10-Q 1 tenb-20240930.htm 10-Q tenb-20240930
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
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☒Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended September 30, 2024
or
☐Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _____ to _____
Commission file number 001-38600
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TENABLE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
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Delaware 47-5580846
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification Number)
6100 Merriweather Drive, Columbia, Maryland 21044
(Address of principal executive offices, including zip code)
(410) 872-0555
(Registrant’s telephone number, including area code)
__________________
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common Stock, par value $0.01 per shareTENBThe Nasdaq Stock Market LLC
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   ☒      No      ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   ☒     No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer☒ Accelerated filer☐
Non-accelerated filer☐  
Emerging growth company☐ Smaller reporting company☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes    ☐      No    ☒
The number of shares of the Registrant's common stock outstanding as of October 31, 2024 was 120,135,387.


TENABLE HOLDINGS, INC.
TABLE OF CONTENTS
Page
 

Where You Can Find More Information
Investors and others should note that we may announce material business and financial information to our investors using our investor relations website (https://investors.tenable.com), our filings with the Securities and Exchange Commission (SEC), our website, webcasts, press releases, and conference calls. We use these mediums, including our website, to communicate with investors and the general public about our company, our products, and other issues, and for complying with our disclosure obligations under Regulation FD. It is possible that the information that we make available on our website may be deemed to be material information. We therefore encourage investors and others interested in our company to review the information that we make available on our website, in addition to following our SEC filings, our webcasts, press releases, and conference calls. The information we post through these channels is not a part of this Quarterly Report on Form 10-Q. These channels be may updated from time to time on our investor relations website.
2
PART I. FINANCIAL INFORMATION
Item 1.        Financial Statements
TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
September 30, 2024December 31, 2023
(in thousands, except per share data)(unaudited)
Assets
Current assets:
Cash and cash equivalents$312,207 $237,132 
Short-term investments236,242 236,840 
Accounts receivable (net of allowance for doubtful accounts of $971 and $470 at September 30, 2024 and December 31, 2023, respectively)
192,648 220,060 
Deferred commissions49,858 49,559 
Prepaid expenses and other current assets52,575 61,882 
Total current assets 843,530 805,473 
Property and equipment, net 39,780 45,436 
Deferred commissions (net of current portion)64,405 72,394 
Operating lease right-of-use assets32,127 34,835 
Acquired intangible assets, net99,474 107,017 
Goodwill541,292 518,539 
Other assets 13,811 23,177 
Total assets $1,634,419 $1,606,871 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses$17,833 $16,941 
Accrued compensation43,040 66,492 
Deferred revenue583,940 580,779 
Operating lease liabilities6,099 5,971 
Other current liabilities6,205 5,655 
Total current liabilities 657,117 675,838 
Deferred revenue (net of current portion) 163,512 169,718 
Term loan, net of issuance costs (net of current portion)357,334 359,281 
Operating lease liabilities (net of current portion)43,706 48,058 
Other liabilities 8,195 7,632 
Total liabilities 1,229,864 1,260,527 
Stockholders’ equity:
Common stock (par value: $0.01; 500,000 shares authorized; 121,344 and 117,504 shares issued at September 30, 2024 and December 31, 2023, respectively)
1,213 1,175 
Additional paid-in capital1,330,517 1,185,100 
Treasury stock (at cost: 1,471 and 356 shares at September 30, 2024 and December 31, 2023, respectively)
(64,925)(14,934)
Accumulated other comprehensive income954 38 
Accumulated deficit(863,204)(825,035)
Total stockholders’ equity404,555 346,344 
Total liabilities and stockholders’ equity$1,634,419 $1,606,871 
The accompanying notes are an integral part of these consolidated financial statements.
3
TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share data)2024202320242023
Revenue$227,088 $201,529 $664,290 $585,404 
Cost of revenue50,499 45,754 148,229 134,774 
Gross profit176,589 155,775 516,061 450,630 
Operating expenses:
Sales and marketing99,083 94,759 300,037 289,750 
Research and development48,020 37,052 136,896 113,080 
General and administrative31,569 31,877 92,889 85,614 
Restructuring— — 6,070 — 
Total operating expenses178,672 163,688 535,892 488,444 
Loss from operations(2,083)(7,913)(19,831)(37,814)
Interest income5,989 7,662 17,587 19,323 
Interest expense(8,148)(8,119)(24,333)(23,208)
Other income (expense), net359 (6,502)(858)(7,993)
Loss before income taxes(3,883)(14,872)(27,435)(49,692)
Provision for income taxes5,328 693 10,734 6,944 
Net loss$(9,211)$(15,565)$(38,169)$(56,636)
Net loss per share, basic and diluted
$(0.08)$(0.13)$(0.32)$(0.49)
Weighted-average shares used to compute net loss per share, basic and diluted
119,169 115,954 118,466 114,967 
The accompanying notes are an integral part of these consolidated financial statements.
4
TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Net loss$(9,211)$(15,565)$(38,169)$(56,636)
Other comprehensive income, net of tax:
Unrealized gains on available-for-sale securities, net 1,225 161 916 811 
Other comprehensive income1,225 161 916 811 
Comprehensive loss$(7,986)$(15,404)$(37,253)$(55,825)
The accompanying notes are an integral part of these consolidated financial statements.

5
TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(Unaudited)
Additional
Paid-in
Capital		Accumulated
Other
Comprehensive (Loss) Income		Total
Stockholders’
Equity
Common StockTreasury StockAccumulated Deficit
(in thousands)SharesAmount
Balance at June 30, 2024
120,461 $1,205 $1,281,545 $(64,925)$(271)$(853,993)$363,561 
Exercise of stock options109 1 662 — — — 663 
Vesting of restricted stock units561 5 (5)— — — — 
Vesting of performance stock units19 — — — — — — 
Issuance of common stock under employee stock purchase plan194 2 6,382 — — — 6,384 
Stock-based compensation— — 41,933 — — — 41,933 
Other comprehensive income— — — — 1,225 — 1,225 
Net loss— — — — — (9,211)(9,211)
Balance at September 30, 2024
121,344 $1,213 $1,330,517 $(64,925)$954 $(863,204)$404,555 
Balance at December 31, 2023117,504 $1,175 $1,185,100 $(14,934)$38 $(825,035)$346,344 
Exercise of stock options756 7 4,791 — — — 4,798 
Vesting of restricted stock units2,497 25 (25)— — — — 
Vesting of performance stock units88 1 (1)— — — — 
Issuance of common stock under employee stock purchase plan499 5 16,257 — — — 16,262 
Purchase of treasury stock— — — (49,991)— — (49,991)
Fair value of replacement equity attributable to pre-acquisition service— — 42 — — — 42 
Stock-based compensation— — 124,353 — — — 124,353 
Other comprehensive income— — — — 916 — 916 
Net loss— — — — — (38,169)(38,169)
Balance at September 30, 2024
121,344 $1,213 $1,330,517 $(64,925)$954 $(863,204)$404,555 
Balance at June 30, 2023
115,529 $1,156 $1,101,928 $— $(701)$(787,822)$314,561 
Exercise of stock options123 1 883 — — — 884 
Vesting of restricted stock units611 6 (6)— — — — 
Vesting of performance stock units13 — — — — — — 
Issuance of common stock under employee stock purchase plan194 2 6,308 — — — 6,310 
Stock-based compensation— — 37,322 — — — 37,322 
Other comprehensive income— — — — 161 — 161 
Net loss— — — — — (15,565)(15,565)
Balance at September 30, 2023
116,470 $1,165 $1,146,435 $— $(540)$(803,387)$343,673 
Balance at December 31, 2022
113,056 $1,131 $1,017,837 $— $(1,351)$(746,751)$270,866 
Exercise of stock options289 3 2,418 — — — 2,421 
Vesting of restricted stock units2,541 25 (25)— — — — 
Vesting of performance stock units78 1 (1)— — — — 
Issuance of common stock under employee stock purchase plan506 5 16,219 — — — 16,224 
Stock-based compensation— — 109,987 — — — 109,987 
Other comprehensive income— — — — 811 — 811 
Net loss— — — — — (56,636)(56,636)
Balance at September 30, 2023
116,470 $1,165 $1,146,435 $— $(540)$(803,387)$343,673 
The accompanying notes are an integral part of these consolidated financial statements.
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TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended September 30,
(in thousands)20242023
Cash flows from operating activities:
Net loss$(38,169)$(56,636)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization24,434 18,900 
Stock-based compensation122,801 108,812 
Net accretion of discounts and amortization of premiums on short-term investments(6,141)(5,903)
Amortization of debt issuance costs1,003 941 
(Gain) loss on other investments(1,452)5,000 
Restructuring4,528 — 
Other4,128 1,800 
Changes in operating assets and liabilities:
Accounts receivable26,911 9,084 
Prepaid expenses and other assets29,868 17,524 
Accounts payable, accrued expenses and accrued compensation(22,921)447 
Deferred revenue(3,153)16,856 
Other current and noncurrent liabilities(5,480)(5,475)
Net cash provided by operating activities136,357 111,350 
Cash flows from investing activities:
Purchases of property and equipment(1,924)(1,299)
Capitalized software development costs(5,930)(4,707)
Purchases of short-term investments(227,210)(217,239)
Sales and maturities of short-term investments234,865 242,864 
Proceeds from other investments3,512 — 
Purchases of other investments(1,250)— 
Business combinations, net of cash acquired(29,162)— 
Net cash (used in) provided by investing activities(27,099)19,619 
Cash flows from financing activities:
Payments on term loan(2,813)(2,813)
Proceeds from loan agreement— 424 
Proceeds from stock issued in connection with the employee stock purchase plan16,262 16,224 
Proceeds from the exercise of stock options4,798 2,421 
Purchase of treasury stock(49,991)— 
Other financing activities— (213)
Net cash (used in) provided by financing activities(31,744)16,043 
Effect of exchange rate changes on cash and cash equivalents and restricted cash(2,439)(2,562)
Net increase in cash and cash equivalents and restricted cash75,075 144,450 
Cash and cash equivalents and restricted cash at beginning of period237,132 300,866 
Cash and cash equivalents and restricted cash at end of period$312,207 $445,316 
Supplemental disclosure of cash flow information:
Cash paid for interest$23,505 $26,786 
Cash paid for income taxes, net of refunds10,073 6,166 
Supplemental cash flow information related to leases:
Cash payments for operating leases
$7,409 $6,797 
The accompanying notes are an integral part of these consolidated financial statements.
7
TENABLE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Business and Summary of Significant Accounting Policies
Business Description
Tenable Holdings, Inc. (the “Company,” “we,” "us," or “our”) is a provider of exposure management solutions. Exposure management is an effective discipline for measuring, comparing and reducing cybersecurity risk in today's complex IT environments. Our solutions provide broad visibility into security issues such as vulnerabilities, misconfigurations, internal and regulatory compliance violations and other indicators of the state of an organization’s security across IT infrastructure and applications, cloud environments, Active Directory and industrial internet of things and operational technology environments.
Basis of Presentation
The accompanying consolidated financial statements include the accounts of Tenable Holdings, Inc. and our wholly owned subsidiaries and have been prepared in conformity with United States generally accepted accounting principles (“GAAP”) for interim financial information. All intercompany accounts and transactions have been eliminated in consolidation.
The consolidated statements are unaudited and should be read in conjunction with the consolidated financial statements and related notes included in our 2023 Annual Report on Form 10-K ("10-K") filed with the Securities and Exchange Commission on February 28, 2024. The consolidated financial statements have been prepared on a basis consistent with the audited annual consolidated financial statements included in the 10-K and, in the opinion of management, include all adjustments of a normal recurring nature necessary to fairly state our financial position, our results of operations, and cash flows.
The results for the three and nine months ended September 30, 2024 are not necessarily indicative of the operating results expected for the year ending December 31, 2024 or any other future period.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. These estimates include, but are not limited to, the determination of the estimated economic life of perpetual licenses for revenue recognition, the estimated period of benefit for deferred commissions, the useful lives of long-lived assets, the fair value of acquired intangible assets, the valuation of stock-based compensation, the incremental borrowing rate for operating leases, and the valuation of deferred tax assets and investments. We base these estimates on historical experience and on various other assumptions that we believe to be reasonable. Actual results could differ significantly from these estimates.
Significant Accounting Policies
Our significant accounting policies are described in our 10-K. During the nine months ended September 30, 2024, there were no material changes to our significant accounting policies from those described in our 10-K.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board (“FASB”) issued ASU 2023-07 - Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires public entities with a single reportable segment to provide all the disclosures required by this standard and all existing segment disclosures in Topic 280 on an interim and annual basis, including new requirements to disclose significant segment expenses that are regularly provided to the Chief Operating Decision Maker ("CODM") and included within the reported measure(s) of a segment's profit or
8
loss, the amount and composition of any other segment items, the title and position of the CODM, and how the CODM uses the reported measure(s) of a segment's profit or loss to assess performance and decide how to allocate resources. The guidance is effective for our annual period beginning January 1, 2025, and interim periods thereafter, applied retrospectively with early adoption permitted. We do not expect the adoption of this standard to have a material impact on our consolidated financial statements and disclosures.
In December 2023, the FASB issued ASU 2023-09 - Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires public entities to provide greater disaggregation within their annual rate reconciliation, including new requirements to present reconciling items on a gross basis in specified categories, disclose both percentages and dollar amounts, and disaggregate individual reconciling items by jurisdiction and nature when the effect of the items meet a quantitative threshold. The guidance also requires disaggregating the annual disclosure of income taxes paid, net of refunds received, by federal (national), state, and foreign taxes, with separate presentation of individual jurisdictions that meet a quantitative threshold. The guidance is effective for our annual periods beginning January 1, 2025 on a prospective basis, with a retrospective option, and early adoption is permitted. Adopting this guidance will result in additional annual tax disclosures but will not impact our provision for income taxes, deferred tax assets or deferred tax liabilities.
2. Revenue
Disaggregation of Revenue
The following table presents a summary of revenue:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Subscription revenue$208,554 $183,268 $608,727 $531,133 
Perpetual license and maintenance revenue11,769 12,200 35,941 36,535 
Professional services and other revenue6,765 6,061 19,622 17,736 
Revenue$227,088 $201,529 $664,290 $585,404 
Concentrations
We sell and market our products and services through our field sales force that works closely with our channel partners, which includes a network of distributors and resellers, in developing sales opportunities. We use a two-tiered channel model whereby we sell our products and services to our distributors, which in turn sell to resellers, which then sell to end-users. Revenue derived through our channel network comprised 94% of revenue in the three and nine months ended September 30, 2024 and 93% of revenue in the three and nine months ended September 30, 2023. One of our distributors accounted for 33% and 34% of revenue in the three and nine months ended September 30, 2024, respectively, and 36% of revenue in the three and nine months ended September 30, 2023. That same distributor accounted for 32% of accounts receivable at September 30, 2024 and December 31, 2023.
Contract Balances
We generally bill our customers in advance and accounts receivable are recorded when we have the right to invoice the customer. Contract liabilities consist of deferred revenue and include customer billings and payments received in advance of performance under the contract. In the three months ended September 30, 2024 and 2023 and the nine months ended September 30, 2024 and 2023, we recognized revenue of $209.6 million, $185.9 million, $497.3 million and $430.8 million, respectively, that was included in the deferred revenue balance at the beginning of the respective periods.
Remaining Performance Obligations
At September 30, 2024, the future estimated revenue related to unsatisfied performance obligations was $771.6 million, of which $592.4 million is expected to be recognized as revenue over the next twelve months, and the remainder is expected to be recognized over the four years thereafter.
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Deferred Commissions
The following summarizes the activity of deferred incremental costs of obtaining a contract:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Beginning balance$115,529 $109,582 $121,953 $111,508 
Capitalization of contract acquisition costs12,420 14,527 32,921 36,819 
Amortization of deferred contract acquisition costs(13,686)(12,565)(40,611)(36,783)
Ending balance$114,263 $111,544 $114,263 $111,544 
3. Cash Equivalents and Short-Term Investments
The following tables summarize the amortized cost, unrealized gain and loss and estimated fair value of cash equivalents and short-term investments:

September 30, 2024
(in thousands)Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Cash equivalents
Money market funds$161,509 $— $— $161,509 
U.S. Treasury and agency obligations988 — — 988 
Total cash equivalents$162,497 $— $— $162,497 
Short-term investments
Commercial paper$44,931 $20 $— $44,951 
Corporate bonds86,461 477 — 86,938 
Asset backed securities27,756 97 (1)27,852 
Yankee bonds12,049 41 (3)12,087 
U.S. Treasury and agency obligations64,091 323 — 64,414 
Total short-term investments$235,288 $958 $(4)$236,242 
December 31, 2023
(in thousands)Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Cash equivalents
Money market funds$130,375 $— $— $130,375 
Total cash equivalents$130,375 $— $— $130,375 
Short-term investments
Commercial paper$82,188 $50 $(22)$82,216 
Corporate bonds61,200 40 (91)61,149 
Asset backed securities15,032 26 (15)15,043 
Yankee bonds6,926 4 (17)6,913 
U.S. Treasury and agency obligations71,456 97 (34)71,519 
Total short-term investments$236,802 $217 $(179)$236,840 
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We considered the extent to which any unrealized losses on our short-term investments were driven by credit risk and other factors, including market risk, and if it is more-likely-than-not that we would have to sell the security before the recovery of the amortized cost basis. At September 30, 2024 and December 31, 2023, our unrealized losses were due to rising market interest rates compared to when the investments were initiated. We do not believe any unrealized losses represent credit losses, and it is unlikely we would sell the investments before we would recover their amortized cost basis.
The contractual maturities of our short-term investments are as follows:
September 30, 2024December 31, 2023
(in thousands)Amortized CostEstimated Fair ValueAmortized CostEstimated Fair Value
Due within one year$184,356 $184,883 $219,437 $219,414 
Due between one and two years50,932 51,359 17,365 17,426 
Total short-term investments$235,288 $236,242 $236,802 $236,840 
At September 30, 2024 and December 31, 2023, cash and cash equivalents included $5.9 million and $5.8 million, respectively, of restricted cash primarily related to collateral for our outstanding letters of credit.
4. Fair Value Measurements
We measure certain financial instruments at fair value using a fair value hierarchy. In the hierarchy, assets are classified based on the lowest level inputs used in valuation into the following categories:
•Level 1 — Quoted prices in active markets for identical assets and liabilities;
•Level 2 — Observable inputs including quoted market prices for similar assets and liabilities in active markets, quoted prices for identical assets and liabilities in inactive markets, or inputs that are corroborated by observable market data; and
•Level 3 — Unobservable inputs.
The following tables summarize assets that are measured at fair value on a recurring basis:
September 30, 2024
(in thousands)Level 1Level 2Level 3Total
Cash equivalents
Money market funds$161,509 $— $— $161,509 
U.S. Treasury and agency obligations— 988 — 988 
Total cash equivalents$161,509 $988 $— $162,497 
Short-term investments
Commercial paper$— $44,951 $— $44,951 
Corporate bonds— 86,938 — 86,938 
Asset backed securities— 27,852 — 27,852 
Yankee bonds— 12,087 — 12,087 
U.S. Treasury and agency obligations— 64,414 — 64,414 
Total short-term investments$— $236,242 $— $236,242 
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December 31, 2023
(in thousands)Level 1Level 2Level 3Total
Cash equivalents
Money market funds$130,375 $— $— $130,375 
Total cash equivalents$130,375 $— $— $130,375 
Short-term investments
Commercial paper$— $82,216 $— $82,216 
Corporate bonds— 61,149 — 61,149 
Asset backed securities— 15,043 — 15,043 
Yankee bonds— 6,913 — 6,913 
U.S. Treasury and agency obligations— 71,519 — 71,519 
Total short-term investments$— $236,840 $— $236,840 
Other Investments
Our investments in privately held securities, which are included in other assets on our consolidated balance sheets and classified as level 3, were as follows:
(in thousands)September 30, 2024December 31, 2023
Equity securities$6,702 $— 
Debt and other securities1,871 9,383 
Total other investments$8,573 $9,383 
In May 2024, we recognized a $1.5 million gain on the conversion of our simple agreement for future equity ("SAFE") investment to an investment in preferred stock.
We did not have any liabilities measured and recorded at fair value on a recurring basis at September 30, 2024 and December 31, 2023.
5. Property and Equipment, Net
Property and equipment, net consisted of the following:
(in thousands)
September 30, 2024December 31, 2023
Computer software and equipment
$20,131$21,845
Internally developed software39,25032,261
Furniture and fixtures
5,1916,513
Leasehold improvements
22,99229,354
Total
87,56489,973
Less: accumulated depreciation and amortization
(47,784)(44,537)
Property and equipment, net
$39,780$45,436
Depreciation and amortization related to property and equipment was $3.6 million, $3.2 million, $10.0 million and $9.7 million in the three months ended September 30, 2024 and 2023 and the nine months ended September 30, 2024 and 2023, respectively.
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In the nine months ended September 30, 2024, we recorded a $4.5 million impairment for furniture and fixtures and leasehold improvements. See Note 7 for additional information.
6. Acquisitions, Goodwill and Intangible Assets
Business Combinations
In June 2024, we acquired Eureka Security, Inc. ("Eureka"), a provider of data security posture management ("DSPM") for cloud environments. Adding Eureka's DSPM capabilities to our solutions provides customers a view into their organization's cloud data security footprint, fight policy drift and misconfigurations that put data at risk, and enables customers to continuously improve their security posture over time. We acquired 100% of Eureka's equity through a share purchase agreement for total cash consideration of $29.2 million, net of $0.4 million cash acquired.
Cash consideration, net of cash acquired, was preliminarily allocated as follows:
(in thousands)
Eureka
Intangible assets$6,900 
Goodwill22,753 
Other current liabilities, net(449)
Total purchase price
$29,204 
We allocated $6.9 million to Eureka's proprietary technology with an estimated useful life of 5 years.
We are still finalizing the allocation of the purchase price for Eureka, which may change as additional information becomes available around working capital and income taxes.
The results of operations of Eureka are included in our consolidated statements of operations from the acquisition date and were not material. Pro forma results of operations are not presented as they are not material to the consolidated statement of operations.
In general and administrative expense, we recognized $0.4 million, $4.6 million, $1.3 million and $4.7 million of acquisition-related transaction costs in the three months ended September 30, 2024 and 2023, and the nine months ended September 30, 2024 and 2023, respectively.
Goodwill and Acquired Intangible Assets
The changes in the carrying amount of goodwill are as follows:
(in thousands)
Balance at December 31, 2023$518,539
Acquired goodwill22,753
Balance at September 30, 2024$541,292

The excess purchase consideration over the fair value of acquired assets and liabilities is recorded as goodwill. The acquired goodwill reflects the synergies we expect from marketing and selling new capabilities from Eureka to our customers. Acquired goodwill is generally not tax deductible.
13
Acquired intangible assets subject to amortization are as follows:
September 30, 2024December 31, 2023
(in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Acquired technology$149,437 $(49,963)$99,474 $142,537 $(35,520)$107,017 
Trade name490 (490)— 490 (490)— 
$149,927 $(50,453)$99,474 $143,027 $(36,010)$107,017 
Amortization of acquired intangible assets was $5.0 million, $3.0 million, $14.4 million and $9.2 million in the three months ended September 30, 2024 and 2023, and the nine months ended September 30, 2024 and 2023, respectively. At September 30, 2024, our acquired intangible assets are expected to be amortized over an estimated remaining weighted average period of 5.5 years.
At September 30, 2024, estimated future amortization of acquired intangible assets is as follows:
(in thousands)
Year ending December 31,
2024(1)
$5,014 
202520,055 
202619,870 
202717,840 
202814,797 
Thereafter
21,898 
Total
$99,474 
_______________
(1)    Represents the three months ending December 31, 2024.
7. Leases
We have operating leases for office facilities. The components of lease expense were as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)
2024202320242023
Operating lease cost(1)
$1,906 $1,900 $5,691 $5,690 
_______________
(1)    Excludes sublease income.
Rent expense for short-term leases in the three and nine months ended September 30, 2024 and 2023 was not material.
In June 2024, we executed a sublease for of a portion of our corporate headquarters through February 2032 and recognized $4.5 million of restructuring expense related to the associated impairment of leasehold improvements and furniture and fixtures. Sublease income, which is recorded as a reduction of rent expense, was $0.4 million for the three and nine months ended September 30, 2024.
Supplemental information related to leases was as follows:
September 30, 2024December 31, 2023
Operating leases
Weighted average remaining lease term
6.7 years7.3 years
Weighted average discount rate
5.7%5.6%
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Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)
2024202320242023
ROU assets obtained in exchange for lease obligations
Operating leases
$— $— $806 $1,234 
Maturities of operating lease liabilities at September 30, 2024 were as follows:
(in thousands)
Year ending December 31,
2024(1)
$1,472 
20259,831 
20269,157 
20278,667 
20287,777 
Thereafter
23,390 
Total lease payments
60,294 
Less: Imputed interest
(10,489)
Total
$49,805 
_______________
(1)    Represents the three months ending December 31, 2024.
Operating lease payments in the table above do not include $0.9 million, $1.7 million, $1.8 million, $1.9 million and $6.4 million of sublease payments we expect to receive in 2025, 2026, 2027, 2028 and thereafter, respectively.
In October 2024, we entered into a new lease in Tel Aviv, Israel. The new lease term is 7 years and the future lease payments are expected to be $19.4 million.
8. Debt
Credit Agreement
In July 2021, we entered into a credit agreement ("Credit Agreement") which is comprised of:
•a $375.0 million senior secured term loan facility ("Term Loan"); and
•a $50.0 million senior secured revolving credit facility ("Revolving Credit Facility").
The table below summarizes the carrying value of the Term Loan:
(in thousands)September 30, 2024
Term loan$364,687 
Less: Unamortized debt discount and issuance costs(4,747)
Term loan, net of issuance costs359,940 
Less: Term loan, net, current (1)
(2,606)
Term loan, net of issuance costs (net of current portion)$357,334 
_______________
(1)    Term loan, net current is included in other current liabilities on our consolidated balance sheets.
The Term Loan bears interest at a rate of 2.75% per annum over the Secured Overnight Financing Rate ("SOFR"), subject to a 0.50% floor, plus a credit spread adjustment depending on the interest period. The Term Loan is being amortized at 1% per annum in equal quarterly installments until the final payment of $350.6 million on the July 7, 2028 maturity date.
15
Our Term Loan is recorded at its carrying value. At September 30, 2024, the fair value of our Term Loan was approximately $364.2 million. In the fair value hierarchy, our Term Loan is classified as Level 2 as it is traded in less active markets.
The maturities of the Term Loan at September 30, 2024 were as follows:
(in thousands)
Year ending December 31,
2024(1)
$937 
20253,750 
20263,750 
20273,750 
2028352,500 
Total
$364,687 
_______________
(1)    Represents the three months ending December 31, 2024.
We may be subject to mandatory Term Loan prepayments related to the excess cash flow provisions. These prepayments would only be required if our first lien net leverage ratio (as defined in our Credit Agreement) exceeds 3.5 at the end of each year. At September 30, 2024, our first lien net leverage ratio was 1.00.
At September 30, 2024, we had $0.2 million of standby letters of credit outstanding under our Revolving Credit Facility related to one of our operating leases. At September 30, 2024, we were in compliance with the covenants under the Credit Agreement.
9. Commitments and Contingencies
Commitments
In December 2023, we entered into a contract with Microsoft for cloud services from February 2024 through January 2027. Under the terms of the contract we committed to spend €28.5 million. If we do not meet our commitment by the end of the term, we will be required to pay the difference. As of September 30, 2024, we have spent €5.1 million of our commitment.
In July 2024, we entered into a new contract with Amazon Web Services, Inc. ("AWS") for cloud services, in which we committed to spend $59.7 million, $77.6 million and $93.0 million in years one, two and three, respectively, for a total commitment of $230.3 million from August 2024 to July 2027. As of September 30, 2024, we have spent $10.0 million of our first year commitment.
Letters of Credit
At September 30, 2024, we had $5.7 million of standby letters of credit related to our grant agreements with the State of Maryland and our operating leases.
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10. Stock-Based Compensation
Stock-based compensation expense included in the consolidated statements of operations was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Cost of revenue$3,216$3,011$9,486$8,542
Sales and marketing15,94115,80547,51746,622
Research and development12,4359,24235,39527,871
General and administrative10,0928,77730,40325,777
Total stock-based compensation expense$41,684$36,835$122,801$108,812
A summary of the unrecognized stock-based compensation expense related to unvested stock at September 30, 2024 is presented below:
Unrecognized Stock-Based Compensation Expense
(in thousands)		Estimated Weighted Average Period
(in years)
Restricted stock units ("RSUs")$310,029 2.7
Performance stock units ("PSUs")7,1903.0
Restricted stock8,5571.5
2018 Employee Stock Purchase Plan ("2018 ESPP")13,3451.0
Restricted Stock, RSUs and PSUs
A summary of our restricted stock, RSU and PSU activity is presented below:
Restricted StockRSUsPSUs
(in thousands, except for per share data)
Number of SharesWeighted
Average
Grant Date Fair Value		Number of SharesWeighted
Average
Grant Date Fair Value		Number of SharesWeighted
Average
Grant Date Fair Value
Unvested balance at December 31, 2023311$45.67 7,343$43.80 258$43.90 
Granted
— — 3,949 46.10 170 47.20 
Performance adjustment(1)
— — — — (10)43.24 
Vested
(93)45.67 (2,497)43.07 (88)43.87 
Forfeited
— — (860)45.02 (11)43.95 
Unvested balance at September 30, 202421845.677,93545.03 31945.68 
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(1)    Represents adjustments due to the achievement of predefined financial performance targets.
In January 2024, under the evergreen provision in our 2018 Equity Incentive Plan we reserved an additional 5.9 million shares of our common stock. At September 30, 2024, there were 26.0 million shares available for grant under the plan.
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Stock Options
A summary of our stock option activity is presented below:
(in thousands, except for exercise prices and years)
Number
of Shares		Weighted
Average
Exercise Price		Weighted-Average Remaining Contractual Term (in years)
Aggregate Intrinsic Value
Outstanding at December 31, 20235,095$8.95 3.5$189,108
Exercised
(756)6.34 30,215
Forfeited/canceled
—— — 
Outstanding and exercisable at September 30, 20244,3399.40 2.9135,020
2018 Employee Stock Purchase Plan
In the nine months ended September 30, 2024, employees purchased 498,890 shares of our common stock at a weighted average price of $32.60 per share, resulting in $16.3 million of cash proceeds. At September 30, 2024, there was $1.6 million of employee contributions to the 2018 ESPP included in accrued compensation.
The fair value of the 2018 ESPP purchase rights was estimated on the offering or modification dates using a Black-Scholes option-pricing model and the following assumptions:
Nine Months Ended September 30,
20242023
Expected term (in years)
0.5 — 2.0
0.5 — 2.0
Expected volatility
31.9% — 51.4%
46.9% — 58.1%
Risk-free interest rate
3.8% — 5.1%
4.8% — 5.4%
Expected dividend yield——
Under the evergreen provision in our 2018 ESPP, in January 2024 we reserved an additional 1.8 million shares of our common stock. At September 30, 2024, there were 10.0 million shares reserved for issuance under our 2018 ESPP.
11. Income Taxes
In the nine months ended September 30, 2024, the provision for income taxes included $5.6 million of income taxes in foreign jurisdictions in which we conduct business, $2.6 million of discrete items primarily related to withholding taxes on sales to customers and $2.5 million of Base Erosion and Anti-Abuse Tax.
In the nine months ended September 30, 2023, the provision for income taxes included $4.3 million of income taxes in foreign jurisdictions in which we conduct business and $2.8 million of discrete items primarily related to withholding taxes on sales to customers, partially offset by $0.2 million of deferred tax benefits related to the acquisition of Alsid SAS.
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12. Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share data)2024202320242023
Net loss$(9,211)$(15,565)$(38,169)$(56,636)
Weighted-average shares used to compute net loss per share, basic and diluted119,169 115,954 118,466 114,967 
Net loss per share, basic and diluted$(0.08)$(0.13)$(0.32)$(0.49)
The following potentially dilutive securities have been excluded from the diluted per share calculations because they would have been antidilutive:
September 30,
(in thousands)20242023
RSUs7,935 7,343 
Stock options4,339 5,196 
Shares to be issued under the 2018 ESPP44 128 
PSUs149 130 
Restricted stock218 — 
Total12,685 12,797 
13. Geographic Information
We operate as one operating segment. Our Chief Executive Officer, who is our CODM, reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources and evaluating financial performance.
Revenue by region, based on the address of the end user as specified in our subscription, license or service agreements, was as follows:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
The Americas$141,583 $127,016 $412,820 $368,510 
Europe, Middle East and Africa59,688 51,397 176,046 150,437 
Asia Pacific25,817 23,116 75,424 66,457 
Revenue$227,088 $201,529 $664,290 $585,404 
Customers located in the United States accounted for 54% of revenue in the three and nine months ended September 30, 2024 and 55% of revenue in the three and nine months ended September 30, 2023. No other country accounted for 10% or more of revenue in the periods presented.
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Our property and equipment, net by geographic area is summarized as follows:
(in thousands)September 30, 2024December 31, 2023
United States$35,256 $39,497 
International4,524 5,939 
Property and equipment, net$39,780 $45,436 
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Item 2.        Management's Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) our consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, or this Form 10-Q, and (2) our consolidated financial statements, related notes and management's discussion and analysis of financial condition and results of operations in our Annual Report on Form 10-K for the year ended December 31, 2023, or the 10-K, filed with the Securities and Exchange Commission on February 28, 2024. This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are often identified by the use of words such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “will,” “would” or the negative or plural of these words or similar expressions or variations. Such forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified herein, and those discussed in the section titled “Risk Factors,” set forth in Part I, Item IA of the 10-K, in Part II, Item 1A of this Form 10-Q and in our other filings with the SEC. You should not rely upon forward-looking statements as predictions of future events. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
We are a leading provider of exposure management solutions. Exposure management is an effective discipline for measuring, comparing and reducing cybersecurity risk in today's complex IT environments.
Our Tenable One Exposure Management Platform, or Tenable One, unifies a variety of data sources into a single exposure view to help organizations gain visibility, prioritize efforts and communicate cyber risks. Building on our existing products, Tenable One is designed to take advantage of the integrations that already exist with our partners and form the foundation of an exposure management program, alongside the other tools, such as endpoint detection and response and firewalls, and required business processes.
With Tenable One, organizations can translate technical data about assets, vulnerabilities and threats into clear business insights and actionable intelligence for security executives and practitioners. The platform combines broad, industry-leading vulnerability coverage, spanning IT assets, cloud resources, containers, web apps and identity systems. Tenable One builds on the speed and breadth of vulnerability coverage from Tenable Research and adds aggregated exposure view analytics, guidance on mitigating attack pathways and a centralized asset inventory.
Tenable One incorporates Tenable Vulnerability Management, Tenable Web App Scanning, Tenable Lumin, Tenable Cloud Security, Tenable Identity Exposure, Tenable Attack Surface Management, Tenable Security Center and Tenable OT Security. All of these products are also offered as standalone solutions, alongside Nessus.
Our platform offerings are primarily sold on a subscription basis with a one-year term. Our subscription terms are generally not longer than three years. These offerings are typically prepaid in advance. To a lesser extent, we recognize revenue ratably for perpetual licenses and the related ongoing maintenance.
We sell and market our products and services through our field sales force that works closely with our channel network of distributors, resellers and managed security service providers (MSSPs), in developing sales opportunities. We typically use a two-tiered channel model whereby we sell our enterprise platform offerings to our distributors, who in turn sell to our resellers, who then sell to end users, who we call customers.
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Financial Highlights
Below are our key financial results:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands, except per share data)2024202320242023
Revenue$227,088 $201,529 $664,290 $585,404 
Loss from operations(2,083)(7,913)(19,831)(37,814)
Net loss(9,211)(15,565)(38,169)(56,636)
Net loss per share, basic and diluted
(0.08)(0.13)(0.32)(0.49)
Net cash provided by operating activities54,607 42,411 136,357 111,350 
Purchases of property and equipment(733)(201)(1,924)(1,299)
Capitalized software development costs(1,163)(1,894)(5,930)(4,707)
Recurring revenue, which includes revenue from subscription arrangements for software (both recognized ratably over the subscription term and upon delivery) and cloud-based solutions and maintenance associated with perpetual licenses, represented 96% of revenue in the three and nine months ended September 30, 2024 and 95% of revenue in the three and nine months ended September 30, 2023.
Key Operating and Financial Metrics
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use and monitor the following operating and financial metrics, which include non-GAAP financial measures, to understand and evaluate our core operating and financial performance.
Calculated Current Billings
We use the non-GAAP measure of calculated current billings, which we believe is a key metric to measure our periodic performance. Given that most of our customers pay in advance, we typically recognize a majority of the related revenue ratably over time. We use calculated current billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers.
Calculated current billings consists of revenue recognized in a period plus the change in current deferred revenue in the corresponding period. We believe that calculated current billings, which excludes deferred revenue for periods beyond twelve months in a customer’s contractual term, more closely correlates with annual contract value. Variability in total billings, depending on the timing of large multi-year contracts and the preference for annual billing versus multi-year upfront billing, may distort growth in one period over another.
Calculated current billings may vary from period-to-period for a number of reasons, and therefore has a number of limitations as a quarter-to-quarter or year-over-year comparative measure. Calculated current billings in any one period may be impacted by the timing and amount of new sales transactions, the timing and amount of renewal transactions, including early renewals, the mix of the amount of subscriptions and perpetual licenses, and the timing of billing professional services, as well as the timing and amount of multi-year prepaid contracts, all of which could favorably or unfavorably impact quarter-to-quarter and year-over-year comparisons. For example, an increasing number of large sales transactions, for which the timing has and will continue to vary, may occur in quarters subsequent to or in advance of those that we anticipate. Additionally, our calculation of calculated current billings may be different from other companies that report similar financial measures. Because of these and other limitations, you should consider calculated current billings along with revenue and our other GAAP financial results.
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The following table presents a reconciliation of revenue, the most directly comparable financial measure calculated in accordance with GAAP, to calculated current billings:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Revenue$227,088 $201,529 $664,290 $585,404 
Deferred revenue (current), end of period583,940 518,372 583,940 518,372 
Deferred revenue (current), beginning of period(1)
(562,587)(495,199)(580,887)(502,115)
Calculated current billings$248,441 $224,702 $667,343 $601,661 
_______________
(1)    Deferred revenue (current), beginning of period for the nine months ended September 30, 2024 includes $0.1 million related to acquired deferred revenue.
Free Cash Flow
We use the non-GAAP measure of free cash flow, which we define as GAAP net cash flows from operating activities reduced by purchases of property and equipment and capitalized software development costs. We believe free cash flow is an important liquidity measure of the cash (if any) that is available, after purchases of property and equipment and capitalized software development costs, for investment in our business and to make acquisitions. We believe that free cash flow is useful as a liquidity measure because it measures our ability to generate cash.
Our use of free cash flow has limitations as an analytical tool and you should not consider it in isolation or as a substitute for an analysis of our results under GAAP. First, free cash flow is not a substitute for net cash flows from operating activities. Second, other companies may calculate free cash flow or similarly titled non-GAAP financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of free cash flow as a tool for comparison. Additionally, the utility of free cash flow is further limited as it does not reflect our future contractual commitments and does not represent the total increase or decrease in our cash balance for a given period. Because of these and other limitations, you should consider free cash flow along with net cash provided by operating activities and our other GAAP financial measures.
The following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Net cash provided by operating activities$54,607 $42,411 $136,357 $111,350 
Purchases of property and equipment(733)(201)(1,924)(1,299)
Capitalized software development costs(1,163)(1,894)(5,930)(4,707)
Free cash flow(1)
$52,711 $40,316 $128,503 $105,344 
_______________
(1)    Free cash flow for the periods presented was impacted by:
Three Months Ended September 30,Nine Months Ended September 30,
(in thousands)2024202320242023
Cash paid for interest and other financing costs$(8,055)$(7,843)$(23,505)$(26,786)
Employee stock purchase plan activity(3,653)(2,236)(6,283)(2,507)
Acquisition-related expenses(663)(571)(1,326)(830)
Restructuring(492)— (5,911)— 
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Customer Metrics
We believe that our customer base provides a significant opportunity to expand sales of our enterprise platform offerings. We define an enterprise platform customer as a customer that has licensed Tenable One, Tenable Vulnerability Management, Tenable Cloud Security, Tenable Identity Exposure, Tenable OT Security or Tenable Security Center for an annual amount of $5,000 or greater. New enterprise platform customers represent new customer logos during the periods presented and do not include customer conversions from Tenable Nessus Expert to enterprise platforms. The following tables summarize key components of our customer base:
Three Months Ended September 30,
20242023Change (%)
Number of new enterprise platform customers added in period386386—%
September 30,
20242023Change (%)
Number of customers with $100,000 and greater in annual contract value at end of period
1,8531,565