Q4 2024 Tenable Holdings Inc Earnings Call
Greetings and welcome to the Tenable fourth quarter 2024 earnings Conference call.
At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
Speaker Change: Pleasure to introduce your host Erin Carney thank.
Speaker Change: You may begin.
Speaker Change: Thank you operator, and thank you all for joining us on today's conference call to discuss tenable. Its fourth quarter 2024 financial results with me on the call today are Steve Burns, Our co Chief Executive Officer, and Chief Financial Officer, and Mark Thurman, Our co Chief Executive Officer, and Chief operating.
Speaker Change: 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.
Speaker Change: We will make forward looking statements during the course of this call, including statements relating to our guidance and expectations for the first quarter and full year 2025.
Speaker Change: And drivers in our business changes in the threat landscape and the security industry and our competitive position in the market raising customer demand.
Speaker Change: Sure and adoption of our solutions, including Tenable, one in cloud security the potential benefits and financial impact of our potential acquisition of Falcon cyber and our ability to successfully integrate all kinds Cyprus operation planned innovation, and new products and services and our expectations regarding long term profitability and free cash.
Speaker Change: Hello, Steve.
These forward looking statements involve risks and uncertainties some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements you should not rely upon forward looking statements as a prediction of future events or.
Speaker Change: 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.
Speaker Change: 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 10-K, and subsequent reports that we file with the SEC.
Speaker Change: 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. There are a number of limitations related to the use of diesel.
Speaker Change: non-GAAP financial measures versus their closest GAAP equivalents.
Speaker Change: Our press release includes GAAP to non-GAAP reconciliations for these measures.
Speaker Change: Before I turn the call over to Steve for those of you who may be interest that we have set up a tribute site for late CEO, Amit your and we welcome any of you that have stories to share to pace them. You can find the site at www Dot Tenable Dotcom, Florida classroom membrane meet you and I'll now turn the call.
Steve Burns: Let's see.
Speaker Change: Thank you Erin I'd like to take a moment to express our heartfelt gratitude for the outpouring of condolences and memories Sheridan honor of our late CEO Amit your round.
Speaker Change: Yes, we've received from the investment community as well as friends and colleagues past and present have been deeply movie and meaningful.
Speaker Change: I mean, it was a trailblazer who's independent and fun loving spirit shone brightly as integrity and transparency what qualities. Many of you value deeply and his presence is irreplaceable.
Speaker Change: And I remain steadfast in our commitment to honor his legacy by continuing to advance Tangibles mission of building a more secure digital future.
Speaker Change: That said I'm pleased to join the call today alongside box urban as we host this call as co Ceos.
Speaker Change: We're excited to share our strong results for the quarter outlined our priorities for 2025 and discuss the strategic rationale behind our pending acquisition of Falcon cider.
Speaker Change: This quarter, we delivered exceptional results exceeding expectations on all of our got it metrics.
Speaker Change: We achieved 11% PCB growth, which exceeded the midpoint of our guidance by $7 5 million.
Speaker Change: Operating margin was 25%, which was significantly better than our expectations.
So generated 86 million and Unlevered free cash flow, which was also better than expected.
Speaker Change: We saw strong performance across our business, primarily driven by continued demand for exposure management and cloud security.
Speaker Change: These results reflect our commitment to evolve our business to address adjacent high growth markets and deliver incremental value to our customers.
Speaker Change: As I mentioned earlier, one of the areas of outperformance in the quarter was exposed dramatically highlighted by tenable, one reaching a record 40% of new business sales.
Speaker Change: The compelling value that our unified exposure platform delivers is rooted in helping customers identify and focus on the exposures that matter most to their business.
Providing these actionable insights through enhanced analytics is the foundation for a holistic approach to risk management and this is the driving force behind the strong adoption of technical one.
Speaker Change: In order for our customers to better understand and reduce risk they need a comprehensive platform that not only contextualize and prioritizes risk data from systems reassess, but also one that aggregate risk data from their other security providers.
Speaker Change: Extending our leadership in exposure management by adding third party data sources and associated remediation workflows across the security stack is a priority for us this year.
Speaker Change: This brings me to the motivation behind our recent announcement of our agreement to acquire a Vulcan ciber.
Speaker Change: The acquisition of Vulcan will augment our existing data capabilities and accelerate our ability to deliver on the future of exposure management in two ways.
Speaker Change: It will enhance our ability to aggregate and consolidate vast amounts of data into a singular unified cyber risk dataset within tenable one.
Speaker Change: Specifically Falcon will allow us to integrate data from more than 103rd party security products, such as endpoint security cloud security application security and vulnerability assessment.
Speaker Change: These extensive data aggregation capabilities when combined with our own extensive risk data will help customers consolidate all soldiers across their security stack into a singular prioritize view from which they can remediate threats.
Speaker Change: By leveraging this unified risk dataset, we believe tenable will be positioned to advanced AI, driven exposure management to transform how customers predict prioritize and mitigate risk across the security stack.
Speaker Change: This brings me to the second key motivator for the acquisition.
Speaker Change: We expect that Vulcan will accelerate our ability to deliver automated remediation capabilities, sometimes referred to as mobilization.
Speaker Change: T cells and their security teams will be able to act faster and more efficiently we're solving their exposures across their security environments with greater precision.
With these enhanced remediation capabilities tenable and will help ensure that security issues, along with corrective guidance get into the hands of the security team members to address exposures quickly wherever they may exist in their environment, whether it be the datacenter and apps in the cloud and so on.
Speaker Change: In short this pending acquisition underscores our commitment to bring the most comprehensive exposure management platform in the market.
Speaker Change: Another thing for US this year is expanding our footprint in cloud security.
Speaker Change: This quarter, our cloud security sales more than doubled with significant wins across both public and private sectors.
Speaker Change: What differentiates tenable and this space is our ease of use pace of innovation and the ability to offer seen that integrate with our exposure management platform.
Speaker Change: Tenable has the ability to assess hybrid environments that most organizations operate at few organizations exists solely on premise are just in the cloud.
Speaker Change: Premise data centers private clouds and public clouds are all part of the equation and our exposure management approach integrates these disparate environment into a unified strategy.
Speaker Change: So in summary, we believe we have strong momentum and exposure management, including cloud security.
With the commentary we provided last quarter on our growth drivers. We believe we will continue to see outsized growth in exposure management highlighted by our increasing scale and cloud security over the ensuing years.
Speaker Change: We continue to execute on this growth algorithm in 2025, we plan to increase our investment in product development and go to market all while continuing to expand our operating and free cash flow margins.
Speaker Change: We remain firmly committed to a balanced growth approach and returning capital to our shareholders through our share repurchase program all of which is intended to create long term value to our shareholders.
Mark Service: I'd like to turn the call now over to Mark service.
Mark Service: Thank you Steve for the last five years as the Chief operating Officer I've had the privilege of working with thousands of customers worldwide as well as partners and employees to understand their challenges firsthand and ensure we deliver solutions that make the biggest impact for their organizations.
Mark Service: I'm incredibly proud of what we've accomplished together and excited to continue executing on our strategy as we move forward.
Mark Service: A key area of focus for us and one I'm very passionate about is making sure we are delivering the solutions our customers need.
Mark Service: This is the motivation behind our investment decisions and our long term strategy.
Mark Service: This also requires us to work closely with customers and partners with feet on the street understanding purchasing behaviors and priorities.
Mark Service: While we have historically added hundreds of new customers and even more expansion deals in past quarters. There are consistent themes. Among these deals.
Mark Service: I'm going to take some time to highlight customer examples that encompass the broader theme we are experiencing.
Mark Service: As Steve mentioned, we're seeing tremendous strength in tenable, one in cloud security, but it's also worth emphasizing that vulnerability management remains foundational to customers security programs.
Mark Service: For many customers via them continues to be the starting point for exposure management as it lays the groundwork for understanding and addressing an organization's risk.
Mark Service: We believe this sets us apart from the competition.
Mark Service: A great example is a major telecom provider that has relied on tenable V M for years.
Mark Service: They are working hand in hand with us to transform their entire approach to exposure management.
Mark Service: The fortune 100 companies leveraging tenable wanted to help unify risk findings for more than 50 security tools, including those for cloud on Prem endpoints and O T systems.
Mark Service: As part of the transformation that they've even created a dedicated exposure management team to support the initiative.
Mark Service: While it continues to be a great starting point with existing customers. We are seeing a shift in new customer interest and behavior.
Mark Service: Increasingly we are seeing new customers adopt tenable, one as their starting point with tenable.
Mark Service: This quarter alone we closed multiple six figure tenable, one deals including V M across industries like health care banking retail and tech.
Mark Service: As organizations of all kinds grapple with understanding risking their fragmented hybrid environments.
Mark Service: Tenable, one resonated deeply with a major financial services company that needed a holistic view across multiple asset types, including external assets cloud infrastructure containers and active directory.
Mark Service: The customer quickly recognize the power of tenable ones visibility and risk prioritization, which provided them with actionable insight to reduce their exposure.
Mark Service: As a result, this turned into a seven figure expansion deal.
Steve Burns: As Steve alluded to our exposure management value proposition is also driving significant traction in cloud security.
Speaker Change: When marquee win this quarter was with a major international Health care Agency.
Speaker Change: They needed a centralized view of their hybrid attack surface, including their cloud environment.
Speaker Change: And a competitive bake off against the top cow cloud players, we won because our unified platform approach, which delivered critical vendor consolidation cost savings and operational efficiencies.
Speaker Change: Most importantly, we help them meet their 1 billion cost cutting mandate while insuring.
Speaker Change: Consistent risk prioritization across their entire attack surface at scale.
Speaker Change: These customer examples illustrate the trust we've earned and the opportunities we're seeing in the market.
Speaker Change: They also highlight the transformative potential of exposure management as organizations move toward a more holistic approach to managing cyber risk.
Speaker Change: We are extremely optimistic about the exposure management market opportunity and are excited about the long runway ahead of us as we continue to focus on organic and inorganic investment that align with our customer goals.
Speaker Change: Over the past year and a half we have added key technology to our exposure management platform.
Speaker Change: Vulcan is no different this acquisition will direct directly respond to the needs of our customers who are overwhelmed with scattered security products.
Speaker Change: Hello views and resource constrained teams.
Speaker Change: And then and it underscores our commitment to building the most comprehensive exposure management platform on the market.
Speaker Change: Importantly, we are executing in the market with a continued focus on sales efficiency.
Speaker Change: We have driven sales productivity higher over the last few years and we intend to continue to drive leverage in the business, while not sacrificing market opportunities.
Speaker Change: With that I will turn it back over to Steve to dive into the financials.
Steve Burns: Thanks Mark.
Speaker Change: I will now turn to our results for the quarter.
Speaker Change: I mentioned earlier calculated current billings defined as revenue recognized in the quarter plus the current change in current deferred revenue grew 11% year over year to $302 2 million.
Speaker Change: This outperformance was largely driven by tenable one in cloud security.
Speaker Change: Current RPI growth was 11% year over year consistent with C. C b graph.
Speaker Change: During the quarter, we added 485, new enterprise platform customers and 135 net new six figure customers.
Speaker Change: As supposed to a strong quarter for us and is indicative of our growing deal sizes.
Speaker Change: Our net dollar expansion rate was 108% this quarter.
Speaker Change: Our renewal rates remain strong.
Speaker Change: Now on to the P&L for the quarter revenue was $235 7 million, which represents 11% year over year growth.
Speaker Change: Revenue in the quarter exceeded the midpoint of our guidance range by $4 7 million.
Speaker Change: Our percentage of recurring revenue remained high at 95%.
Speaker Change: Gross margin was 82% this quarter up from 81% last quarter and is inline with expectations.
Speaker Change: Gross margin for the full year was 81% up from 80% last year.
Speaker Change: Going forward, we continue to expect gross margins to be in the high 70 to low 80% range.
Speaker Change: Sales and marketing expense was $80 1 million down from 83.1 billion last quarter and as a percentage of revenue was 34% compared to 37% last quarter.
Speaker Change: Sales and marketing expense was lower sequentially on an absolute dollar basis and percentage basis.
Speaker Change: Primarily due to improved sales efficiency, partially offset by higher sales commissions attributed to our sales performance and seasonally high where no base in the quarter.
Speaker Change: For the full year sales and marketing expense as a percentage of revenue was 37% down from 42% last year, representing a 450 basis point improvement, reflecting the strength of our go to market model.
Speaker Change: Looking ahead, we plan to add capacity this year, but I expect sales and marketing spend as a percentage of revenue will continue to trend lower in 2025.
Speaker Change: R&D expense was $32 5 million, which was down from $35 6 million last quarter R&D expense was lower this quarter in comparison to last quarter, primarily due to foreign tax credits received associated with investments in scaling our global engineering capabilities.
Speaker Change: R&D expense as a percentage of revenue was 14% this quarter.
Speaker Change: Down from 16% last quarter.
Speaker Change: For the full year R&D expense as a percentage of revenue was 15% compared to 14% last year.
Speaker Change: G&A expense was $20 5 million, which was down from $21 1 million last quarter G&A expense as a percentage of revenue was 9% this quarter and for the full year, which was flat relative to last quarter as well as for the full year of 2023.
Speaker Change: Income from operations was $59 4 million and exceeded the midpoint of our guided range by 11.4 million.
Speaker Change: Operating margin for the quarter was 25%, which was 400 basis points better than the midpoint of our guided range.
Speaker Change: Operating margin for the full year was 20% representing a 500 basis point increase from the prior year.
Speaker Change: I'm very pleased with our ability to continue to drive leverage in the business.
Speaker Change: As operating margins have doubled from 10% for 2022% to 20% in 2024.
Speaker Change: EPS for the quarter was 41 cents, which was seven times better than the midpoint of our guided range.
Speaker Change: Now, let's turn to the balance sheet, we finished the quarter with $577 million of cash and short term investments.
Speaker Change: This receivable was 259 million and total deferred revenue was 833 million current deferred revenue was $650 million, which gives us a lot of visibility into expected revenue over the next 12 months.
Speaker Change: We generated a record 86 million of Unlevered free cash flow this quarter, which is up compared to 61 million last quarter.
Speaker Change: For the full year 2024, we generated 238 million of Unlevered free cash flow exceeding the guide from our Q2 earnings call.
Speaker Change: We felt confident that we can continue to expand our operating and free cash flow margins over the ensuing years as we have done so for every year since our IPO.
Speaker Change: In October 2024, our board of directors increased the repurchase authorization on our share repurchase program by 200 million.
Speaker Change: During the quarter, we repurchased one 2 million shares of our common stock for an aggregate purchase price of 50 million. Thus far we have repurchased almost $2 7 million shares for $115 million since November of 'twenty, three and have $185 million of remaining authorization.
Speaker Change: With the results of the quarter behind us I'd like to discuss our outlook for Q1 and the full year 2025.
Speaker Change: Our guidance excludes the impact of the potential acquisition of Vulcan, cyber, which we expect to close shortly.
Speaker Change: For the first quarter. We currently expect revenue to be in the range of 232 to 234 million.
non-GAAP income from operations to be in the range of $42 million to $44 million.
Speaker Change: non-GAAP net income to be in the range of $35 million to $37 million, assuming interest expense of 7 million interest income of $5 2 million and a provision for income taxes of $3 6 million.
Speaker Change: And non-GAAP diluted earnings per share to be in the range of 28 to 30 cents per share assuming 124 million fully diluted weighted average shares outstanding.
Speaker Change: For the full year. We currently expect calculated current billings to be in the range of a 1 billion 40 to $1 55.
Speaker Change: Revenue to be in the range of 971 billion to 981 billion.
Speaker Change: non-GAAP income from operations to be in the range of $213 million to $223 million.
Speaker Change: non-GAAP net income to be in the range of $189 million to 199 million.
Speaker Change: Assuming interest expense of $28 3 million interest income of 21 million and a provision for income taxes of $13 4 million.
Speaker Change: non-GAAP diluted earnings per share to be in the range of $1 52 to $1 60 per share assuming $124 5 million fully diluted weighted average shares outstanding and Unlevered free cash flow to be in the range of $285 million to $295 million.
Speaker Change: Let me provide some context related to our tenable standalone outlook. The PCB outlook, we're providing today is consistent with the directional comments, we provided last quarter.
Speaker Change: The one thing I would note is that our outlook is incrementally more cautious for U S. Federal due to the transition of the new administration.
Speaker Change: It's early in the year. So we look forward to updating you on our progress throughout the year.
Speaker Change: Our guidance for operating income reflects our emphasis on profitable growth, we typically frontload, our investments in sales and marketing and R&D early in the year.
Speaker Change: Terms of quarterly flow, we expect operating margin to generally increase throughout the year. If some of these investments take hold.
Speaker Change: For the full year, our guide reflects a 200 basis point improvement over 2024.
It's worth noting that on a standalone basis, we expect to deliver 285 to 295 million of Unlevered free cash flow in 2025.
Speaker Change: Which is above the target that we previously provided.
Speaker Change: Our long term expectation of 35% plus unlevered free cash flow margins overtime is unchanged.
Speaker Change: Now separate from the outwork and related commentary I just provided.
Speaker Change: Falcon is expected to contribute an additional 50 basis points of growth to C. C B and revenue for the full year with a de Minimis contribution to Q1.
Speaker Change: In terms of quarterly flow for the rest of the year, we expect the topline financial impact of Vulcan to occur largely in the second half of the year as we prioritize our product integration into tenable, one and go to market with the expansive remediation workflow ops in the second half of the year.
Speaker Change: Falcon is also expected to add $11 million to $13 million of operating expenses and reduce them lever free cash flow by $20 million, including transaction costs. We expect the transaction to be accretive in the first half of next year and for the full year of 2026.
Mark Service: So with that Mark and I would like to thank everyone for joining us on the call today, we're very excited about the opportunity ahead and look forward to updating you throughout the year, we hope to see you at the Morgan Stanley Susquehanna and Cantor Fitzgerald conferences in the coming weeks, we'd now like to open the call for questions.
Speaker Change: Great. Thank you.
Mark Service: We would now be conducting a question and answer session.
Speaker Change: Like to ask a question. Please press star one on your telephone keypad.
Speaker Change: Information tone will indicate your line is in the question queue.
Speaker Change: You May press star two to remove yourself from the queue.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before a person is marquis.
Speaker Change: One moment, please pool for questions.
Speaker Change: First question is from Jackie Kelly you from Barclays. Please go ahead.
Jackie Kelly: Okay, Great Hey, guys. Thanks for taking my question here.
Speaker Change: Let me just start by saying I know the team will continue to honor our meats legacy of a better security and I'm sure he'd be proud of these results today.
Jackie Kelly: Thank you.
Jackie Kelly: Absolutely.
Jackie Kelly: Maybe on the business, Steve and Mark.
Speaker Change: Now, there's a good bit of noise out in the VM space right now maybe the question is how do you sort of feel tenable is doing competitively and do you think there's an opportunity to maybe extend your lead in N V and exposure management in 2025.
Jackie Kelly: Exactly good question.
Jackie Kelly: I'll start here first we felt really good about the momentum we have in VM.
Jackie Kelly: We saw better than expected growth in VM, we'd be PCB by $7 5 million from the midpoint of the guided range be almost certainly a contributing factor and it came in better than what we were expecting at the onset of a quarter.
Jackie Kelly: A lot of large wins and competitive displacements and VM continues to be a foundational starting point for exposure management.
Jackie Kelly: Notwithstanding the results for the quarter, our outlook for exam for the upcoming year and even beyond does not change from the graph Algo I provided last quarter. You know, we expect volume growth to be in the mid single digit range going forward. We think those are the right expectations to have yeah, and I'll just add from a customer and field perspective, we were definitely very very bullish on what we saw from the <unk>.
Jackie Kelly: <unk>, we had some of the highest win rates against our competition in Q4.
Jackie Kelly: DM perspective, and when you really are talking to customers and as we're separating ourselves from a tenable one perspective and differentiating you know we are seeing competitive displacements. The environment. I will also add there was a threatening environment that was out there with salt typhoon on with some of the telcos, which we're leading it to you.
Lynn Moore: Lynn Moore.
Lynn Moore: Placements from a competitive perspective, so we were very optimistic we really really we're positive about what we saw in Q4 in regard to competitive displacements and our differentiation from our B M and kind of a one perspective.
Speaker Change: Very helpful. Thanks, guys.
Fred: Next question is from Brian This is Fred.
Speaker Change: J P. Morgan. Please go ahead.
Speaker Change: Yeah.
Speaker Change: I'm sorry, Brian Your line is live.
Brian: Oh, sorry about that yeah. Good afternoon. Thank you for taking the question and a good CSL set of results here, Steve maybe for you.
Speaker Change: Can we unpack some of the comments that you made on the federal caution in the quarter was related to guidance. I know you guys have a lot of government business a lot of it's state and local but on the federal side you know what is it that you're seeing.
Speaker Change: Our real time, that's kind of giving you a little bit more caution obviously, you see new stories, but maybe if you could relate you know where you're seeing some softness where youre seeing stability just to gauge the level of caution that you see in and kind of what's driving that caution around the guidance.
Mark Service: You bet, Hey, it's Mark I'll kind of jumping on that one so right now we actually saw was a little bit in Q4 from a CR perspective was a bit of an overhang in Q4 and now as we have the new administration kind of taking hold we are seeing a little bit of a distraction. We are not seeing any changes in budgets.
Mark Service: We are not seeing any changes in projects being canceled, but there is a little bit of gray area as theres. Some moving seats and there is some freezes and hiring we're just putting a little bit of grey area in regards to timing of some of these transactions in the federal space, We have I think very strong pipeline.
Mark Service: Let them in the fed space, we're just being a bit cautious based on all of the different factors and really the moving seats that are taking place, which we expect and anticipate to get cleaned up but that is why we're taking the outlook in the fed space here in Q1.
Mark Service: Great and any appetite for disclosing maybe the federal exposure kind of disaggregate that from the state and local I know you usually give a total government number but just to get a better sense of the exposure there.
Mark Service: You know, we typically about 50% of our total sales come from public sector that includes U S federal as well as state and local in a number of other agencies will say here that what were mild right full year something slightly lower again as Mark said, we're just taking a more cautious approach here given the new administration given the overhang.
Mark Service: Hang of continuing resolution and we think that's the right expectation is that it's still extremely bullish on the outlook and the opportunity.
Mark Service: We have tremendous.
Mark Service: Oh yeah.
Mark Service: And federal civilian and Intel and we expect those will be tailwind of growth for us, but certainly some cautionary remarks, just given some of the change that's taking place.
Speaker Change: Very helpful. Thank you Steve.
Speaker Change: Next question is from Hamzah <unk> from Morgan Stanley. Please go ahead.
Speaker Change: Alright, great. Thank you for taking my question and I'll Echo My condolences.
Speaker Change: So it's family owned.
Speaker Change: Your entire technical team.
Speaker Change: Thank you Hamzah.
Speaker Change: Steve or excuse me Mark talked.
Speaker Change: Talked about so you talked about cloud security sales at the doubling year on year I'm wondering you know, we're seeing a lot of consolidation.
The security market and in the cloud security market more recently as well to what extent is that coming from your existing customers or net new customer lands. Thank you.
Speaker Change: So kind of what we're seeing and we highlighted with tenable one we actually saw a significant uptick in new customers.
Actually joining tenable being part of the kind of a one platform.
Speaker Change: We see a massive opportunity we have huge one of the largest installed bases are there any cyber company on the planet and we are going out there with the tenable one message and cloud security is a huge part of that consolidation message I highlighted one of the examples of a.
Speaker Change: Health Agency, which was a seven figure cloud deal. This was all about consolidation. It was all about a hybrid environment, where they had on prem vulnerability needs in assets. They had cloud their operational technology. So what we are seeing with exposure management is getting that full visibility of that attack surface.
Speaker Change: And cloud is a massive part of it and that's why we're seeing that business double that's why we're very optimistic about our cloud bookings and revenues in 2025, and I think youre going to continue to see that trend customers are definitely looking for that consolidation play and exposure management fits really really nicely in that contract.
Speaker Change: Thank you.
Shaul Eyal: The next question is from Shaul Eyal from TD Cowen. Please go ahead.
Shaul Eyal: Thank you good afternoon, let me also offer my condolences.
Shaul Eyal: Hum.
I had a question.
Shaul Eyal: Now to your <unk>.
Speaker Change: European maybe international operations, how did they perform this quarter versus the U S operations.
Speaker Change: And then maybe I know you've mentioned the competitive landscape, but maybe can you break it for us what youre seeing.
Speaker Change: On the legacy front versus some of the maybe emerging private competitors front any color will be extremely helpful. Thank you.
Speaker Change: Sure well tenable as a global company, we sell in 160 countries.
Speaker Change: We have a presence in 40 different countries and demand is not monolithic and it can change from quarter to quarter.
Speaker Change: This quarter, we saw you know particular demand on the International fund specifically in Europe, and even in particular in the Middle East.
Speaker Change: Retail was a girl for US certainly areas of Latin America. Some of our largest deals came out of those two.
Speaker Change: Peter.
Speaker Change: We're pleased to see that and I think as a whole as we look out into 2025.
One of the things we mentioned earlier in the call was that we plan to add capacity complained I'm planning to make investments and so we're going to invest in those markets, where we're seeing opportunity where we're seeing growth.
Speaker Change: Competitive dynamics really hasn't changed that much from quarter to quarter, you see the traditional VM incumbents for.
Speaker Change: For vulnerability management and cloud security, where we're seeing good traction there.
Speaker Change: Not only are we demonstrating an ability to sell cloud security standalone and win those deals outright, but we're also selling it as a part of the broader solution.
Speaker Change: And with regard to the latter a front there's really selling.
Speaker Change: Selling into environments.
Speaker Change: That where customers have a hybrid needs most customers don't have workloads that are completely on prem. They don't have work was there a 100% in the cloud so hybrid environments, the ability to secure both and be able to deliver insights with respect to those environments.
Speaker Change: Certainly.
Speaker Change: A big part of the value proposition we're delivering.
Speaker Change: Thank you so much very helpful.
Gray Powell: Our next question is from Gray Powell from BTG. Please go ahead.
Gray Powell: Okay, great. Thanks for taking my question and before I ask I just wanted to offer my condolences on Amit as well.
Speaker Change: A lot of respect for them.
Speaker Change: But yeah in terms of the question just on the billings guidance.
Speaker Change: Can you give us any color on how youre thinking about linear.
Speaker Change: Linearity for the year versus prior years.
Speaker Change: And is there any reason why maybe this year would be more back end loaded, particularly with some of the comments you made on us Scott.
Speaker Change: Sure.
Speaker Change: With regard to our outlook for the full year. The CTV outlook, we're providing today is consistent with the directional comments, we made last quarter.
Speaker Change: The one thing as we called out earlier is that we're incrementally more cautious on the U S. Federal.
Speaker Change: We also talked about the impact of the Vulcan acquisition, one close that will contribute roughly a half a point of CCP graph that'll be more towards the back half of the year in part because we're prioritizing the product integration first we're building those capabilities natively into our tenable one platform will be in market with more expansive solution during the course of the year.
Speaker Change: We expect it to contribute more fully the CCP yeah.
Speaker Change: The second half of the year, so notwithstanding fad and certainly the impact of the acquisition you would expect our same seasonal flow.
Speaker Change: Understood. Okay. Thank you very much.
Yeah.
Speaker Change: The next question is from Rudy passenger from D. A Davidson. Please go ahead.
Rudy: Hey, Thanks for taking my questions I guess, just kind of similar to Craig's question on PCB, but excellent revenue guide.
Speaker Change: Guide kind of implies like a pretty modest.
Rudy: The acceleration in your revenue growth rate year over year throughout the year I'm curious any color you could ride there is Q1, a tough compare or just what maybe is driving that in the guide, especially considering maybe some.
Rudy: More conservative assumptions around fed, which is which is more Q3 heavy.
Rudy: Yeah, I mean, our revenue is really an output of sales with a C. M. P. C. B is a good proxy of that is.
Rudy: Is it a number of factors that go into our revenue forecast such as the mix between subscriptions in perpetual licenses services things of that sort. So overall, we feel like the assumptions.
Rudy: There are appropriate given the our outlook and sales and I wont say theres nothing here disgrace that skewing that higher are more of a track relation of what we're seeing in the current quarter for the full year.
Speaker Change: Okay. That's helpful. That's it for me thank you.
Speaker Change: The next question is from Roger Boyd from UBS. Please go ahead.
Roger Boyd: Okay. Thanks for taking my questions I'll add my condolences for meat industry lost just a great person I wanted to ask about customer adds the 100 K plus E. C V number looked pretty good I think the overall enterprise customer adds maybe maybe a little bit weaker or any color on what you're seeing across the cohorts. I know you mentioned kind of better traction up market.
Speaker Change: What are you seeing what's the kind of mid market SMB. Thanks.
Speaker Change: Yeah, well first of all this was a quarter of large deals. So yes. We added over 400, I think 485, new enterprise platform customers. We added 185 net new six figure customers.
Speaker Change: One of the things that Mark talked about earlier was the strength in large deals the ability to transact six and even seven figure deals obviously that corresponds with the broader product stack, we're going to market with a very expansive cloud offering we have an integrated platform, we're securing and assessing more areas of the attack surface for our customers.
Speaker Change: Consequently, we're covering more of those assets. So we're pleased to see these bigger bites upfront larger lands.
Speaker Change: And not only the ability to bring on new customers, but also expanding relationships with existing customers. So certainly a large deals figured prominently this quarter, Yeah, and then I'll just ask exactly what Steve just said not only did we see great big expansions coming out of our installed base, but some of the largest.
Speaker Change: Competitive wins that we had were in fortune 500 companies. So we were displacing competition and very very large enterprise customers, which obviously helped us grow pretty significantly here in Q4 also we balance that though with outstanding mid market growth. So we saw excellent global.
Speaker Change: Mid market growth. This was a very very exciting trend that we had seen all the way through Q4 and it wasn't just a U S. Based phenomenon, we saw across the globe in EMEA Asia Latam. So not only we were able to win in these large enterprise accounts getting expansion getting big competitive displacement, but that mid market messaging.
Truly resonates right from a tenable, one perspective, and we saw great growth around the globe and Midmarket too so.
Speaker Change: It was an exciting thing in regards to not only the size of the deals but the growth rates that we saw.
Speaker Change: Really helpful color. Thanks, guys.
Patrick Colville: Our next question is from Patrick Colville from Scotiabank. Please go ahead.
Speaker Change: This is Joe Andrew on for Patrick Colville.
Speaker Change: You touched on it a bit in the prepared remarks, but I'd love to hear a bit more about Vulcan cyber Ah why.
Speaker Change: Why bulking and I know you touched on data integration in.
Speaker Change: Automated remediation, but as their application security posture management focus as well thanks.
Speaker Change: Hi, Yeah very good question I think the best way to think about Vulcan is twofold first of all can enhances as Hugh mentioned earlier everything we do by bringing in an adjusting massive amounts of data from third party security products, such as endpoint and cloud in.
Speaker Change: And application security and even vulnerability assessment, they have fairly robust data.
Speaker Change: Model for aggregation.
Speaker Change: You do vocation prioritization and even normalization of this vast amounts of data.
Speaker Change: Second Vulcan enriches the data.
Speaker Change: But we have and provides broader more intelligent remediation capabilities. For example, you can automatically launch our web application scanning of an external domain with our last product in.
Speaker Change: When that remade itself has discovered with our a M. A S M offering.
Speaker Change: So they provide rich radiation workflow.
Speaker Change: Ops on the backend so are the final piece I would say here notwithstanding ido, we ingest data notwithstanding the ability.
Speaker Change: To drive.
Speaker Change: And more and deeper richer remediation capabilities.
Speaker Change: It accelerates really our AI strategy.
Speaker Change: We will have more expansive data more extensive datasets allow us to solve critical challenges for our customers.
Speaker Change: It will be a multi year cycle as a force multiplier on the kinds of insights that we can deliver with the risk data that were managing for our customer. So really excited about the acquisition certainly complement what we're doing today and certainly provides a broader and richer capabilities on many levels for us.
Speaker Change: Yeah.
Speaker Change: Okay makes sense. Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Next question is from Joshua Tilton from Wolfe Research. Please go ahead.
Speaker Change: Hey, this is Patrick on for Josh and just want to Echo both of our condolences.
Speaker Change: Can you give us a sense for how you're thinking about the trend.
Speaker Change: And there are for 2025 it was good to see it stabilize this quarter, but how what's what's factored into the guidance.
Speaker Change: From that perspective thanks.
Speaker Change: Yeah.
Speaker Change: Well, we don't disclose if we talk about we provide a guide for CCP, we do it on an annual basis.
Speaker Change: And one of the things that we talked about earlier was.
Speaker Change: There's no significant change those to the seasonal quarterly flows that we experienced last year that.
Speaker Change: That we expect for this year with the exception of two things number one we're expecting lower contribution from the Fad were taken a cautious tone, there and approach given the new administration and the overhang of continuing resolution.
Speaker Change: We're expecting it to contribute minimally.
Speaker Change: First quarter and to some extent into Q2. The second thing is we have yeah.
Speaker Change: The acquisition of Vulcan and White close it'll add a half a point of CCP graph, we said that'll be more so the back half of the year given the fact that we're prioritizing the product integration and building some of those capabilities natively into our tenable one exposure management platform.
Speaker Change: Next question is from Adam Borg from Stifel. Please go ahead.
Max: Hey, Thanks, guys see that Max per school on for Adam Borg.
Max: Just wanted to ask if you could give an update on what kind of traction you're seeing with the channel and then as you look out into 2025, well, whereas a tenable gonna be investing most across size bars, and that's S. P's in.
Max: And et cetera, and any any color around that would be super helpful.
Max: You bet so all of your box.
Speaker Change: We obviously one of the greatest Differentiators Tenable has as a company as we are 100% channel company. So we don't do direct business. So we get an enormous amount of leverage from our partner ecosystem and so Q4 was no different and when you look at what we know is doing with tenable one with.
Speaker Change: Cloud security and now, adding Vulcan and it's really important to keep this in mind with Vulcan is we are going to our existing buyer. We are going to the folks that we are champions and coaches within the installed base and talking to them about exposure management and now fulfilling exposure management from <unk>.
Speaker Change: Third party asset ingesting that and by also doing this automated remediation workflow the channel will benefit greatly because the channel all around the globe right over 5000 partners. They have exposure management and <unk> practices. So now that we're able to integrate with tenable one vote.
Speaker Change: Alcan being able to go to the channel the training the enablement. The onboarding will be very quickly very quickly happened almost seamlessly because it's the tenable. One story. So we'll be investing in MSS piece will be investing in retailers would be investing in distribution.
Speaker Change: We saw record quarter in regards to some of our channel in business in Q4, and we're expecting you know a phenomenal year coming out of the channel in 2025, and it's really going to be driven by technical one cloud and exposure management now with Vulcan.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Next question is from Jonathan Ho from William Blair. Please go ahead.
Speaker Change: Hi, and let me also echo my condolences as well with a rich I need.
Speaker Change: Definitely a large loss here for the entire community and for his family. Yeah. Just wanted to see if you could maybe give us a sense of where we are in terms of executive search and perhaps some thoughts on what you're looking for this is definitely a tough shoes to fill and so any color would definitely be appreciated. Thank you.
Speaker Change: Yeah.
Steve Burns: Hi, Jonathan This is Steve the board is running the search and evaluating internal and external candidates.
Steve Burns: But there's no designated timeline and they're focused on ensuring we of course have the right leadership at this company going forward in the interim the board has expressed complete confidence in me and mark to be able to lead this company going forward.
Speaker Change: I can't speak for the main criteria, but certainly.
Speaker Change: Someone who has the ability to continuing to execute.
Speaker Change: On the vision.
Speaker Change: And continue to refine and enhance division over the course of time and the one thing I will say is that you know Amit was certainly the driving force behind the strategy and the vision for tenable, but collectively and the management team had a very heavy hand in shaping it influencing that refining and evolving it and so that's.
Speaker Change: And that's something we plan to continue going forward.
Speaker Change: Thank you.
Speaker Change: Next question is from Mike cycles from Needham and company. Please go ahead.
Mike cycles: Hey, Thanks for taking the questions guys and I apologize if there's any background noise on my side.
Mike cycles: I think the first question if I could just wanted to check I know we've centered our some of the commentary on the incremental caution that's being introduced with respect to U S fed.
Mike cycles: Bruce is the CFPB guide being relatively maintain versus where we were a quarter ago.
Mike cycles: Despite that Q4 upside.
Mike cycles: It's fair to assume that were it not for this incremental course around U S.
Mike cycles: You guys would be lifting the CCP guide for this coming year by that for Q beat or is there any way to kind of quantify that.
Mike cycles: That incremental caution that's being introduced here today.
Mike cycles: No I think that's a certainly a fair characterization look the quarter came in better than expected. It's early in the year our outlook for the full year reflects some of the directional comments, we made last quarter. The difference here is that we're remodeling and lower contribution from fed that historically, it's been strong for us.
Mike cycles: Long term that we could expect it to continue to do so it's fair to say, there's a little more uncertainty given the transition of the new administration and other things that we talked about here.
Mike cycles: So I think that's a fair characterization of the outlook.
Mike cycles: Terrific and then for the follow up I know that.
Mike cycles: We've spoken about this additional capacity that's coming online as well.
Mike cycles: Is it fair to think that.
Mike cycles: Again, you guys are talking about the strength in Q4 with these large six and seven figure deal is that.
Mike cycles: Our capacity really to help you land with these larger deals or can you help us again and provide some additional context for where that capacity is expected to go.
Mike cycles: Yeah.
Mike cycles: In terms of the capacity we're adding.
Mike cycles: Given how the second half of the year has played out we have confidence to add capacity I think we're very pleased with the level of productivity that we're seeing in the sales organization.
Mike cycles: Selected higher during the course of the year, we discussed at the beginning of the year that we expect sales and marketing as a percent of revenue to trend lower during the course of the year and it certainly did so we're putting more product in the hands of our sellers.
Mike cycles: And so.
Mike cycles: The investment here really reflects the strength that we're seeing one thing I want to be clear is that we're not capacity constrained we have the ability to not only.
Mike cycles: That deliver hit and exceed the guide that we provided today.
Mike cycles: But certainly be able to drive significant upside so the capacity, we're adding today really speaks the opportunity.
Mike cycles: Maybe perhaps the second half of the year more so in 2026.
Speaker Change: Very good. Thank you very much guys. Good luck.
Speaker Change: Our next question is from China, sorry from Robert Baird. Please go ahead.
Speaker Change: Yeah. Thanks, a lot for taking my question I've got a little Echo granola as Laura.
Speaker Change: I was allergic family and some words of support for what they're trying to.
Speaker Change: Just on the final note.
Speaker Change: So you're just not public sector of questar.
Speaker Change: Notable events.
Speaker Change: Uh-huh assignments Oh, sorry.
Speaker Change:
Speaker Change: Seeing our tagline.
Speaker Change: Certainly there's just curious looking ahead.
Speaker Change: Right.
Speaker Change: How can we address the unique fulfillment cycles and the compliance requirements of public sector that you.
Speaker Change: Have walked away or yours now.
Speaker Change: It's still early days, but are you trying to sort of feed into the the new doors are cost conscious and mindful of the framework was I'm.
Speaker Change: Sorry, I know you guys are disciplined.
Speaker Change: Yes, I'm sorry.
Speaker Change: You're a bit in auto, but right now I'm, having a tough time hearing you.
Speaker Change: Yeah, Let me go on to the next question and maybe it <unk> clear.
Speaker Change: We can come back.
Speaker Change: Operator, let's go to the next question.
Speaker Change: Yeah.
Speaker Change: Okay No problem once again, it's still want to join the queue.
Speaker Change: Yeah.
Speaker Change: If there no further questions I turn the floor back to management for closing comments.
Speaker Change: Well great. Thank you for joining us today, we're excited to.
Speaker Change: B here.
Speaker Change: Our progress for the fourth quarter as well as our outlook for full year 'twenty five.
Speaker Change: And we hope to see you at the Morgan Stanley Susquehanna, even Cantor Fitzgerald conferences in the coming weeks.
Speaker Change: Thank you. Thank you.
Speaker Change: This concludes today's teleconference. You may disconnect your lines at this time. Thank you again for your participation.
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