement over our prior guidance and is a terrific start to the year for us. We continue to expect to follow the similar seasonal spending patterns as prior years, with incremental investment more weighted in the first half of the year, resulting in higher operating margins in the second half of the year. I also want to provide an update on the restructuring costs that we discussed in February.

Speaker Change: Our guidance today also reflects a full year operating margin of 18% at the midpoint.

Speaker Change: Which is a 50 basis point improvement over our prior guidance and is a terrific start to the year for us.

Speaker Change: We continue to expect to follow the similar seasonal spending patterns as prior years with incremental investment more weighted in the first half of the year, resulting in higher operating margins in the second half.

Steve: We incurred $1.4 million of restructuring costs in Q1 associated with one-time severance benefits related to the reduction in force that took place in January, which was better than the $2 to $3 million range that we previously provided. Additionally, we are still in negotiations to sublease a portion of our real estate, which is expected to result in a non-cash impairment charge of $6 to $7 million in Q2. Please note that restructuring expenses are excluded from our non-GAAP results. And finally, as a reminder, our next update to unleveraged free cash flow will be on our Q2 call.

Speaker Change: I also want to provide an update on the restructuring costs that we discussed in February we.

Speaker Change: We incurred $1 4 million of restructuring cost in Q1 associated with one time severance benefits related to the reduction enforced that took place in January which was better than the $2 million to $3 million range that we previously provided.

Speaker Change: Further we are still in negotiations to sublease a portion of our real estate, which is expected to result in a noncash impairment charge of $6 million to $7 million in Q2.

Please note that restructuring expenses are excluded from our non-GAAP results.

Speaker Change: And finally as a reminder, our next update to Unlevered free cash flow it will be on our Q2 call.

Steve: Thanks, Steve. In summary, Q1 was marked by a healthy balance of growth and margin expansion. We are excited about where we are as a company and the opportunity in front of us. We hope to see you at the Morgan Stanley Conference in the coming week. We'd now like to open the call up for questions from the audience. Also, Jason Merrick, our Senior Vice President, Products, is here today to participate in the Q&A session.

Speaker Change: Thanks, Steve.

Steve: Summary, Q1 was marked by a healthy balance of growth and margin expansion. We are excited about where we are as a company and the opportunity in front of US we hope to see you at the Morgan Stanley Conference in the coming weeks.

Speaker Change: We'd now like to open the call up for questions for Steve also Jason Merit, our senior Vice President products is here today to participate in the Q&A session.

Speaker Change: Thank you.

Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question. You may press star 2 if you would like to remove your questions from the question. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment, please; we have a poll for questions. The first question comes from the line of Jewel Fishbein, on tourist security. Thank you for taking my question and congrats on a good quarter.

Speaker Change: 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, a confirmation tone will indicate your line is in the question queue.

Speaker Change: If I start to if you would like to remove your questions 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 poll for questions.

Speaker Change: The first question comes from the line of Jordan Fishbein, but securities. Please go ahead.

Joel P. Fishbein: Thank you for taking my question and congratulations on a good quarter. I'd like to ask about Hermetic. I know that Amit talked about a win there in the automotive space that included cloud security. I'd just love to understand the competitive dynamics around that space, and I just have a quick follow-up for Steve.

Joel P. Fishbein: Thank you for taking my question and congrats on the good quarter.

Joel P. Fishbein: I'd like to ask you about our Medicaid I know that <unk> talked about a win there.

In the automotive space that included.

Joel P. Fishbein: Cloud security I'd, just love to understand the competitive dynamics around that space and and I just have a quick follow up for Steve.

Operator: Please go ahead. Hello? Hello?

Speaker Change: Please go ahead.

Speaker Change: Hello.

Speaker Change: Okay.

Operator: Speakers, please go ahead. Fishbein, Mr. Fishbein, just give me a moment. Mr. Aaron?

Speakers. Please go ahead.

Okay.

Speaker Change: Fishbein selfish brain just give me a moment.

Speaker Change: Yeah.

Speaker Change: Yeah.

Aaron: Mr. Aaron.

Aaron: Okay.

Operator: Ms. Karney, can you please go ahead and speak? Your line has been unmuted. All right, just give me a moment. Ladies and gentlemen, the speaker line has been disconnected. Please be on hold while we quickly get them reconnected.

Aaron: MS. Connie Please go ahead and speak.

Operator: .......

Connie: Your line has been muted.

Connie: Alright, just give me a moment.

Connie: Ladies and gentlemen, the speaker line has been disconnected. Please.

Connie: Please be on hold while we quickly get them reconnected.

Connie: Yeah.

Connie: [music].

Operator: Ladies and gentlemen, the speaker line has been reconnected. Please go ahead. Can you hear us, Mr. Fishbein?

Connie: Ladies and gentlemen, the speaker line has been reconnected. Please go ahead.

Joe: Hi, Joe.

Joe: Can you hear Mr Fishbein.

Joel P. Fishbein: Thanks for taking the question and congrats on a good quarter. Jason, I have one for you and a quick follow-up for Steve. Amit mentioned on the call the Hermetic win with the automotive company, and that's obviously great. I'm curious about the competitive dynamics around Hermetic, obviously the space is fairly crowded, and what differentiates that offering that you have in the marketplace and talk about maybe the competitive dynamics of why you won. That would be helpful. Thank you.

Joe: Yeah I'm here a question okay.

Joe: Thanks for taking the question and congrats on the good quarter, Jason I had one for you and a quick follow up for Steve.

Joe: Meet mentioned on the call.

The medic win with the automotive company and that's obviously, great I'm curious about the competitive dynamics around Hermetic, obviously, the space is fairly crowded and what differentiates.

Joe: That offering that you have in the marketplace and talk about maybe the competitive dynamics of why you won that would be helpful. Thank you.

Jason Merrick: Joel, thank you very much for the question. So we could not be more excited with the competitive capabilities across the tenable portfolio and even more so with our cloud security solution that Aromatic brings, you know, with their more expansive CNAP capability. It gives our customers the ability to leverage the entire platform, but we also have the flexibility for customers to choose specific components within our cloud security offering. So customers can choose the infrastructure as code, CFPM, or CWPP.

Joe: Joe. Thank you very much for the question. So we could not be more excited with the competitive capabilities across the total portfolio.

Speaker Change: Even more so with our cloud security solution that aromatic rings.

Speaker Change: With there.

Jason Merrick: But we also believe that we've got the industry-leading cloud infrastructure entitlement management capability, the acronym is called KEM. This gives organizations the ability to have visibility into the entitlements of the cloud. And this is a differentiator for us in the market. Even customers that have implemented a cloud security solution today with other competitors are choosing to add our KEM capability. Now, the other major competitive dynamic is Tenable One and being able to bring cloud security data into Tenable One.

Speaker Change: More expansive female capability.

Speaker Change: Gives our customers the ability to leverage the entire platform, but we also have the flexibility for customers to choose specific components within our cloud security offerings, our customers can choose Infrastructure's code P. M. C. W. P P but.

Speaker Change: But we also believe that we've got the industry, leading cloud infrastructure entitlement management capability the acronym called cure this.

Gives organizations the ability to have visibility and to the entitlements of the workloads that are working in the cloud and this is a differentiator for us in the market even customers that have made the cloud security solution today with other competitors are choosing to add our kidney capability now.

Jason Merrick: Great! Thank you so much.

Now the other major competitive dynamic is tenable, one and being able to bring the cloud security data into technical one.

Speaker Change: Great. Thank you so much.

Speaker Change: Yeah.

Operator: Thank you. The next question comes from the line of Brian Essex with J.P. Morgan. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Our next question comes from the line of Brian Essex with JP Morgan. Please go ahead.

Brian Lee Essex: Hi, good afternoon, and thank you for taking the question. I was wondering, maybe either Jason or Steve, could you talk about the spending environment and macro? I know last year Q1 was a bit unusual. What do you think so far? You're a bit, you know, early in the earning season, so it'd be great to get your insight on how you see the spending environment unfolding so far this year. Our enterprise is willing to spend, maybe compare that to the environment last year, and where you're seeing any strength or weakness, whether that's on the enterprise side, a recovery in the small bank, credit union, Page PAGE of NUMPAGES www.verbalink.com Page PAGE of NUMPAGES, of that and how the pipeline is looking as we head into Q2. Thank you.

Brian Lee Essex: Hi, good afternoon, and thank you for taking the question I was wondering.

Brian Lee Essex: Maybe either Jason Steve could you talk about the spending environment and macro I know last year Q1 was.

Brian Essex:

Was a bit unusual what are you seeing so far your bid you know early in the earning season. So it would be great to get your insight around how you see the it spending environment unfolding so far this year.

Brian Essex: Our enterprise is willing to spend.

Brian Essex: And maybe compare that to the environment last year, and where are you seeing any strength or weakness, whether that's on the enterprise side.

Brian Essex: A recovery in the small.

Brian Essex: Small bank credit Union.

Brian Essex: After you know after the disruption last year, and maybe give us a sense of.

Brian Essex: Of that and how the pipeline is looking as we head into Q2. Thank you.

Brian Essex: Sure. This is Steve I'll.

Steve: Sure. You know, this is Steve. I'll say first, I think we're executing very well, certainly within the confines of the current market. Overall, security spend remains healthy and a top priority. And as we said earlier, exposure management, a category that we pioneered, continues to gain widespread adoption and validation. Not only from security practitioners but also partners and industry analysts. Gardner, as you heard earlier, is now taking or talking about cyber exposure as a critical means of reducing breaches.

I'll say first I think we're executing very well certainly within the confines of the current market overall.

Brian Essex: Overall security spend remains healthy and a top priority.

Brian Essex: And then.

Brian Essex: Earlier exposure management or category that we pioneer continues to gain widespread widespread adoption and validation.

Brian Essex: Only from security practitioners, but also partners and industry analysts Gardner as you heard earlier is now taking talking about cyber exposure as a critical means to reducing breaches.

Steve: We're seeing large enterprise organizations create exposure management departments. We're seeing our partners, too, starting to develop exposure management practices and hire exposure management engineers. Well, clearly, there's a lot of momentum in the space and specifically with our platform. So one of the major areas of strength for us was with Tenable One, our unified platform and exposure management offering represented 26% of our total new sales this quarter, compared to 22% last quarter. We also saw strength in our core VM business, where we continue to enjoy a high win rate.

Brian Essex: Large enterprise organizations create exposure management departments.

Brian Essex: We're seeing our partners to starting to garner exposure management practices and higher exposure management Engineers Oaks.

Brian Essex: Yes.

Brian Essex: Clearly theres a lot of momentum in the space and specifically with our platform.

Brian Essex: But one of the major.

Brian Essex: Areas of strength for us.

Brian Essex: What would a tangible one.

Brian Essex: Our unified platform and exposure management offerings represented 26% of our total new sales this quarter, it's up from 22% last quarter. We also saw strength.

Brian Essex: In our core VM business, where we continue to enjoy high win rates.

Steve: And out of the gate here, we're very pleased with the demand that we're generating, specifically in the cloud top of the funnel, which remains very strong. We're seeing some terrific engagement on both the customer and the partner front. So overall, we're seeing good spending across the board, a good start to the year, and we thank you for providing a good outlook as a result.

Brian Essex: Out of the gate here, we're very pleased with the demand that we're generating specifically cloud top of funnel that remains very strong we're seeing some terrific engagement.

Brian Essex: From both a customer and the partner front. So overall, we're seeing good spending across the board good start to the year and we think we're providing a good outlook as a result.

Steve: Got it. Helpful. Congratulations on the results, and we'll keep it to one. Thank you.

Speaker Change: Got it helpful. Congrats on results and we will keep it to one thank you.

Operator: Thank you. The next question comes from the line of Saket Kalia with Barclays. Please go ahead.

Barclays: Thank you next question comes from the line of sockets Cardio with Barclays. Please go ahead.

Sockets Cardio: Okay great.

Saket Kalia: Okay, great. Hey guys, thanks for taking my questions here. It's great to hear everybody's voice. Steve, maybe just to start with you, you know, just on that last point, great to see just that growing mix of Tenable One as a percentage of new sales. You know, do you have any data or just even anecdotes on what exposure management modules outside of Core VM customers are most gravitating towards? Because you get a nice uplift there on Tenable One versus sort of, you know, kind of buying a la carte. What are the modules that are sort of driving this?

Sockets Cardio: Thanks for taking my questions here and great to hear everybody's voice.

Sockets Cardio: Steve maybe just maybe just to start with you.

Barclays Cardio: On that last point, great to see just the growing mix of tenable one.

Barclays Cardio: As a percentage of new sales.

Steve: Do you have any data or just even anecdotes on what what exposure management modules outside of core VM customers are most gravitating towards because you get a nice uplift there on tenable one versus versus sort of you know.

Steve: Buying a la carte what are the modules that are sort of driving that.

Steve: Most often.

Steve: Yes, well, a good example of that is our largest win within the quarter. It's a seven-figure win with a European manufacturer. We specifically, you know; it was Tenable One. We won the cloud security mandate, so that was the tip of the spear for us. And then along with that purchase, we displaced an incumbent VM vendor, and we also sold OT security, which we have now more recently integrated into Tenable One. So, Tenable One is a means for customers to not only understand the risk posture across the attack surface, but it is also allowing us to consolidate many categories of security, not only VM, but also cloud and OT, as I just mentioned.

Speaker Change: Yes, well a good example of that is our largest win within the quarter to seven figure win for us.

Steve: With a European manufacturer.

Steve: We specifically.

Steve: Tenable, one we wanted to cloud security mandate, so that was the tip of the spear for US and then along with that purchase we displaced a an incumbent VM vendor.

Steve: We also sold out to.

Steve: Security, which we now have more recently integrated into tenable. One so tenable one is a means for customers generally understand the risk posture across the attack surface, but also is allowing us to consolidate many categories that security not only be M. But also cloud and Ot as I just mentioned web.

Steve: Web app is also, you know, one of those modules that continues to get good traction for us. And I would say, not only in terms of the threats that we offer in Tenable One and the areas of the attack surface that we secure, but also in terms of insights and analytics. It's connecting all the volumes and all the threats with the identities and the entitlements, and those who can make lateral movement.

Steve: <unk> was also a.

Steve: One of those modules that are continuously good good traction for us and I would say not only in terms of the breadth that we offer and tenable one of the areas of the attack surface that we secure but it's also the insights and the analytics, it's connecting all of the walls and all the threats with the identities of the entitlement.

Steve: And those who can make lateral movement. So we could not be more pleased with the momentum we're getting in tenable, one and again theres just a lot of traction with exposure management as I mentioned earlier and certainly it's resonating well not only with customers, but also partners.

Steve: So, we could not be more pleased with the momentum we're getting in Tenable 1. And again, there's just a lot of traction with exposure management, as I mentioned earlier. And certainly, it's responding well, not only with customers but also partners.

Steve: That's great. And maybe for my follow up, and it's maybe something for both you and Jason.

Speaker Change: That's great.

Speaker Change: Maybe for my follow up and it's maybe something for both you and Jason and maybe it's also related to that answer that you gave but one thing that sort of stood out to me was just the better new logo ACB in the quarter I think.

Speaker Change: We called out Steve.

Saket Kalia: And maybe it's also related to that answer that you gave. But, you know, one thing that sort of stood out to me was just the better new logo for ACB in the quarter. I think that's what you typically call it.

Speaker Change: Maybe some of the things that you just talked about but what do you feel like is driving that success, particularly with no with new logos.

Speaker Change: Think about some reasons, maybe it's a better VM market, maybe it's that the that sort of momentum and exposure, maybe it's market share gains any thoughts on sort of what's driving that it's good performance all around but particularly with new logos any thoughts there would be helpful.

Saket Kalia: Maybe it's some of the things that you just talked about, but what do you feel is driving that success, particularly with the new logos? And as I just think about some reasons, you know, maybe it's a better VM market, maybe it's that sort of momentum and exposure, maybe it's market share gains, any thoughts on sort of what's driving that, that it's good performance all around, but particularly with new logos, any thoughts there would be helpful.

Speaker Change: Yes.

Speaker Change: That's a great question and I think the the market is starting to dictate that.

Speaker Change: I can tell you that tenable, we're having more conversations with T cells that are looking for more than a single solution better.

Jason Merrick: Yeah, that's a great question, and I think the market is starting to dictate this. I can tell you that at Tenable, we're having more conversations with CISOs that are looking for more than a single solution vendor. And with Tenable, we have the portfolio of products to help an organization be able to deal with the ever-growing attack surface. And maybe this is an area where I can explain a little bit more about Tenable One and what it does for our customers.

Speaker Change: And with Tenable, we have the portfolio of products to help an organization be able to deal with the ever growing attack surface and maybe it is.

Speaker Change: An area that I can explain a little bit more about kind of a one and what it does for our customers. It starts with rebuilding inventory for our customer we bring in assets from the cloud from Ot, we bring in identities human and nonhuman, we can even bring in third party data assets, so being able to bring in all of this information so on organs.

Jason Merrick: It starts with us building an inventory for a customer. We bring in assets from the cloud and from OT. We bring in identities, human and non-human. We can even bring in third-party data assets.

Speaker Change: <unk> has the ability to understand what assets. They are responsible for the second piece is we then analyzed that inventory we look for findings we look for risk we look for toxic combinations.

Jason Merrick: So being able to bring in all of this information, an organization has the ability to understand what assets they're responsible for. The second piece is that we then analyze that inventory. We look for findings. We look for risk. We look for toxic combinations.

Jason Merrick: And we contextualize and normalize this information. And then the third step is we help with prioritization. We give business context. From a business organization's perspective, what the associated risk is, and why it's important. But just as importantly, we also give the technical prioritization details. What assets need to be remedied?

Speaker Change: We contextualize it normalize this information.

Jason Merrick: This helps with compliance, this helps with regulation, and drives remediation. And then lastly, and really, truly, the power of Tenable One is that we bring all these things together in the analytics, the ability to optimize, and the ability to share this information with executive management, with boards, and with peer groups to be able to drive actionability. And if you think about it, it's circular. So that continually, the inventory constantly changes. And the power of Tenable One is that we build that inventory, we analyze the inventory for risk and toxic combinations, we help with prioritization, and we help with optimization.

Speaker Change: And then the third step is we help with prioritization, we give business contacts from our business organization, what the associated risk is and why its important but just as importantly, we also give the technical prioritization details what assets need to be Remediated. This helps with compliance this helps with regulation and dry.

Speaker Change: <unk> remediation and then lastly, and really truly the power of kind of once we bring all these things together the analytics the ability to optimize the ability to share. This information with executive management with boards and with peer groups to be able to drive action ability.

Speaker Change: Think about it it's circular so that continually the inventory constantly changes and the power tenable one as we build that inventory, we analyze the inventory per risk and talks of combinations, we help with prioritization and we help with the optimization.

Jason Merrick: Super helpful. Thanks, guys. Thank you. Next question comes from the line of Hamza Fodderwala with Morgan Stanley. Please go ahead. Good afternoon. Thank you.

Speaker Change: Super helpful. Thanks, guys.

Operator: Thank you. The next question comes from the line of Hamza Fodderwala with Morgan Stanley. Please go ahead.

Speaker Change: Thank you next question comes from the line of Hamzah 41, though but Morgan Stanley. Please go ahead.

Hamzah: Great. Good afternoon, and thank you for taking my question Steve.

Hamzah: Steve a lot of macro uncertainty out there I'm wondering just on the spending environment again.

Hamzah: How would you characterize the environment relative to.

Hamzah: When you last gave guidance 90 days ago and could you give any commentary on early pipeline trends for Q2 as it relates to your guidance for Q2 and for the full year. Thank you.

Steve: Well, specifically with regard to Q2, the pipeline remains healthy. For the first time, we're sending expectations for the quarter and providing an outlook, and the outlook we're providing, we think, is strong, not only for Q2, but also for the year. And as a reminder, in Q1, we beat CCB, we beat revenue, we're flowing through the beat for both CCB and revenue, and we're also growing in both of those areas. So the outlook for Q2, we believe, is absolutely strong. The outlook for the year is more improved than 90 days ago.

Steve: Well, specifically with regard to Q2 <unk>.

Steve: Pipeline remains healthy and this is the first time, we're spending expectations for the quarter and providing an outlook and the outlook. We're providing we think is strong.

Steve: Not only for Q2, but also for the year and as a reminder, in Q1, we beat <unk> beat revenue flowing through the peak for both CCP revenue. We're also raising and both of those both of those areas. So the outlook for Q2, we believe is absolutely strong.

Steve: For the year is more improve the 90 days ago, and I would say certainly some areas of strength as we talked about earlier with regard to kind of a one and even in our core VM business, where there's lots of opportunity for us.

Steve: And I would say certainly some areas of strength, as we talked about earlier, with regard to Tenable 1, and even in our core VM business, where there's lots of opportunity for us, and we continue to remain strong there. Some of the areas that have been more fluid for us over the past year have been strong for us, specifically mid-market. We're off to a good start. The spending environment was, again, healthy this quarter, as deal sizes continue to be favorable.

Steve: And.

Steve: Continued remained strong back.

Steve: Some of the areas that have been more fluid troughs over over the past year.

Steve: Our strong process, specifically mid market were off to a good start.

Hamzah: The environment was again healthy this quarter as deal sizes continue to be favorable.

Steve: We're making a lot of progress with cloud there, transacting large six-figure deals. OT continues to resonate not only in the enterprise market but also in the mid-market, so certainly, the mid-market was another area of strength. And I would also say, you know, the Fed, in Q1, defense and critical infrastructure was an area of strength for us in the public sector. We also saw good traction with state and local and higher e And we did have the opportunity to see a little bit of upside in the quarter from U.S. Federal, but CR, continuing resolution, influenced and capped some of the upside for us in the quarter. That said, the selling environment, I would say it's stronger now than last year, and we had a great year last year in Fed. And we expect to have another strong year this year.

Hamzah: We're making a lot of progress with cloud there.

Hamzah: Transacting large six figure deals Ot continues to resonate not only in the enterprise market, but also the mid market. So certainly mid market was.

Hamzah: Another area of strength and I would also say.

Hamzah: The fed in Q1.

Hamzah: Defense and critical infrastructure was an area of strength for us in the public sector. We also saw good traction with state and local higher Ed.

Hamzah: Pipeline in fab remains exceptionally strong.

Hamzah: And.

Hamzah: We did have the opportunity to see a little bit of upside in the quarter from U S federal but CR continuing resolution influencing cap some of the upside for us in the quarter that said the selling environment I would say, it's stronger now than last year, and we had a great year last year in fat.

Hamzah: And we expect to have another strong year this year.

Hamzah: Funds are starting to open and slow down the different agencies activity around customers.

Hamzah: It was the strongest we've ever seen.

Hamzah: In federal.

Speaker Change: So we're certainly excited.

Hamzah: Adding a bullish outlook on the year and certainly a good good start to it with regard to our results for the quarter.

Steve: on the year and certainly a good start to it with regard to our results for the quarter. Okay, very clear. Thank you, Steve. Thank you. The next question comes from the line of Andrew Nowinski with

Speaker Change: Okay very clear thank you Steve.

Operator: Thank you. The next question comes from the line of Andrew Nowinski. Wells Fargo, Great, thank you for taking the questions and it's great to hear that Amit's recovery is going well.

Speaker Change: Thank you next question comes from the line of Andrew Nowinski with Wells Fargo. Please go ahead.

Andrew James Nowinski: Great. Thank you for taking the questions and great to hear that it meets recovering is going well.

Andrew James Nowinski: I wanted to ask Steve maybe just a follow up on the fed side.

Andrew James Nowinski: As it relates to the <unk> vulnerability that seems pretty widespread in the industry I guess was that one of the drivers of.

Steve: Demand in and how how much of an impact does it have on the quarter or your pipeline going forward.

Andrew James Nowinski: You know, things like that, that, you know, that kind of bubble up pretty fast, don't have a big impact in the current quarter. We can see some upside there, but as I commented earlier, what drove the results in the Fed and Q1 were defense and critical infrastructure. You know, and I would say, you know, Tenable One is certainly an area that continues to resonate well, certainly at the federal level, but we're also seeing a ton of strength at state and local and higher education, where OT also remains a tailwind for us.

Steve: Things like that that you know the kind of bubble up pretty fast don't have a big impact in the current quarter, we can see some upside there.

Hamzah: But as I commented earlier, what drove the drove our results in fact in Q1 was defense and critical infrastructure.

Hamzah:

Hamzah: And I would say one is certainly an area that continues to resonate resonate well certainly within at the federal level, but we're also seeing a ton of shrimp at state and local and in higher Ed.

Hamzah: We're Oh Gee.

Hamzah: Also remains a tailwind for us so overall spending environment is very strong for fad.

Andrew James Nowinski: So, overall, the spending environment is very strong for the Fed. I'm super excited about not only Q2, what's ahead for us there, but also headed into the strong Fed year end in the September quarter. Okay, and then it looks like the net retention rate dipped down to about 109% this quarter. I guess, when do you think that will bottom out? And how are you thinking about it going forward? Sure.

Hamzah: I'm Super excited about about not only Q2, what's ahead for US there, but also headed into the strong.

Hamzah: Yeah year end in September quarter.

Hamzah: Okay, and then it looks like the net retention rate dipped down to about 109%. This quarter I guess when do you think that will bottom out and how are you thinking about it going forward.

Steve: Yeah, well, the Net Tower Expansion Rate in the quarter, as I mentioned earlier in the call, was really a consequence of the mix of business, you know, more skewed towards new versus expansion. By the way, that is a very good thing for us. And you know, the one thing I will say is that we provide a lot of color on our business with regard to the metrics that we provide. For example, we disclose the number of new customers. We will disclose the number of large deals.

Hamzah: Sure.

Hamzah: Yeah, well the net dollar expansion rate in the quarter as I mentioned.

Hamzah: Earlier on the call with us.

Hamzah: Really a consequence of the mix of business.

Hamzah: More skewed towards new versus the expansion by the way that it is a very good thing for us.

Hamzah: And.

Hamzah: The one thing I will say is that we provide a lot of color.

Hamzah: On our business with regard to the metrics that we provide.

Hamzah: We just closed a number of new customers, we can disclose the number of large deals and the rate of expansion with customers in the current quarter. It's important to note that we do not optimize our business around a single metric and these metrics can fluctuate naturally from quarter to quarter and I will say that all of our kpis are meant to be evaluated in aggregates.

Steve: And the rate of expansion with customers in the current quarter. But it's important to note that we do not optimize our business around a single metric, and these metrics can fluctuate naturally from quarter to quarter. And I'll say that all of our KPIs are meant to be evaluated in aggregate so you have a better appreciation of the factors that have influenced our results for the quarter. And with respect to the expansion rate, it is possible that we could see fluctuations going forward. That is a good thing.

Hamzah: You have to have a better appreciation of the factors that influenced our results for the quarter and with respect to the expansion rate. It is possible that we could see fluctuations going forward that said, we felt good about our outlook for the year, which reflects modestly higher growth in the second half of the year consistent with our top track last quarter and that.

Hamzah: Indeed be driven by an improvement in one or more of those metrics.

Speaker Change: Got it thanks guys.

Steve: Thank you. The next question comes from the line of Brad Reback. Great, thanks very much.

Speaker Change: Thank you next question comes from the line of Brad Reback with Stifel. Please go ahead.

Brad Robert Reback: Great. Thanks very much.

Brad Robert Reback: Steve I know during the prepared remarks, you talked about an acceleration in CCP growth in the back half of the year consistent with last quarter.

Brad Robert Reback: What are the things that need to get better for that to happen.

Brad Robert Reback: Okay.

Brad Robert Reback: Sure, I would say a couple of things. First, again, this is very consistent with the talk track that we set when we acquired Aromatic in October of last year. Our mandates were very clear. Number one, integrate the current capabilities of Tenable with the Aromatic platform, which we have done and will certainly continue to do. Number two, work to build pipeline opportunities. So the guide that we gave last quarter, which was 12 to 14% growth, we said directionally to expect slightly lower growth in the first half of the year, in particular in Q1.

Steve: Sure I would say a couple of things first again this is very consistent with the talk track that we.

Brad Robert Reback: Offered up on our last call finder, we acquired nomadic in.

Brad Robert Reback: In October of last year, and our mandates.

Brad Robert Reback: We're very clear number one.

Brad Robert Reback: Integrate the current cases.

Brad Robert Reback: With the dramatic platform.

Brad Robert Reback: We have done and we'll start with in digital number to work to build pipeline opportunities.

Brad Robert Reback: So the guide that we gave.

Brad Robert Reback: Last quarter, which was 12% to 14% growth, we said directionally expect slightly lower growth in the first half of the year in particular to Q1, we're delighted to deliver.

Brad Robert Reback: We're delighted to deliver outperformance relative to those expectations that we set in the first quarter today. And then we also said honestly higher growth with regard to cloud security in the second half of the year as we complete the product integration and build pipeline opportunities. And we start to work towards closing those opportunities over the course of the ensuing month. The other thing I'll say is certainly Fed. That's going to be a catalyst for growth.

Brad Robert Reback: Outperformance relative to those expectations that we set in the first quarter.

Brad Robert Reback: Today, and then we all set.

Brad Robert Reback: The higher growth with regard to cloud security second half of the year as we complete the product integration as we build pipeline opportunities and.

Brad Robert Reback: We start to.

Brad Robert Reback: Worked towards closing those opportunities over the course of the ensuing months. The other thing I will tell you is certainly fat that's going to be a catalyst of growth could not be more bullish about fad pipeline that we have mandates that we're getting and certainly the engagement with our customers. So.

Brad Robert Reback: Could not be more bullish about the Fed, the pipeline that we have, mandates that we're getting, and certainly the engagement with our customers. So nothing's really changed in our outlook for the year this quarter relative to last.

Brad Robert Reback: So nothing's really changed in our outlook for the year. This.

Brad Robert Reback: This quarter relative to last.

Steve: Great, thank you very much. Thank you. The next question comes from the line of Jonathan Ho, a brilliant player. Please go ahead.

Speaker Change: Great. Thank you very much.

Jonathan Frank Ho: Thank you. The next question comes from the line of Jonathan Ho, William Blair, please go ahead. Hi, good afternoon, and just wanted to also echo that.

Speaker Change: Thank you next question comes from the line of Jonathan Ho with William Blair. Please go ahead.

Jonathan Frank Ho: Hi, Good afternoon, and just wanted to also Echo my thoughts and prayers with me as he continues to improve as well just wanted to get a sense from you in terms of the OTC markets. You've mentioned this a number of times in the discussions, but whats maybe changed there and you know what's where are we in terms of the adoption curve around these OTT solutions.

Speaker Change: Thank you.

Jason Merrick: Absolutely. Great question.

Speaker Change: Yes, absolutely great question, so what youre seeing in the industry is quite interesting.

Speaker Change: With the rules of the CSO more seafoods are having to accept the risk to be able to take over the Ot security or security requirements. So not only are we seeing this in manufacturing and industrial controls, but we're also seeing that in building management systems. The pieces are now having to take on responsibility.

Jason Merrick: So what you're seeing in the industry is quite interesting. With the role of the CISO, more CISOs are having to accept the risk to be able to take over the OT security requirements. So, not only are we seeing this in manufacturing and industrial controls, but we're also seeing this in building management systems, where CISOs are now having to take on responsibility for this. Just recently, I was with a CISO in the financial services sector who had just gotten a mandate from his board that he is now responsible for the building management system.

Speaker Change: <unk> of this.

Speaker Change: Just recently I was with our CSO and our financial services sector, who has just gotten a mandate from them or that he is now responsible for the building management system.

Jason Merrick: And we're seeing this trend across the board, where CISOs are now having to take on more and more responsibility. So, by being able to give visibility, not only from VM, not only from cloud, but being able to bring an identity in from OT and bring that data together, we really do find that we have a unique opportunity, and we are seeing a significant number of opportunities in the OT.

Speaker Change: And we're seeing this trend across the board, where Caesars, we're now happy to take on more and more responsibility, so quite being able to get the visibility not only from VM not only from cloud, but being able to bring an identity I know T and bring that data together, we really do find that we have a unique opportunity and we are seeing a significant.

Speaker Change: A number of opportunities in the Ot space.

Speaker Change: Great. Thank you.

Speaker Change: Yeah.

Operator: Thank you. The next question comes from the line of Mike Cikos with Needham & Co. Please go ahead.

Speaker Change: Thank you next question comes from the line of Mike sequels.

Unknown Executive: Please go ahead.

Michael Joseph Cikos: Great. Thanks for taking the questions here, guys. I think the first one for Steve, and I just want to make sure I better understand the guidance that we have here today. So, I know 2Q coming in slightly below on the timeline versus where consensus was, but you guys are taking up the full year above and beyond just this 1QB, right? And I just wanted to get a better understanding of that second half acceleration that we're looking for. Is that really a function of what you're seeing in the pipeline related to the Fed? Is this part of the outperformance for 1Q here? Any changing assumptions around the mid-market? Can you better flush that out for us?

Unknown Executive: Great. Thanks for taking my questions here guys I think the first one.

Unknown Executive: For Steve and I, just want to make sure I better understand the guidance that we have here today.

Unknown Executive: I know QQ coming in slightly below on the top line versus where consensus was but you guys are taking up full year above and beyond just as <unk> right and I just wanted to get a better understanding that second half.

Unknown Executive: Acceleration that were looking for is that really a function of.

Unknown Executive: What youre seeing in pipe related to fed is it part of the outperformance for for once you hear.

Unknown Executive: Any change in assumptions around mid market can you can you better flush that out for us.

Steve: Uh, sure. Uh, first, in terms of Q2, as I understand it... This is the first time we're providing any commentary around this. So...

Speaker Change: Sure first in terms of Q2.

Speaker Change: Mentioned this is the first time, we're providing any commentary around the corner so.

Steve: The guide we think we're giving in Q2 is strong, it's reflective of the execution and the outperformance in Q1, as well as our revised outlook for the year. And I would say, you know, there's, in terms of the spending environment, I think there's a confluence of factors that are impacting that. Number one, we're continuing to see strength in the mid-market. Number two, we talked about the public sector, and that'll be a source of tailwinds for us during the course of the year, specifically as we head into the Fed's fiscal year-end in September.

Speaker Change: The Guy who we think we are giving in Q2, a strong it's reflective of the execution.

Unknown Executive: And the outperformance in Q1 as well as our revised outlook for the year.

Unknown Executive: And I would say.

Unknown Executive: In terms of the spending environment I think there is a confluence of factors that are impacting that number one we're continuing to see strength in the mid market number two we talked about public sector that'll be a source of tailwind for us during the course of the year, specifically as we head into the third fiscal year end in September.

Steve: And certainly cloud security, where we're building pipeline opportunities. So overall, you know, if you look at the guide that we're giving, 217 to 219 for revenue, the high end, it's in line with the consensus. We think we're set up well for success, not only in the current quarter but also for the rest of the year.

Unknown Executive: And certainly our cloud security, where we're building pipeline opportunity so overall.

Unknown Executive: <unk>.

Unknown Executive: Look at the guide that we're giving $2 17 to $2 19 for revenue the high end, it's in line with the consensus.

Unknown Executive: We think we're set up well for success not only in the current quarter, but also for the rest of the year.

Michael Joseph Cikos: Got it. Thank you for that, Steve. And if I could just shift over to Jason for a second, really on the product here.

Speaker Change: Got it thank you for that Steve and if I could just shift over to Jason for a second really on the product here.

Jason Merrick: We saw that Tenable had released AI Assistant and Attack Path Analysis. And I know that that is a part of your higher tier SKU, if you will, it's Tenable One Enterprise, right? So should we think about Tenable's strategy with the Gen AI capabilities as really helping drive an up tiering, if you will, towards those higher SKU packages?

Jason Merit: We saw that tenable.

Jason Merit: Tenable had released AI assistant and attack path analysis, and I know that that is a part of your.

Jason Merit: Your higher tier SKU, if you will it's terrible one enterprise right. So should we think about tenable strategy with the Ginnie I capabilities is really helping drive and peering. If you will towards those higher SKU packages.

Jason Merrick: That was a great question. So, first, fundamentally, what we have to do as Tenable, what we are doing within AI, it's important to understand that to be competitive in AI, organizations have to have, you know, proprietary information, information that they in the industry have that differentiates across the competitive landscape. At Tenable, we're the market leader in vulnerability management. We've been doing this for over 20 years.

Speaker Change: That was a great question. So I think first fundamentally we have to.

Speaker Change: Tenable.

Speaker Change: We are doing within AI, it's important to understand that to be competitive and AI organizations have to have.

Unknown Executive: Prior to their information.

Unknown Executive: They and the industry have the differentiation across the competitive landscape.

Unknown Executive: Tenable, we're the market leader in vulnerability management, we've been doing this for over 20 years. So we have a ton of rich information.

Jason Merrick: So we have a ton of rich information, knowing more about threat and vulnerability data and cyber than any other organization. The second piece is we have the ability to leverage insights from, you know, our 40,000 plus customers and bringing that in as part of our model training and giving us the ability to then put this throughout the product. So the first place that we put it into was Attack Path Analytics, and we provided the AI function there.

Unknown Executive: Knowing more about threat and bone data and cyber than any other organization. The second piece is we have the ability to leverage insights from our 40000, plus customers and bringing that in as part of our model training and giving us the ability to then put this throughout the product so far.

Unknown Executive: First place that we put it into was attacked athletics and providing the AI function there and again that is part of our top tier.

Jason Merrick: And again, that is part of our, you know, top tier Tenable One offering. So we've got organizations today, for instance, a large shipping manufacturer. The exposure management team is leveraging the Attack Path Analytics enabled with AI to actually help drive prioritization and visualization of how the systems are actually connected. And that's just one example, but we're seeing that across the board.

Unknown Executive: Tenable, one offering so we've got organizations today for instance, a large shipping manufacturer.

Unknown Executive: Exposure management team is leveraging the attack path analytics enabled with AI to actually help drive prioritization and visualization.

Unknown Executive: How the systems are actually connected and.

Unknown Executive: And that's just one example, but we're seeing that across the board. Our plan is also to take the AI function and capability and embedded across the entire portfolio. So it's not just the top tier one analytic components, we're going to be bringing this into b.

Jason Merrick: Our plan is also to take the AI functioning capability and embed it across the entire portfolio. So it's not just the top tier Tenable One analytic components. We're going to be bringing this into VM. We're going to be bringing this into our identity exposure capability. We're going to be bringing this into, you know, all of our service-delivered solutions, and we're super excited about that capability because it's going to help organizations with explainability, drive prioritization, and drive analytics.

Unknown Executive: We're going to be bringing this into our identity exposure capability, we're going to be bringing this into all of our service delivery solutions and we're super excited about that capability, because it's going to help organizations with explain ability try prioritization and drive analytics.

Unknown Executive: Sure.

Jason Merrick: Okay. Thank you very much for that. I appreciate the time, guys. Thank you. Next question comes from the line of Patrick Colville. Scotiabank, please go ahead. Hey, thank you so much. Great to be on the call. And also great to be part of the Tenable story. Steve, let me ask you something.

Speaker Change: Understood. Thank you very much for that I appreciate the time guys.

Speaker Change: Yeah.

Operator: Thank you. The next question comes from the line of Patrick Colville with Scotiabank. Please go ahead.

Speaker Change: Thank you next question comes from the line of Patrick Colville with.

Patrick Edwin Ronald Colville: With Scotiabank. Please go ahead.

Patrick Edwin Ronald Colville: Hey, Thank you so much Greg on the cool and also great to be part of the Tenable story.

Patrick Edwin Ronald Colville: Steve Let me ask you a question.

Patrick Edwin Ronald Colville: No it's about the competitive environment in cool vulnerability management.

Patrick Edwin Ronald Colville: You got one competitor who over the last couple of quarters. In this year is really stepping on the gas in terms of investment.

Patrick Edwin Ronald Colville: Another piece.

Patrick Edwin Ronald Colville: Just going through quite a deep restructuring I guess, what are you seeing in terms of competitive dynamics in vulnerability management and how these.

Patrick Edwin Ronald Colville: Impacting tenable.

Patrick Edwin Ronald Colville: Yeah.

Patrick Edwin Ronald Colville: Well, I would say the market and competitive dynamics there are very favorable for us and VM. VM was a source of upside for us in the quarter. Our close rates and our win rates remain very high. We believe differentiation is very apparent.

Patrick Edwin Ronald Colville: Well I would say the market and competitive dynamics there are very favorable for us in VM VM was a source of upside for us in the quarter.

Patrick Edwin Ronald Colville: Our close rates in our win rates remain very high.

Patrick Edwin Ronald Colville: We believe differentiation is very apparent.

Steve: You know, investing in this market is not a recent phenomenon for us. It's something that we've been doing over the course of the years, and where we have been investing, we recognize the importance of the VM market. And we believe that success there translates to opportunity elsewhere. So we are, we believe, a clear and unequivocal leader.

Patrick Edwin Ronald Colville: Asking in this market is not a recent phenomenon for us it's something we've been doing over the course of the years.

Patrick Edwin Ronald Colville: And we.

Patrick Edwin Ronald Colville: We have been investing we recognize the importance of the VM market.

Patrick Edwin Ronald Colville: And we believe that success there translates to opportunity elsewhere.

Patrick Edwin Ronald Colville: So we.

Patrick Edwin Ronald Colville: We are we believe the clear and unequivocal leader, we have the largest customer base.

Steve: We have the largest customer base, and now in terms of device coverage, it is the most expensive in terms of device coverage. You can see that we're adding 400 new customers a quarter, and yes, a good number of those are coming from Tenable One, but within Tenable One, we're having success selling VM there and addressing a VM use case, but a good number of those customers are also coming from our core VM offering, such as, you know, Security Center or IO.

Patrick Edwin Ronald Colville: Now in terms of device coverage most expansive in terms of device coverage.

Patrick Edwin Ronald Colville: You can see that we're adding 400, new customers a quarter and yes.

Patrick Edwin Ronald Colville: Good number of those are coming from tenable, one, but within tenable, one or having success selling b M. There and addressing a VM use case.

Patrick Edwin Ronald Colville: But a good number of those customers are also coming from our core VM offerings, such as security center or IL.

Steve: So, for us, virtual machine is an incredibly important market. It's one we're going to continue to invest in, where we are continuing to differentiate, and we are continuing to displace incumbent vendors. As we mentioned earlier, our largest opportunity, our largest deal in the quarter was a seven-figure opportunity where we displaced the current VM incumbent. And there are, you know, many stories like that all within those 410 customers that we announced this quarter. So, overall, we were incredibly bullish on VM going forward. And I also want to add that we are also investing.

Patrick Edwin Ronald Colville: For us the EMS incredibly important market. It's one we're going to continue to invest in.

Patrick Edwin Ronald Colville: We are continuing to differentiate.

Patrick Edwin Ronald Colville: And.

Patrick Edwin Ronald Colville: We're continuing to displace incumbent vendors as we mentioned earlier, our largest opportunity our largest deal in the quarter was a seven figure opportunity, where we displace the current VM comment theres. Many stories like that all within those 410 customers that we announced this quarter. So abroad, we ranked <unk>.

Patrick Edwin Ronald Colville: Lee.

Patrick Edwin Ronald Colville: Bullish on VM going forward.

Steve: And I also want to add that we are also investing in innovation in VM. So we're not, you know, resting on our laurels.

Patrick Edwin Ronald Colville: And I also want to add that we're also investing in innovation and.

Patrick Edwin Ronald Colville: So we're not resting on our laurels.

Steve: We're going to be adding new capabilities that are really, truly focused on the VM practitioner that is going to create a lot of excitement for our customers. Terrific, thank you. Thank you. The next question comes from the line of Gary Powell with BTIG. Please go ahead. Okay, great. Thank you for taking the question.

Patrick Edwin Ronald Colville: We're going to be adding new capabilities that are really truly focused on VM practitioner.

Patrick Edwin Ronald Colville: It's going to create some a lot of excitement for our customers.

Speaker Change: Terrific. Thank you.

Operator: Thank you. The next question comes from the line of Gary Powell with BTIG. Please go ahead. Okay, great. Thank you for taking the question.

Speaker Change: Thank you next question comes from the line of Gary Pablo with BP <unk>. Please go ahead.

Gary Pablo: Okay, great. Thank you for taking the question.

Gary Pablo: So I was just hoping to dig in on some of the disclosures. The stats you gave on tenable one.

Gary Pablo: At 26% and then broader exposure management solutions at 50% of new sales was really helpful.

Gary Pablo: Is there anything you can do to give us like a sense as to what a standalone cloud security contributed or was the bigger contribution of that incremental more like on the Ot. Unlike some of the other products in there.

Gray Wilson Powell: We do not disclose bookings or CCB by product, but what I will say is, look, you know, Tenable One is nearly half of the, we said 26%, so nearly half of 50% of our new sales is coming from exposure management solutions. Exposure management solutions are either selling the platform standalone or selling individual products such as cloud security or OT individually to address a specific use case. And so we're having success selling both.

Speaker Change: We do not disclose bookings or CCP byproduct.

Speaker Change: And what I will say is look.

Speaker Change: Tenable, one is nearly half of the fit we said, 26% so nearly half of the 50% of our new sales coming from exposure management solutions.

Patrick Edwin Ronald Colville: <unk> solutions is either selling the platform standalone or selling individual products such as cloud security of your Ot individually to address a specific use case and sell.

Patrick Edwin Ronald Colville: We're having success selling both what we did say, though with regard to cloud security is expect greater contribution in the second half of the year related to the acquisition of nomadic as we look to begin start building pipeline opportunities and closing deals in the second half of the year regarding our more expansive snap offering so overall.

Gray Wilson Powell: What we did say, though, with regard to cloud security, is to expect greater contribution in the second half of the year related to the acquisition of RMATIC as we look to begin, start building pipeline opportunities, and closing deals in the second half of the year regarding our more expansive CNAP offering. So, overall, I would say we're seeing good growth in cloud security specifically. Obviously, we continue to see good growth with Tenable One, and you know, we expect both cloud security and Tenable One to be a challenge for us during the course of the year.

Patrick Edwin Ronald Colville: I would say, we're seeing good growth in cloud security, specifically, obviously continue to see good growth with tenable, one and we expect both cloud security untenable wanted to be tailwind for us during the course of the year.

Speaker Change: Alright, that's directionally helpful. Thank you.

Steve: All right, that's very directionally helpful. Thank you. Thank you. The next question comes from the line of Shaul Eyal with TD Coven, please.

Operator: Thank you. The next question comes from the line of Shaul Eyal with TD Covenant.

Speaker Change: Thank you next question comes from the line of Shaul Eyal.

Speaker Change: P D. Cohen. Please go ahead.

Shaul Eyal: Thank you. Good afternoon, everybody. Congratulations on the results.

Shaul Eyal: Thank you good afternoon, everybody congrats on resolved some great to hear and maybe it's doing much better.

Shaul Eyal: My question also on new logos.

Shaul Eyal: Leaving aside that the sizable displacement that you had and just announced and discussed.

Shaul Eyal: Where we're mostly over the 410 logos were they mostly displacement or were they mostly greenfield.

Steve: That's a good question. You know, what we said on average, or what we have said this quarter was no different, is that about a third of all of our new logos are greenfield opportunities. And these are customers, specifically, I'll say within VM, customers that I haven't had no enterprise-wide VM solution for. They could be using a systems integrator. They could be using an MSSP, an outsourcing virtual machine. So there's... So for us, there is lots of untapped opportunity, not only within VM but certainly elsewhere, as we look to invest in some of the biggest markets in all of cyber, such as cloud, identity, and OT.

Speaker Change: That's a good question, what we said is on average or what we have said in this quarter was no different.

Shaul Eyal: About a third of all of our new logos are greenfield opportunities and these are customers, specifically I'll say within VM customers that have had no enterprise wide VM solution it could be using our systems integrator there.

Shaul Eyal: It could be using an MSP and outsourcing VM. So there's.

Shaul Eyal: For us lots of untapped opportunity not only within VM, but certainly elsewhere as we look to invest in some of the biggest markets in all of cyber such as cloud identity and O T. So about a third of our opportunities are greenfield.

Steve: So about a third of our opportunities are greenfield, which means, consequently, some of these are displacements. And again, we can achieve a high, a very high win rate against incumbents. And, you know, there's no, you know, no change in the competitive dynamics, certainly within VM. Thank you.

Shaul Eyal: Which means consequently, some of these are displacements and again, continuing a high very high win rates.

Shaul Eyal: Against incumbents.

Shaul Eyal: There is no no change in the competitive dynamics certainly with him.

Speaker Change: Thank you.

Shaul Eyal: Thank you. The next question comes from the line of Rudy Kissinger with DAW. Hey, this is Andres Miranda on behalf of Rudy. First of all, congratulations on the numbers. I just have a quick question for you guys. Could you quantify the...

Speaker Change: Thank you next question comes from the line of Rudy Cassandra with D. A Davidson. Please go ahead.

Speaker Change: Hey, this is Andrew on behalf of Rudy.

Andrew James Nowinski: First of all congrats on the numbers. So I just have a quick question for you guys.

Speaker Change: Could you quantify the.

Andrew James Nowinski: And Murray contribution to revenue in <unk> in Q1 or any other data points that we can use for the model.

Steve: Well, we're meant to contribute minimally in Q1, and that's expected. We closed on Armatic in Q4, we're hard at work integrating the product, we're in the market selling the more expansive CNAP offering, and we expect greater contribution from Armatic for the second half of the year, and our outlook for Armatic specifically has not changed since our last call. We said we expected two points of incremental CCB growth because of Armatic, and that has not changed this quarter. Great, thank you.

Speaker Change: While our Mag contributed minimally in Q1 and Thats expected alright.

Andrew James Nowinski: Alright, we closed we closed on a nomadic and Q4 are hard at work integrating the product.

Andrew James Nowinski: We're in market selling to more expansive snap offering and we expect greater contribution.

Andrew James Nowinski: In the second half of the year and our outlook for <unk> specifically.

Andrew James Nowinski: It's <unk>.

Andrew James Nowinski: Not changed since our last call. We said, we expect two points of incremental <unk> growth because of <unk> and that has not changed this quarter.

Speaker Change: Great. Thank you and.

Steve: What percent of your sales came from the overlay teams in the past years? Could you maybe give us some color there, and are you seeing any sales reps selling the entire portfolio successfully since the past rift that you announced? Yeah, well, we're seeing, you know, most, if not all of ourselves are upselling the combined offering. So we're leading with Tenable One. Tenable One is a use case that resonates with customers. It obviously helps customers understand their risks more broadly across the attack surface.

Speaker Change: Just a quick one what percent of your sales came from the overlay teams in the past years. If you could maybe give us some color there and are you seeing any sales reps selling the entire portfolio to assist police genes. The bus routes that you announced.

Speaker Change: Yeah, well we're seeing.

Speaker Change: Most if not all of the data.

Andrew James Nowinski: But.

Andrew James Nowinski: Our sales reps selling combined offering so we're leading with tenable. One number one is the use case that resonates with customers.

Andrew James Nowinski: It obviously helps customers understand their rest more broadly across the attack surface.

Steve: And, you know, it leads to higher selling prices for us. And some of our highest close rates in the company are coming from Tenable One. Also, half of all of our new logo six-figure lands are Tenable One.

Andrew James Nowinski: And it leads to higher selling prices for us and some of our highest close rates in the company are coming from tenable. One also half of all of our.

Andrew James Nowinski: New logo seats figure lands.

Steve: So, we're getting great traction with Tenable One, transacting larger deals, and having success selling it to our customers. You know, in terms of the overlays, it's something that we talked about on the last call, which is, look, over the course of the years, we have broadened the product portfolio and evolved from having a singular focus on VM, which we continue to do very well, and we're continuing to be the market leader, but also addressing adjacent markets, such as web app security, cloud security, OT, you know, identity security, and A

Andrew James Nowinski: So we're getting great traction with tenable, one transacting larger deals and having success selling into our customers.

Andrew James Nowinski: In terms of the overlays, it's something that we talked about on the last call, which is look over the course of the years, we have broadened our product portfolio and a ball from having a singular focus on VM, which we continue to do very well and well continue to be the market leader, but also addressing adjacent markets such as web App security Cloud Security O T.

Andrew James Nowinski: Identity security ASM. So we brought in the product portfolio, we have brought new products to market and our reps have had success selling those initially when you do that it requires the use of some specialist last wrap some overlay reps.

Steve: So, we've broadened the product portfolio. We have brought new products to market, and our reps have had success selling those. Initially, when you do that, it requires the use of some specialist reps, some overlay reps. But what we have recognized is that, you know, we have had success selling those products in our own right, and those products become more mainstream and we've become less reliant on overlay reps. Again, specialists are going to be really important here, and we continue to have those, but I think what you're seeing today in terms of the efficiency, you know, of our spend in sales and marketing really reflects the, you know, the sales organization's ability to sell the broader exposure platform.

Andrew James Nowinski: But what we have recognized is that we have had success selling those products in their own right and those products become more mainstream that we become less reliant on overlay reps again specialists are going to be really important here and we continue to have those but I think what youre seeing today in terms of the efficiency.

Andrew James Nowinski: Of our of our spend in sales and marketing it really reflects the.

Andrew James Nowinski: Sales organizations ability to sell the broader exposure platform.

Andrew James Nowinski: Yes.

Speaker Change: Great. Thank you.

Operator: Thank you. The next question comes from the line of Shyam Patil.

Speaker Change: Thank you next question comes from the line of shampoo.

Unknown Executive: Saskia Hanna. Hey, this is Aaron on behalf of Sham. Thank you for taking our question.

Steve: Great. Thank you. Thank you. Next question comes from the line of Shyam Patel. This has been a presentation by the U.S. Department of State.

Susquehanna: Susquehanna. Please go ahead.

Jason Merrick: Yeah, absolutely. Great question.

Speaker Change: Hey, this is Aaron on for Sean. Thank you for taking our question.

Aaron: Jason maybe this one's for you on the product side, you gave that health plans for a few minutes ago on the generative AI offerings and roadmap just as we think about the generative AI roadmap what are.

Andrew James Nowinski: Do you see as kind of the low hanging fruit in terms of things you can add on in the near term versus what's more of a longer term objective and opportunity. Thank you.

Jason Merrick: So, from a product perspective, I think there's a couple of pieces that we will go, and we will leverage our AI capabilities. First and foremost is being able to pull together information and enrich it that helps a security practitioner understand the risk of an asset. So, this is a term that you're going to hear us use a lot more called toxic combinations.

Jason Merit: Yes, absolutely great question, so from a product perspective, I think there's a couple of pieces that we will go when we will leverage our AI capabilities first and foremost is being able to pull together information and enriches the helps a security practitioner understand the risk of an ask.

Jason Merrick: The ability to pull together not just the asset information but combine this and enrich it with identity data. So, I can now pull together that, you know, I've got an individual with elevated credentials that has access to this critical system, and I'm able to expose that. AI gives you the ability to pull together all of this information very quickly. And so, there's an explainability component within this. So, instead of a practitioner, you know, going through a kind of mining for all of this information because we collect a significant amount of data for our customers, providing that quickly is an easy, you know, what I would call low-lying fruit. We're also going to be enabling an AI chatbot capability.

Jason Merit: So this is.

Andrew James Nowinski: A term that you're going to hear a lot more call toxic combination the ability to pull together not just the asset information, but combined this an enriched with identity data. So I can now pull together that I've got an individual with elevated credentials that has access to this critical system and and being able to expose that gives you the ability to.

Andrew James Nowinski: Altogether all of this information very quickly and so theres an explain ability component within this so instead of a practitioner going through kind of mining for all of this information because we collect a significant amount of data for our customers providing that quickly.

Jason Merrick: So, think of it as a tenable expert at your fingertips. So, the ability to do, you know, generative AI questions where you can say, hey, what are my top threats? You know, what is my CEO vulnerable to?

Andrew James Nowinski: And easy what I would call the low lying fruit, we're also going to be enabling an AI chatbot capability. So think of it as a tenable expert at your fingertips, so the ability to do.

Andrew James Nowinski: Generally the AI questions, where you can say hey, what are my top threats.

Andrew James Nowinski: As Mike My CEO vulnerable to and being able to get context that information I think that even from a business standpoint, AI can help organizations find blind spots areas that theyre not scanning areas that they need of improvement. So I think that with our AI capabilities, well theyre going to help with prioritization explain ability.

Jason Merrick: And being able to get context for that information. I think that, you know, even from a business standpoint, AI can help organizations find blind spots, areas that they're not scanning, areas that they need improvement in. So, I think that, you know, with our AI capabilities, while they're going to help with prioritization explainability, they can also drive business outcomes. For example, you've got a grouping of cloud services that are not being scanned, or you've got a grouping of assets that just came up in a subdomain, and our tax service management product brought that up.

Andrew James Nowinski: We can also drive business outcomes, you've got a grouping of cloud services that are not being scanned or you've got a grouping of assets that just came up in a sub domain and our tax surface management product brought that up so being able to highlight those business cases for organizations I think are super powerful and again I think that we've got a phenomenal.

Jason Merrick: So, being able to highlight those business cases for organizations, I think, is super powerful. And again, I think that we've got a phenomenal opportunity with the tenable data that is going to make our LLM powerful and really important across the product portfolio.

Andrew James Nowinski: Opportunity with the tenable data that is going to make our own powerful and really important across the product portfolio.

Speaker Change: Very helpful. Thank you.

Andrew James Nowinski: Okay.

Andrew James Nowinski: Okay.

Speaker Change: Thank you.

Operator: The next question comes from the line of Patrick O'Neill with Wolf Research; please go ahead.

Andrew James Nowinski: The next question comes from the line of Patrick O'neil with Wolfe Research. Please go ahead.

Patrick Edwin Ronald Colville: Hey, thanks for taking my question. This is Patrick on for Josh.

Patrick Edwin Ronald Colville: Alright, Thanks for taking my question. This is Patrick on for Josh.

Patrick Edwin Ronald Colville: Just was hoping to get a little more color on the.

Patrick Edwin Ronald Colville: 109% and our or is there anything to call out on expansion generally being worse or gross retention being worse outside of.

Patrick Edwin Ronald Colville: Just was hoping to get a little more color on the 109% NRR. Is there anything to call out on? The FinServe Tech and Telecom names you called out. Thanks.

Speaker Change: The sensor pack.

Patrick Edwin Ronald Colville: Telecom.

Patrick Edwin Ronald Colville: Names that you called out.

Andrew James Nowinski: Thanks.

Steve: Hi, this is Steve. No, retention was really bad this quarter. You know, this is moderation; the expansion rate is really a function of the mix of business, and in Q1, it was skewed towards new business. Specifically, we had 410 new enterprise platform customers, lots of new six-figure logo lands. And within those cohort of new customers, we grew year over year ACV by 30% from newly acquired customers. So certainly a strong quarter for us in terms of new business. That's a very good thing for us. And that had an impact on our expansion rate.

Andrew James Nowinski: Hi, This is Steve no retention was really this quarter.

Steve: This is the moderation the expansion rate is really a function of the mix of business and in Q1, it was skewed towards new.

Steve: Specifically, we added 410, new enterprise platform customers lots of new six figure logo lands.

Steve: And within those cohort of new customers, we grew year over year ACB.

Steve: By 30% from newly acquired customers, So certainly a strong quarter for us for new business.

Steve: That's a very good thing for us.

Steve: That had an impact on our expense rate.

Patrick Edwin Ronald Colville: And then one quick follow-up, if you don't mind. How should we think about that number going forward and sort of what's baked into the guidance? I know you don't explicitly guide to that or measure the business to one metric, but sort of what's based in the guidance around that full year NRR. Thanks. Sure. So in terms

Speaker Change: And then one quick follow up if you don't mind.

Speaker Change: How should we think about that number going forward and sort of what's baked into the guidance. I know you don't explicitly guide to that or measure the business to one metric.

Speaker Change: But sort of what's baked into the guidance around that full year at all.

Speaker Change: Thanks.

Steve: In terms of our outlook for the year, our outlook does reflect higher growth in the second half of the year for the reasons I just described. And that would mean that we would see improvement in at least one, if not more, of the three key KPIs that we provide. Again, we provide a number of large customers. We also provide new enterprise platform customers. We also disclose the expansion rate. We would need to see at least one, specifically one, should I say, improvement in one of those metrics. If you come from any one of those, perfect. I appreciate it.

Speaker Change: Sure. So in terms of our outlook for the year, our outlook does reflect higher growth. The second half of the year for reasons I just described and that would mean that we would see improvement in at least one if not more of the three key kpis that we provide we provide.

Operator: Thank you. This concludes.

Speaker Change: A number of large customers, we provide new enterprise platform customers. We also disclosed the expansion rate and we would need to see.

Speaker Change: At least one <unk>.

Speaker Change: Typically one should I say.

Speaker Change: Improvement in and one of those metrics.

Speaker Change: It could come from any one of us.

Speaker Change: Perfect I appreciate it.

Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Thank you.

Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.

Speaker Change: Okay.

Speaker Change: Thanks.

Speaker Change: [music].

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Speaker Change:

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Speaker Change: [music].