Q3 2024 Tenable Holdings Inc Earnings Call
Greetings and welcome to Tanabals.
Speaker Change: 3rd quarter 2024, Ernest Conference call. At this time, all participants are on a listen-only mood. A question and answer session will follow the formal presentation. At that time, we ask that you please limit to one question.
Speaker Change: If anyone should require operator assistance during the conference, please press Stars Euro on your telephone keypad.
Speaker Change: As a reminder, this conference is being recorded. I would now like to turn the call over to your host, Erin Karney. Thank you, you may begin.
Erin Karney: Thank you, Operator and thank you all for joining us on today's conference call to discuss 10-Blessed
Erin Karney: With me on the call today, or a meteor and our chief executive officer and Steve Vintz, our chief financial officer. Prior to this call, we issued a post release announcing our financial results for the quarter. You can find the post release on our IR website at tentables.com.
Erin Karney: We'll make forward looking statements during the course of this call, including statements related to our guidance and expectations for the fourth quarter of fully year 2020-4 and 2025.
Erin Karney: Growth and drivers on our business changes in the threat land, skates in the security industry and our competitive position in the market. Growth in our customer demand for an adoption of our solutions, including sensible one, cloud security and AI aware.
Erin Karney: Planed in Innovation and New Products and Services and our expectations regarding long-term profitability and free cash flow. These four looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to different materially from those anticipated by these statements.
Erin Karney: You should not rely upon forward-looking statements as a prediction of future events. Forward-looking statements represent our beliefs and assumptions only as of today and should not be considered representatives of our views of any subsequent dates. And we just claim any obligation to update any forward-looking statements or outlook.
Erin Karney: For further discussion of the material risks and other important factors that could affect our actual results, please refer to the contained and our most recent annual report on Form 10K and plus the point reports that we file at the FCC.
Erin Karney: In addition, all of the financial results we discussed today are non-gap financial measures, but the exception of revenue. These non-gap financial measures are in addition to a non-esuppt 2 for our superior to measures of financial performance prepared in accordance with Gap.
Erin Karney: There are a number of limitations related to the use of these non-gap financial measures versus their closest gaps we could believe. Our press release includes gaps to non-gap reconciliation for these measures, all now turn the call over to me.
Speaker Change: Thank you, Erin. We delivered strong results for the quarter, surpassing expectations about the top and bottom line, including a record quarter for Unlevered Free Cash Flow.
Speaker Change: 10.1. In Quad Security, continue to drive strong demand as customers increasingly adopt our exposure solutions and our laser focused on exposure management.
Speaker Change: Many of the trends we saw across our business in Q2 continue to play out in Q3. Federal One, our Explosions Management Platform, and Cloud Security, were top spending priorities for customers in the quarter. We've posed many deals for both offerings across GEOs and a wide range of industries.
Speaker Change: A hope that percentage of our customers are evolving onto 10-1 and embarking on the exposure management journey with us.
Speaker Change: We believe this adoption of our platform is a precursor to a follow-on sale and a broader more strategic relationship with animal.
Speaker Change: With In-Temble 1, Identity and Cloud Security continued to be top areas of adoption for our customers as they look for analytics they can't find elsewhere.
As a result, 10-1 is growing well in excess of our overall grade 38 and accounted for approximately 30% of new sales in Q3.
Other areas of strength in the quarter included public sector and mid-market. We anticipate it's two-three to be a stronger year-end for fed business on historical experience and that played itself out as expected.
In addition to a strong Fed quarter we close some piled deals in the broader public sector.
Speaker Change: This seeks to both the diversification or product and customer-based that we can leverage in this fear.
Speaker Change: As mentioned, another area of strength for the quarter was mid-market.
We're a fairly broad definition of mid-market customers and we're seeing meaningful traction in the higher end of that range, specifically companies approaching 5,000 employees.
Speaker Change: In fact, we close our first seven favorite market deal in Q3.
This year was primarily tenable one with multiple asset types licensed, unlocking the power of the platform.
Miller to Enterprise Counter Parts, these customers have complex environments to benefit from the visibility and actionable insights are products delivered.
This is resulting in good demand for 10-1 as more of these companies look to a single vendor to consolidate their stack while remaining a sophisticated approach to security.
Speaker Change: August 3.
Speaker Change: Some of the headwinds you previously called out, including longer sales cycles with additional scrutiny in new business and large VM deals, persisted. However, we did see some stabilization in VM relative to Q2.
Speaker Change: Importantly, pipe build, particularly among large deals, continues to see solid traction, which we believe indicates a lot of opportunity.
Speaker Change: An addition to traction with 10-0-1, we're seeing consistent demand for cloud security product.
Speaker Change: Technical Product Security continues to be our fastest growing product and has ASP's coming in twice as high as in our other products.
Speaker Change: Presversely to monitor the health of cloud native applications as a whole rather than individually monitoring cloud infrastructure.
Speaker Change: A unified cloud offering brings an overall view to our customers.
Speaker Change: Further, an exemplified priority risks and provides immediate insights into where they should focus this remediation efforts.
We're winning landmark deals, often against some of the most predominant players in the space, which validates our ability to compete and win in the cloud market.
As customers cloud environments expand and get more complex, we continue to innovate at a progressive pace.
We recently released new data security posture management and artificial intelligence security posture management capabilities for sensible cloud security.
By sending exposure-man capabilities to cloud data and AI resources, the technical cloud security, DNAF, offering expand into some of our customers' greatest areas of concern.
With the rapid rise of AI adoption, many organizations have jumped on board without fully considering essential safeguards around cybersecurity, privacy and compliance.
Speaker Change: Surdrift that challenge with begun rolling out AIAware in Q3, AIAware detects misconfigurations and unauthorized AI software, libraries and plugins, all without interrupting customers daily operations.
In the eight weeks since its launch, many of our customers have already started using AI aware.
With A.I. where our customers can confidently, and securely use AI in their business, knowing how to better handle on AI-related risks.
And where is another example of how terrible one enables customers to quickly and easily assess new and evolving areas of the attack surface?
Most organizations operate in the hybrid environment with data and applications spread across multiple systems, both on-premise and in the cloud.
Speaker Change: When the customer wants to understand where an exposure might reside in their systems, they can turn to tentival to determine areas that are at risk. And most importantly, uncover risks.
As they traverse between these environments.
Speaker Change: We believe.
This is a huge, compassionate, Danish for us.
Speaker Change: Whether customer is on-prem using private or public cloud or in some cases, even looking to repatriate some of their work loads.
They need to feel confident that they have solutions with both across silos and can track and mitigate risks.
Speaker Change: Across these heterogeneous environments, and we're not slowing down.
We are continuing to lean in on the areas that matter most to our customers.
Speaker Change: Our focus on the entire hybrid threat differentiates a sensible and is key to how we win against large and formidable competitors across the business.
Speaker Change: I'd like to spend a few minutes talking about another line transformation. As we move from a primarily VM focused business to our broader exposure management offerings.
Speaker Change: Explosions Solutions now constitute over 50% of new sales and over 35% of total sales.
Speaker Change: We also looked at our business in terms of total assets license to better understand how customers are deploying sensible ones and for what use cases.
At this point, non-VN exposure solutions represent 20% of our total license facet.
9Venum exposure solutions are growing and nearly 30% left by 5 security which is growing in approximately 100%.
They're two key takeaways that we believe, validating our strategy and set us up for continued success going forward. First, Tundra and has become our flagship products and is the primary way our customers want to consume licenses for all asset types.
and the University of Texas, including VM with enhanced analytics.
The second key takeaway is that cloud and identity are primary growth drivers.
or growing at very healthy rates and are increasingly meaningful portions of our business.
Speaker Change: We are effectively deploying capital by investing in key areas of innovation to help our customers solve some of the toughest problems they're facing.
We're doing this while also balancing growth with profitability and delivering strong cash flow.
Giving the efficiency of our model, we're happy to announce that our board has approved an additional 200 million to share by that program. We believe in the incredible opportunity in front of us and look forward to continue to execute on our vision. And now let you turn the call over to Steve.
Thanks for me, overall we're very pleased with our execution this cordler. Highlight up by better than expected CCB, revenue and earnings.
Calculate a current building to find his revenue recognized in the quarter, plus the changing current deferred revenue, who are 11% in year of a year to 248.4 million.
Speaker Change: C.C.B. came in slightly better than expected in the quarter due to strength in our exposure management platform, and the increased adoption in our cloud security offerings.
10 of the one was approximately 30% of total new sales in the quarter of many six and seven figure wins from large enterprises in the telecommunications, transportation, medical technology and cloud infrastructure industries.
These marquee wins are a clear indication of our ability to provide large and sophisticated customers with a trusted platform that unifies and assesses the first aspects of exposure data and allows C.S. to make data-driven risk-based decisions.
We believe Tenable On provides a significant and compelling opportunity for us to continue to land new customers and expand relationships with existing customers at notably higher price points.
Today, approximately a third of our total six-figure customers are tenable one-customers.
and we are only 10% penetrated into our total enterprise platform customer base.
So the takeaway is that we are seeing meaningful momentum with our exposure management platform. And we believe there's a lot of runway for continued growth.
As I meet commented earlier, Clouse Security was also a major highlight for us with many notable winds from large organizations and public sector customers both in the U.S. and abroad, as well as state and local government agencies.
Speaker Change: We attribute.
Speaker Change: The approximately 100% year-of-year growth in this new market to the strength of our integrated CNAP offering and our ability to help customers of all sizes visualize exposures, misconfigurations, and access for workloads across hybrid environments.
We are also pleased to see VM Stabilize this quarter without performance in the mid-market, and I'm a churning pipeline in the large market.
Finally, I also want to note that current RPO growth was 12% year of a year.
Turning to other highlights, we added 386 new enterprise platform customers and 60 net new six figure customers during the quarter.
Our NetDollar expansion rate was 108% this quarter. Our Rinal rates remain strong.
Now, onto the P&L for the quarter. Revenue was 227.1 million, which represents 13% year-of-year growth.
Revenue in the quarter exceeded the midpoint of our guide by 4.1 million.
Speaker Change: Our percentage recurring revenue remained high at 96% this quarter. On now turn to expenses, I'll start with growth margin, which was 81% this quarter down 20 basis points from last quarter and in line with our expectations.
Our gross margin reflects the continued investment in our cloud infrastructure to efficiently scale, our exposure platform and see nap offerings.
We would characterize these incremental investments in the quarter semifix cost versus variable, which should yield some leverage in gross margins over time.
Tell us what marketing expense was 83.1 million down from 84.8 million last quarter.
Speaker Change: and as the percentage of revenue was 37% compared to 38% last quarter.
Speaker Change: Chittels, a marking expense was lower sequentially on an absolute dollar basis primarily due to the seasonality of marking in programs, bending Q2 and higher-level societal rep productivity in the quarter offset and part-blide higher commissions.
Speaker Change: Overall, we are driving greater efficiency in our go-to-market efforts this year, as we successfully adapt to selling a broader product suite in close large deals.
Speaker Change: As a result, tells a marking spend, as a percentage of revenue is decreased significantly by 730 basis points since 2022.
Looking ahead, we expect sales of marketing span as a percentage of revenue will continue to trend lower over time.
R&D expense was 35.6 million, which was up from 33.4 million last quarter.
Speaker Change: R&D expense was higher this quarter in comparison to last quarter due to a full quarter of engineering headcount cost related to the acquisition of Yorika and last capitalized software development costs related to our recently enhanced analytics for exposure management.
R&D expenses at the percentage of revenue with 16% discorder, up 60 basis points compared to last quarter.
GNA expense was 21.1 million, which was up from 19.6 million last quarter. GNA expense as percentage of revenue was 9% this quarter, in class relative to last quarter.
Income from operations was 45 million and exceeded the midpoint of our guided range by 2 million.
OPPORTING MARGION for the quarter was 20%, which was 50 basis points better than the midpoint of our guided range.
We believe the notable app performance in earnings is quarter but flex the strength of our recurring revenue model.
Resiliency of our customer base and ability to balance growth with profitability.
Overall, we are very pleased with our ability to continue driving leverage in the business as operating margins have increased from 10% for the full year, 2022 to 15% for 2023 to 20% this quarter.
EPS from the quarter was 32 cents, which was 3 cents better than the midpoint of our guided range.
Speaker Change: Now, let's turn to the balance sheet. We finished the quarter with 548 million in cash and short-term investments.
A Council Receivable was $193 million and total deferred revenue was $747 million.
Keren toford revenue was 584 million, which gives us a lot of visibility into expected revenue over the next 12 months.
We generated a record 60.8 million of unlevered free cash flow during the quarter, which is up compared to 36.5 million last quarter.
Speaker Change: On a year-to-date basis, we generated 152 million of unlevered free cash law, which puts us well within reach to achieve the 225-235 million annual guide we provided last quarter.
Rekal, we do not guide to unlever free cash flow quarterly, but instead we do it at the beginning of the year and at the midpoint of the year which was doing our call in July. We feel confident that we can continue to expand our operating and free cash flow margin over the ensuing years as we have done so every year since our IPO.
With the results of the quarter behind us, I'd like to discuss our outlook for Q4 and the full year.
Speaker Change: For the fourth quarter, we currently expect revenue to be in the range of 229 to 233 million.
9GAP income from operations to being the range of 47 to 49 million.
Non-Gat Medding Company in the range of 42 to 44 million, assuming Interest Expense of 7.8 million, Interest Income of 6 million, and a provision for income taxes of 3.1 million.
Nongap diluted earnings per share of the being the range of 33 to 35 cents, assuming 125.5 million fully diluted weighted average shares outstanding.
and for the full year we currently expect.
Calculate a current belly to be in the range of 957 to 967 million revenue to be in the range of 893.3 million to 897.3 million.
Gats Incum from Operations to the Indian Range of 171.8 million to 173.8 million.
9G at net income to be in the range of 149.9 million to 151.9 million. Assuming interest expense of 32.1 million, interest income of 23.5 million and a provision for income taxes of 12.3 million.
Speaker Change: And finally, non-gap diluted earnings per share to be in the range of $1.21 to $1.23, assuming $123.5 million fully diluted weighted average share self-standing.
Speaker Change: Earlier, Amit highlighted some of the underlying growth drivers of our business were related to the accelerated adoption of our exposure solutions.
Speaker Change: The takeaway here is that we believe we have a very compelling opportunity in front of us to drive growth higher over time at exposure solutions to become a larger part of our overall mix.
Consistent with past practice, we will provide our guidance for 2025 during our call next February. But at a high level, it's fair to assume that our growth next year will be approaching the midpoint of our own pride, CCB, growth for the fourth quarter of this year.
Speaker Change: It's also worth noting that we are on track to deliver the 280 to 290 million of unlovered free cash flow target in 2025 that we previously provided.
Fuel Rush Strong Offering Leverage and Increasing Free Cash Flow Generation, we're very pleased to announce today a $200 million increase to our shared repurchase program, which demonstrates our commitment to effectively deploy and return capital to our shareholders.
Speaker Change: We have confidence our ability to drive, continue leverage in our business and deliver 35% plus on-leverage free cash flow margins over time.
and we'll now turn the call back to Amit for some closing comments.
Thanks, Steve. In summary, we're happy with where we are in our journey to becoming the exposure management company.
We are very encouraged by the progress and cloud and tenable on and look forward to on-term success. We hope to see you at the Wells Fargo and Barkley's conferences in the coming weeks.
Speaker Change: We now like to open a call up for questions.
Thank you. At this time we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad.
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Police. One moment please while we pull off for questions.
Alright, first question comes from Zach and Calia with Park Lays. Please proceed with your question.
Okay, great. Hey guys, thanks for taking my questions here and good to hear from Everton, team.
Maybe for you to start with you, it was great to hear that exposure management makes up about 35% of total revenue.
Kudjuk has just maybe touched on how fast that grew this quarter and maybe how you think about that growth going forward. Broadbrush.
Hi, Zachette. This is Steve Good question.
Steve Vintz: A couple of things first, what we said was exposure solutions now constitute.
Speaker Change: Over 50% of new sales and over 35% of total sales.
So that is based on sales of individual products use.
Speaker Change: When we mentioned exposure solutions that the whole would include 10-to-1 and sales of our standalone non-VM products.
Additionally, we also look at our business in terms of access, license, the better understand how customers are actually deploying tenable on and for what use cases are non-VM solutions on an asset basis are growing 30 percent and represent 20 percent of our total sales.
So this is a fact that some total of all apps that fly since fire, customers.
for our exposure solutions, both on a standalone basis as well as through the platform, so just to be clear it does not include any of the MASSS license within the platform.
Speaker Change: I think that's helpful because it really helps us understand the traction that we're seeing with our solutions.
Speaker Change: Both as a platform, but then also individually licensed assets where we're seeing the growth we're seeing the adoption by the customers.
Yeah, absolutely much faster growth in those non-VMS, that's for sure. I mean, maybe that's a natural segue for you.
You know, cloud security just feels like a very clear rising tide. Maybe the question for you is, how do you feel about the breadth of tentables offering here? And where do you think your cloud security portfolio goes in the future?
We're very excited about our cloud security offering. And your character as it is, you know, all things rising with the time that you think this is a large market, it's rapidly going market, I think there's tremendous opportunity. I think it's both on beyond that.
We're seeing a demonstrating success in competitive situations where we now have a lot of confidence going to total against market leaders and winning your fair share of those transactions. We don't have to do crazy things. I know there's a lot of concern. We don't have to do crazy things from a discounting or packaging perspective.
I think the competitiveness of our offerings speaks for it.
Speaker Change: Speaks for itself.
We've brought in the offering to be a full CNAP capability. We've recently announced the addition of data security posture management. We've also added...
A.I. Security Post-Rumansment Things that we think make us highly competitive and on the leading edge of where this market is going. And we're seeing the adoption from our customers.
Very helpful. Thanks guys.
Our next question comes some hands of Fatoa Wall with Morgan Stanley. Please proceed with your question.
Great, thanks for taking my question, good evening.
Steve, I wanted to just understand a little bit.
Will it your guidance philosophy around?
Q4 and 2025, so by my math it sounds like you're guiding to about 8 to 9%.
Speaker Change: ETV growth for Q4. Is that roughly how we should consider 2025?
Relays that guidance, I'm just curious, you know what you're assuming around, you know, budget flush and cue for what you're seeing in your pipeline is a more or less conservatism or something that you're seeing in the business that makes you a bit more concerned. Thank you.
Speaker Change: So...
Speaker Change: Our full year CCB Guide today is 957,967 million. That does.
Speaker Change: So, yes, that there's 8 to 9% growth in Plague Growth in the fourth quarter.
and just unpack that a little bit our guidance to them, is that exposure solutions, continues to see outside's growth. I mean, talk about how 20% of our business is in terms of assets, it's growing 30% so we expect that now we'll grow going forward. It also reflects some moderation.
in the growth of the amp. We feel like these are good expectations.
To have certainly in the short term, and you know as we talked about.
On the call earlier, we also feel like these are our exit velocity here in terms of growth and T.C.B.
It's fair to have those expectations for the full year next year. We'll give our guidance and February.
Speaker Change: But obviously it's a fair expectation to have now. I want to overall telly and we continue to add lots of new opportunities in the top of the funnel for both exposure solutions in VM. Moreover, we're pleased with the...
Speaker Change: Besides, but also the change in the maturity of the pipe, we have many large, least-day job opportunities. So overall, we're pleased with the results of the Porter. We feel like we have good expectations going forward and with regard to growth of both exposure solutions and VM.
Speaker Change: Makes sense, thanks.
Our next question comes from Brian Ethics with JP Morgan. Please proceed with your question.
Brian Ethics: Good afternoon and thank you for taking the question. Maybe for me, I think you've previously noted that you may have changed some of the incentives that you have for the federal business. I know this time last year there was some revenue recognition kind of issues that played into that. Perhaps Shadow will call her on how those changes played out.
with regard to federal execution in this quarter, what should we expect over the next year or so?
We anticipated you're Q3 to be our seasonally strong quarter in US federal and
I think it played out pretty much as expected. Last year we had some unusual first-of-the-fair business. We didn't see anything that nature is here.
Got it. And then, any quick follow for Steve, as you're kind of pretty much at 20% operating margins, you've delivered.
Certainly some pretty healthy operating, a large and expansion consistent way over the past years. And, line to the growth outlook, maybe help us understand how you think about the guardrails of margin expansion versus growth and how we might expect.
Martin Expansion to progress going forward, get in and give him a growth outlook, be it.
Speaker Change: Dorn.
Well, I think every quarter since we've been a public company, you know, we've been able to increase.
The Martians are shy to say over years, the public company has been able to drive margin leverage and expand the operating margin tendering cash flow. Just as example, I think the operating margins are not based on 10% in 2022 and then it's 15% last year in 2023. This quarter is roughly 20%.
And on the last call we talked about our free castball marchons, by the way, free castball is following the similar trend line with the operating margins. And on the last call we provided a new long term target for our free castball marchons and we said we expect free castball marchons.
to increase the 35% plus. So we have a lot of confidence to continue to drive leverage in the business. We are balanced, Ruler.
We have 96% recurring revenue, we have 80% plus growth margins and healthy net and grow stellar and all right.
and certainly a broader product portfolio or getting great traction with some of the newer offerings here. But at the same time, we're also investing. You can see that growth in R&D, spend this quarter, is approaching 30 percent. We've become more efficient and sales and marketing.
Sales for Marketing's percent of revenue was 42% last year.
is roughly 36% this quarter and a tracking in line.
Speaker Change: With the comments we made it for the end of the year, so overall we think we're...
Speaker Change: Managing effectively deploying capital, managing the business in a very healthy way, leaning in and investing in innovation and at the same time, walking in the margins of a very gradual manner. I think the right way to think about the second-wall span of the margins.
and several hundred basis points a year each year sometimes more depending on growth and but obviously you have to see how next year plays out.
Good, very helpful, thank you.
Speaker Change: Our next question comes from Joel Fishbine with Truist Securities. Please proceed with your question.
Thanks for taking the question, Amit, you talked about early traction, I know it's really days with AI posture management and AI aware. I'm loved to hear and understand how you're pricing these products and what the competition looks like in those markets. Thanks.
Speaker Change: With AI aware, which we're seeing tremendous adoption and enthusiasm for that large number of customers are now.
Speaker Change: Actuality Using That Our Modernization occurs primarily through just increased Asset Calits and the same is true with AI security posture management.
Thanks for the competitive environment around that.
You know, I think if you looked at AI security posture management, you are seeing a small number of other market leading.
C-Naps coming to market with similar capability but there's a pretty large trap between.
You're going to be leading the market and I can large number of others just providing either traditional CSPM or a much lighter cloud capability which don't take lead anything like AI security posture management.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Mike Seiko's with Needem and Company. Please proceed with your question.
Mike Seiko: Hey guys, thanks for taking the questions here and I just wanted to continue on that thread that you'll always teasing at. But we similarly talk about the pricing dynamics for on-clave security. I know that's a newer piece of the portfolio here, which is wanted to make sure I was checking up on the pricing and competitive dynamics for that product as well.
Yeah, with on-page security it's very similar to how we previously priced our other on-prem offering.
You know, we licensed some on a prior IP address or a per asset basis in this case having its per IP address and customers with license for number of addresses that they're trying to cover.
and maybe another more per Steve here. But if I just cycle back to last quarter's guidance, one of the things that wasn't applied is that up.
Speaker Change: You guys were seeing these headwinds specific to new business, particularly vulnerability management in North America
But the guidance that was explained is being more cautious and it stands, IE that that's trend for the new business with BM was kind of...
We painted across the board for new business across all of the tenable. And one of the things I'm trying to tease out is with where we stand today.
How has the new business trended for a tenable...
Speaker Change: I'm going to go to the next one.
I think it's pretty to say that new businesses tougher to transact in this macro, but we're very pleased to be adding nearly 400 new logos this quarter.
And of course the number of customers added in the quarter can be influenced by a number of factors including the size of the deals but we typically add between 3 and 500.
Speaker Change: A Quater in this Quater was no different. I think the word that Amit used earlier to describe the M. This Quater was...
Speaker Change: Stable, and Stable-ized. And so we're very pleased to see execute this quarter, which was the results of the quarter as obviously CCB and revenue came in, so it's better than expected.
Over all of our encouraged what we see but we also know that we have a lot of large opportunities in the funnel who are working hard to close those. But overall, it is just scrubbing as much as we better than what we experienced in the last quarter.
Thank you.
Speaker Change: Our next question comes from Jonathan Ho with William Blair. Please see with your question.
Hi, good afternoon and congrats on the strong results. Just wanted to follow up a little bit on the Tenable One platform and you can you help us understand, do you typically get a lot of the benefits from new asset types up front or does it take a little bit of time for that to translate? Maybe can you help us understand how Tenable One may be effects your ASP as well. Thank you.
Speaker Change: Yes, a great question, Jonathan. So the short answer is that that completes all thought over time. What will initially see is a higher...
Price Per asset, and typically 20 to 25% higher price per asset when purchasing coverage through 10 to 1, then purchasing standalone VM for instance.
Speaker Change: and part of the volume drive there are the enhanced analytics, the exposure views, the attack path analytics and some of the things that are available in traditional learning, competitive VM products and offerings.
from there we see the remainder of uplift coming from the expansion of
Asset Types, or Greater Coverage of Assets. So, someone who might initially begin their exposure management journey with us stepping from the Amit Yoran to 10.1.
Will then frequently be able to seamlessly expand to cover identity and look at the identities within their environment, who has access to what that means.
What that looks like from a glass-reedy perspective or from a potential compromised or a counter or indicators of attack perspective.
The short answer is we see uplifting initially through the higher price brass at the end, through a great raster coverage and greater types of assets. We'll see that broader coverage which gets us to a 70% realized high-RA SP.
Makes a ton of sense and then just in terms of your stabilization comments, can you talk to maybe the pricing environment and the competitive environment and whether you've seen some of these newer competitors You start to gain any traction or whether your things are relatively stable. Just want to get a sense around that stabilization from these
Singles. Thank you.
Yeah, things have been exceptionally...
Stable and consistent from our perspective in what comes to the VM market. We'll see and we'll hear much more noise certainly more marketing coming from newer entrances into the market. But we'll infrequently see them in competitive situations where someone is looking for an enterprise VM product and we're going to do show up.
You know I think our sales team is fully enabled in terms of understanding the key different shader. I think enterprise customers which test products very quickly look at them and say okay there's a very very different.
Quality of the experience and quantitative difference when looking at coverage in terrible these are the traditional competitors and certainly even much more.
Bernouce against NewarkhamPatter. So we think that environment is stable and enjoy exceptionally strong wind rates against both.
Speaker Change: Legacy and New Orleans International Market.
Speaker Change: Great, thank you.
Our next question comes from Patrick Colville with Scoshabank. Please proceed with your question.
Hey Alman, Chris, thank you so much for taking my question. I guess I just want to ask one about
Stopre purchase, I don't think there was any stopre purchase this quarter but
Speaker Change: New Wave announced an expansion of the repurchase authorization. So I guess talking through why no repurchase this quarter and then, you know, was the philosophy around by-back.
We did not reproduce stock discolored, but we do plan to do so going forward. And of course we're pleased to announce a $200 million increase.
Speaker Change: in the Authorization for our Share-Buy Back Program.
which we think reflects our ongoing commitment to reduce share count and return capital to share holders. There's no exploration to be increasing the authorization.
But we do plan to do so opportunistically. So the amount that we buy back each and every quarter can vary and obviously great please to increase our commitment today on the buyback.
Thanks so much. I guess my second question if I may, you know, thank you for providing that kind of early look into 2025 to 8%
Karney Billings Growth. I mean, there's a lot of kind of wind and tenable sales with exposure management with clouds, with kind of ITDR, OT security. I guess when will these tailwinds be more reflected in numbers?
Thank you for any color that would be super helpful. Thank you.
Yeah, I think one, you know, a number of things, your first word obviously will provide guidance in the upcoming call. But, you know, more importantly, one of the things that I wanted to call out earlier was provide a little bit more transparency to our exposure solutions and becoming an increasingly...
and I think that's important to teach part of our business and the increasing percentage of our revenue and they're going at very healthy rates and we think we're highly competitive in those win rates and go through it so I think for things that will be able to build upon and ideally expand going forward.
Speaker Change: We just declare we feel very confident that growth will not be a lot of tireless of course to talk. We're not setting those expectations today, but over the years we have brought in the product, Sweden.
and Evolve and Difference Fire of Excellence and 20% of our fitness today, going 30% is very notable. We have confidence that we will be able to sustain that and compete in some of these really large market opportunities.
Speaker Change: Terrific, thank you so much, thank you Gras.
Thank you.
Speaker Change: Our next question comes from grey pal with BTIG. Please proceed with your question.
Okay great, thanks for taking the question and congrats on the results is good to see the stabilization.
So maybe it's a start off high level.
Have you seen any uncertainty around the elections in the US? Cause any impact on field discussions or just have any impact on how customers are thinking about their security budgets? It doesn't look like it just from the results, but curious that came up at all this past quarter.
We have not had a lot of discussion with commercial clients or international clients about potential impacts of US elections on security budget.
Obviously there's a lot of uncertainty in the federal space and so we're taking that sort of cautious approach to our dive in the fourth quarter.
Great. And then just more of like a housekeeping question for Steve. I just want to make sure to understand the disclosures correctly.
When you call on exposure management at 35% of total sales, is that a revenue number, or is that remoralated to something like billings or bookings? I guess there's sort of a loose definition of sales when disclosing these metrics. I just want to make sure I'm thinking of it correctly.
We have to turn up sales, so we call that bookings internally.
Alright, perfect, thank you very much.
Speaker Change: Thank you.
Speaker Change: Next question comes from Michelle Alio with TD Cowan. Please proceed with your question.
Speaker Change: Thank you, good afternoon everybody.
My question, Amit, or Steve, I don't maybe it's a little too early given where we stand in the fourth quarter, but from where you sit, when you compare the seasonal budget flush, how would you characterize sports you?
Speaker Change: 20th, Skarantime
I'm sorry you are inaudible for part of your question can you repeat that?
I was asking about seasonality in the fourth quarter. Again, a little tour at the point given where in the end of the first month of the quarter. But how would you characterize the seasonal budget flush this year versus last year?
Well, I think it's fair to say that we're not expecting any.
Uh, significant seasonal budget flash.
Speaker Change: [inaudible]
The linearity within the quarter, we're off to a good start in October. I would characterize the flow that we've experienced so far as unremarkable and inconsistent, should I say, more so with what we experienced with prior quarters this year.
Understood. And a follow-up from a graphic perspective, anything outstanding this quarter one way or the other?
Speaker Change: We say outstanding, I'm sorry.
We're having a tough time hearing you on this end, the connection's probably not good. I know, I apologize, it's pretty much unwinded. But anything unusual or pretty much a consistent quarter from a geographic performance perspective?
Speaker Change: No, we talked about on the last call a little bit of the disparity in the growth rates among some of the geos but you know this quarter as we discussed you know
It was more stable and the man was more consistent.
really, across GEOs. The one thing...
that I mentioned earlier that's probably worth noting now is
just really the strength in the mid-market. This year, it's been an area of outperformance for us.
A million-dollar deal there, and we see a ton of opportunity there. And keep in mind, the mid-market, when we say mid-market, it's employees anywhere from 500 employees up to 5,000. So these are big companies. We're having great success there, selling the broader offering. We're getting great traction there, and we have high expectations going forward.
Thank you so much, Steve.
Our next question comes from Rankin Kothari with Robert Baird. Please proceed with your question.
Hiya, this is Sranik from Baird. Good afternoon. Thanks for taking my question.
So, starting with Steve, just following from what you mentioned on the outperforming mid-market and...
closing the first seven-figure deal in this segment.
You touched upon the net dollar expansion rates. I just wanted to, if you can help us get a sense of...
That how to unpack that came in at 108% which was... If you take just like a point lower than last quarter, if you can help elaborate and provide some color on factors there in the context of the new low expansion within these cohorts that you highlighted mid-market.
which of course are larger organizations.
and Enterprise. If that is a factor and any color on product segments with exposure and cloud security offerings also growing strongly and then I'll follow up.
We provide a lot of transparency about our business on a quarterly basis. We disclose the number of new customers, that new six-figure deals, large deals.
Speaker Change: The rate of expansion within the customer base in a given quarter.
Speaker Change: And we do not optimize our business around a single metric. And these metrics, of course, can fluctuate naturally from quarter to quarter. That said, we did see a modestly lower rate of expansion this quarter, which we largely attributed to timing and budgets.
Speaker Change: on some large deals here. We did see.
Strengths and new businesses we've discussed it was for roughly 400 in the quarter, but what was remarkable about that is just
Speaker Change: Some of some of the larger opportunities within that so I think we're doing a good job
Blending at higher price points, obviously giving the broader offering, giving the momentum in cloud. Amit talked about the ASPs in cloud.
Heather notably higher this year in comparison to last year in comparison to some of our other products So obviously bigger lands is going to be a big area of focus for us And of course, we still have the expansion opportunity going forward here and tell but any given quarter the expansion rates The number of new logos and that new six-figure deals can vary within one another
Speaker Change: Stephen Vintz, Amit Yoran
Just curious, in terms of any trends that you observe with these customers, in terms of...
how they're looking to consolidate the security vendors and how you guys are positioned to be perhaps the one-stop shop there and in any ways how you might be adapting your sales motions or pricing or customer success. Just wanted to understand how you approach mid-market.
Yeah, I think we are seeing some benefit from consolidation with our T1 platform. Folks are including VM as a more strategic approach to understanding exposure management. I think if you talk to Gartner, if you look at, you know, listen to some of the language they're using, VM is foundational to understanding exposure management risk and as such.
You know, we're seeing adoption of...
Private Participants, which we think is...
and they're very applicable and we're seeing great traction in the mid-market, which again for us can go up to...
Speaker Change: and others.
Speaker Change: the sort of elegance of how
and the various aspects of our cloud security product are integrated into a unified platform.
are really appreciated, you know, perhaps especially in the mid-market where they don't have all the cloud security expertise and all the cloud security, you know, staffing that they're looking for. So I think both Tenable One and cloud security become natural areas for, you know, outperformance for us in the mid-market.
Great. Thanks a lot, Thomas.
Our next question comes from Kingsley Crane with Canaccord Genuity. Please proceed with your question.
Kingsley Crane: Great, congrats on the quarter and this is sort of similar to Jonathan's question earlier. You talked about Tenable One garnering 20 to 25% premium per asset but also a much higher ASP on the back of more pervasive deployments.
So the question is, as you add in more asset types like OTE and more functionality through Remitic, how should we think about the growth in both price per asset as well as asset counting? Is there room for that premium per asset to increase or is this really a asset growth play? Thanks.
The short answer is that I believe there's room to expand along both of those dimensions.
Certainly, when it comes to price per asset, we want to be sensitive to that. We're trying to move customers from procuring a stand-alone VM product to procuring any stand-alone product to be willing to pay a premium. In order to do that, we've enhanced...
and Luis to enhance the analytics as part of T1 as a platform, the ATT&CK PATH analytics.
Speaker Change: and I'm going to be talking about the room and exposure views, the benchmark and some of the functionality and capability there.
Speaker Change: We think that there's lots of room to continue to add additional analytic types.
for Tableau on within the existing customer base and within the existing asset count.
That said, we are still in the early days of penetrating a massive customer base.
Speaker Change: with a broader set of asset types.
So, when you pull CISOs out there and you talk to many of our customers, you know, many of them aren't even aware in ways that our offering has broadened. So, I think we have to continue to do a more aggressive job marketing and bringing some of these new products.
to market and having, I think, the expansion of asset types and asset count growth is probably also a very natural way for T1 prices to continue or realized ASPs to continue to grow.
Thanks, really helpful. That's it for me.
Speaker Change: Our next question comes from Roger Boyd with UBS. Please proceed with your question.
Great, thanks for taking the question. Amit, you talked last quarter about VM being cyclically challenged and it seems like you're still expecting to see that in the fourth quarter and presumably...
A broader cyclical recovery is not embedded into your initial counter 25 outlook, but with that in mind, just what would give you more confidence that the cyclical headwinds are lifting? Is it really just a continuation of...
Macro uncertainty in cell cycles, or is it more specifically tied to
some of the license capacity dynamics you've talked about in the past. Thanks.
Yeah, well I think, you know, we're trying to take an approach here that sets us up for success going forward.
The first comment I'll make is that as you may poll and ask
out there and security programs, what you will hear is that VM is absolutely foundational to what they do. Nobody's getting rid of, the VM program, nobody's reducing their VM program.
What we have heard in recent periods is that they aren't as rapidly expanding their VM program as they have in previous periods. One of the things that would give me confidence that we're seeing improvement there is seeing improvement there. So seeing improvement.
What we are seeing is customers with VM requirements coming to us and saying, hey, I'm willing to pay a higher ASP to procure VM through Tenable One as a platform because
Speaker Change: Understanding exposure management is more strategic to me. I want these enhanced analytics.
And so now, 20% plus of our VM customers are coming to us and say hey, we want to… we want to procure our VM program through TenableONE as a platform with these enhanced analytics. So what we're trying to about is improvingduction or independentization with implementational evaluation. And to do that, we're then going to be doing that with Angular11 to implement those attributes. So want to promote those training needs in the local, how to implement those adaptation skills? So there's a...
Speaker Change: One, visibility into...
Speaker Change: the continued confidence in the VM market, but two, the size and scope and growth rate of our exposure solutions, which are obviously, you know, we've been talking about a long time as the foundational stake that we're laying for our future as a company and the real momentum that we're seeing there.
Our next question comes from Rudy Kessinger with D.A. Davidson. Please proceed with your question.
Speaker Change: Hey, this is Andres for Rudy. Thank you for taking my question. First of all, congrats on a fantastic quarter. I just wanted to ask a quick question. Last quarter you said that you had longer sales cycles. Is there any update data you can give us? Do you think that was partially affected by the cross-strike outage? Any comment will be helpful. Thank you.
Yeah, you know and I'll start off and then turn it over to Steve. I think what you know we've basically seen more of the same sales cycles continue to operate as we saw them in in previous quarter.
I don't know that I would attribute it to CrowdStrike and only CrowdStrike, but we do also see continued contract negotiations with procurement officers and procurement offices.
pushing aggressively on terms and things which, you know, which have introduced
in the sort of expansion of sales cycle. But I think, you know, what we've seen this quarter, last quarter, we're anticipating will continue to play itself out and bake that into our guidance going forward and our expectations.
Yeah, and there's no notable change in our sales cycles really from one quarter to the next. The one thing that's probably worth highlighting is
the sales cycles for Tenable One. Yes, Tenable One.
Speaker Change: has higher selling prices, right? We talked about this 60 to 70% uplift. Actually, the range in which that happens can vary anywhere from 50 up to over 90%. So when customers move from a standalone product into the platform, we're obviously getting higher selling prices, we're delivering incremental value on an asset basis and covering.
more assets across their attack surface through different asset types, so despite having those higher selling prices, we're actually seeing...
Those will be shorter sales cycles with the integrated offering. So I think it speaks to the fact that customers certainly want to understand REST more broadly across their attack surface. They want companies to deliver greater insights and exposure management is resonating and obviously industry analysts and others are taking note as well.
Speaker Change: Sounds good. Thank you.
Our next question comes from Joshua Tilton with Wolf Research. Please proceed with your question.
Joshua Tilton, are you there?
Speaker Change: It does not sound like there is a question.
Yeah, he's in the queue, but he may be muted, so there's no other questions, so I'm going to close the call, okay?
Sounds good. Thank you.