10-Q 1 tenb-20220331.htm 10-Q tenb-20220331
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________
FORM 10-Q
__________________
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period Ended March 31, 2022
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
__________________
TENABLE HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
__________________
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 April 29, 2022 was 110,582,186.



TENABLE HOLDINGS, INC.
TABLE OF CONTENTS
Page
 

2

PART I. FINANCIAL INFORMATION
Item 1.        Financial Statements
TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
March 31, 2022December 31, 2021
(in thousands, except per share data)(unaudited)
Assets
Current assets:
Cash and cash equivalents$287,455 $278,000 
Short-term investments
238,645 234,292 
Accounts receivable (net of allowance for doubtful accounts of $423 and $524 at March 31, 2022 and December 31, 2021, respectively)
96,381 136,601 
Deferred commissions40,335 40,311 
Prepaid expenses and other current assets59,415 60,234 
Total current assets 722,231 749,438 
Property and equipment, net 39,598 36,833 
Deferred commissions (net of current portion)58,928 59,638 
Operating lease right-of-use assets37,521 38,530 
Acquired intangible assets, net73,221 71,536 
Goodwill280,574 261,614 
Other assets 25,802 31,230 
Total assets $1,237,875 $1,248,819 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued expenses$17,057 $16,254 
Accrued compensation35,236 54,051 
Deferred revenue404,786 407,498 
Operating lease liabilities3,564 2,320 
Other current liabilities3,162 3,759 
Total current liabilities 463,805 483,882 
Deferred revenue (net of current portion) 122,722 123,387 
Term loan, net of issuance costs (net of current portion)364,063 364,728 
Operating lease liabilities (net of current portion)53,685 55,046 
Other liabilities 6,632 6,463 
Total liabilities 1,010,907 1,033,506 
Stockholders’ equity:
Common stock (par value: $0.01; 500,000 shares authorized; 110,287 and 108,929 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively)
1,103 1,089 
Additional paid-in capital906,263 869,059 
Accumulated other comprehensive loss(1,363)(306)
Accumulated deficit(679,035)(654,529)
Total stockholders’ equity226,968 215,313 
Total liabilities and stockholders’ equity$1,237,875 $1,248,819 
The accompanying notes are an integral part of these consolidated financial statements.
3

TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Three Months Ended March 31,
(in thousands, except per share data)20222021
Revenue$159,368 $123,189 
Cost of revenue34,930 22,073 
Gross profit124,438 101,116 
Operating expenses:
Sales and marketing81,570 58,635 
Research and development34,290 26,838 
General and administrative26,126 21,445 
Total operating expenses141,986 106,918 
Loss from operations(17,548)(5,802)
Interest expense, net(3,326)(28)
Other expense, net(944)(66)
Loss before income taxes(21,818)(5,896)
Provision for income taxes2,688 1,852 
Net loss$(24,506)$(7,748)
Net loss per share, basic and diluted
$(0.22)$(0.07)
Weighted-average shares used to compute net loss per share, basic and diluted
109,524 104,531 
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 March 31,
(in thousands)20222021
Net loss$(24,506)$(7,748)
Other comprehensive loss, net of tax:
Unrealized losses on available-for-sale securities(1,057)(2)
Other comprehensive loss(1,057)(2)
Comprehensive loss$(25,563)$(7,750)
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 StockAccumulated Deficit
(in thousands)SharesAmount
Balance at December 31, 2021108,929 $1,089 $869,059 $(306)$(654,529)$215,313 
Exercise of stock options293 3 2,584 — — 2,587 
Vesting of restricted stock units809 8 (8)— —  
Issuance of common stock under employee stock purchase plan256 3 8,879 — — 8,882 
Stock-based compensation— — 25,749 — — 25,749 
Other comprehensive loss— — — (1,057)— (1,057)
Net loss— — — — (24,506)(24,506)
Balance at March 31, 2022110,287 $1,103 $906,263 $(1,363)$(679,035)$226,968 
Balance at December 31, 2020103,715 $1,037 $757,470 $10 $(607,852)$150,665 
Exercise of stock options607 6 4,009 — — 4,015 
Vesting of restricted stock units792 8 (8)— —  
Issuance of common stock under employee stock purchase plan399 4 8,042 — — 8,046 
Stock-based compensation— — 16,963 — — 16,963 
Other comprehensive loss— — — (2)— (2)
Net loss— — — — (7,748)(7,748)
Balance at March 31, 2021105,513 $1,055 $786,476 $8 $(615,600)$171,939 
The accompanying notes are an integral part of these consolidated financial statements.
6

TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended March 31,
(in thousands)20222021
Cash flows from operating activities:
Net loss$(24,506)$(7,748)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization4,896 2,816 
Stock-based compensation25,398 16,952 
Other1,323 313 
Changes in operating assets and liabilities:
Accounts receivable40,341 32,455 
Prepaid expenses and other assets8,463 5,427 
Accounts payable, accrued expenses and accrued compensation(18,745)(6,003)
Deferred revenue(3,543)(5,648)
Other current and noncurrent liabilities(765)61 
Net cash provided by operating activities32,862 38,625 
Cash flows from investing activities:
Purchases of property and equipment(4,811)(1,061)
Purchases of short-term investments(60,850)(29,361)
Sales and maturities of short-term investments55,135 31,000 
Business combination, net of cash acquired(22,960) 
Net cash (used in) provided by investing activities(33,486)578 
Cash flows from financing activities:
Payments on term loan(938) 
Proceeds from stock issued in connection with the employee stock purchase plan8,882 8,046 
Proceeds from the exercise of stock options2,587 4,015 
Other financing activities(3)(3)
Net cash provided by financing activities10,528 12,058 
Effect of exchange rate changes on cash and cash equivalents and restricted cash(449)(1,068)
Net increase in cash and cash equivalents and restricted cash9,455 50,193 
Cash and cash equivalents and restricted cash at beginning of period278,271 178,463 
Cash and cash equivalents and restricted cash at end of period$287,726 $228,656 
Supplemental disclosure of cash flow information:
Cash paid for interest$4,051 $71 
Cash paid for income taxes, net of refunds4,320 3,470 
Supplemental cash flow information related to leases:
Cash payments for operating leases
$750 $1,518 
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 Cyber Exposure solutions, which is a discipline for managing, measuring and comparing cybersecurity risk in the digital era. Our platform offerings 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 2021 Annual Report on Form 10-K ("10-K") filed with the Securities and Exchange Commission on February 25, 2022. 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 months ended March 31, 2022 are not necessarily indicative of the operating results expected for the year ending December 31, 2022 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. 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 three months ended March 31, 2022, there were no material changes to our significant accounting policies from those described in our 10-K.
Recently Issued Accounting Pronouncements
In March 2020, the Financial Accounting Standards Board ("FASB") issued ASU No. 2020-04 - Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting. This ASU provides optional expedients and exceptions to contract modification guidance to ease the financial reporting burden of the transition from the London Interbank Offered Rate ("LIBOR") to alternative reference rates. The ASU was effective beginning on March 12, 2020 and can be adopted prospectively through December 31, 2022. We are currently evaluating the impact of this accounting standard on our consolidated financial statements.
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2. Revenue
Disaggregation of Revenue
The following table presents a summary of revenue:
Three Months Ended March 31,
(in thousands)20222021
Subscription revenue$142,687 $107,402 
Perpetual license and maintenance revenue12,873 12,405 
Professional services and other revenue3,808 3,382 
Revenue$159,368 $123,189 
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. We derived 92% of revenue through our channel network in the three months ended March 31, 2022 and 2021. One of our distributors accounted for 37% and 41% of revenue in the three months ended March 31, 2022 and 2021, respectively. That same distributor accounted for 34% and 32% of accounts receivable at March 31, 2022 and December 31, 2021, respectively.
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 March 31, 2022 and 2021, we recognized revenue of $142.7 million and $114.9 million, respectively, that was included in the deferred revenue balance at the beginning of each of the respective periods.
Remaining Performance Obligations
At March 31, 2022, the future estimated revenue related to unsatisfied performance obligations was $555.7 million, of which approximately 76% is expected to be recognized as revenue over the succeeding twelve months, and the remainder is expected to be recognized over the four years thereafter.
Deferred Commissions
The following summarizes the activity of deferred incremental costs of obtaining a contract:
Three Months Ended March 31,
(in thousands)20222021
Beginning balance$99,949 $78,876 
Capitalization of contract acquisition costs10,330 7,224 
Amortization of deferred contract acquisition costs(11,016)(8,800)
Ending balance$99,263 $77,300 
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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:

March 31, 2022
(in thousands)Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Cash equivalents
Money market funds$156,230 $ $ $156,230 
Total cash equivalents$156,230 $ $ $156,230 
Short-term investments
Commercial paper$111,521 $ $(297)$111,224 
Corporate bonds37,339  (252)37,087 
Asset backed securities26,358  (190)26,168 
Certificates of deposit20,000  (37)19,963 
Supranational bonds8,599  (107)8,492 
U.S. Treasury and agency obligations36,191  (480)35,711 
Total short-term investments$240,008 $ $(1,363)$238,645 
December 31, 2021
(in thousands)Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Cash equivalents
Money market funds$178,518 $ $ $178,518 
Total cash equivalents$178,518 $ $ $178,518 
Short-term investments
Commercial paper$134,165 $ $(47)$134,118 
Corporate bonds27,169  (41)27,128 
Asset backed securities27,464  (53)27,411 
Certificates of deposit10,000  (8)9,992 
Supranational bonds8,632  (33)8,599 
U.S. Treasury and agency obligations27,168  (124)27,044 
Total short-term investments$234,598 $ $(306)$234,292 
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 securities before the recovery of the amortized cost basis. At March 31, 2022, 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.
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The contractual maturities of our short-term investments are as follows:
March 31, 2022
(in thousands)Amortized CostEstimated Fair Value
Due within one year$214,808 $213,966 
Due between one and two years25,200 24,679 
Total short-term investments$240,008 $238,645 
At March 31, 2022 and December 31, 2021, cash and cash equivalents included $5.8 million of restricted cash primarily related to collateral for our outstanding letters of credit and excluded $0.3 million of restricted cash related to an account established as collateral for a lease arrangement, which is included in other assets on the consolidated balance sheets.
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:
March 31, 2022
(in thousands)Level 1Level 2Level 3Total
Cash equivalents
Money market funds$156,230 $ $ $156,230 
Total cash equivalents$156,230 $ $ $156,230 
Short-term investments
Commercial paper$ $111,224 $ $111,224 
Corporate bonds 37,087  37,087 
Asset backed securities 26,168  26,168 
Certificates of deposit 19,963  19,963 
Supranational bonds 8,492  8,492 
U.S. Treasury and agency obligations 35,711  35,711 
Total short-term investments$ $238,645 $ $238,645 
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December 31, 2021
(in thousands)Level 1Level 2Level 3Total
Cash equivalents
Money market funds$178,518 $ $ $178,518 
Total cash equivalents$178,518 $ $ $178,518 
Short-term investments
Commercial paper$ $134,118 $ $134,118 
Corporate bonds 27,128  27,128 
Asset backed securities 27,411  27,411 
Certificates of deposit 9,992  9,992 
Supranational bonds 8,599  8,599 
U.S. Treasury and agency obligations 27,044  27,044 
Total short-term investments$ $234,292 $ $234,292 
We did not have any liabilities measured and recorded at fair value on a recurring basis at March 31, 2022 and December 31, 2021.
5. Property and Equipment, Net
Property and equipment, net consisted of the following:
(in thousands)
March 31, 2022December 31, 2021
Computer software and equipment
$34,120$29,203
Furniture and fixtures
5,8515,944
Leasehold improvements
26,92626,713
Right-of-use assets under finance leases
1,3431,343
Total
68,24063,203
Less: accumulated depreciation and amortization
(28,642)(26,370)
Property and equipment, net
$39,598$36,833
Depreciation and amortization related to property and equipment was $2.5 million and $2.2 million in the three months ended March 31, 2022 and 2021, respectively.
6. Acquisition, Goodwill and Intangible Assets
Business Combination
In February 2022, we acquired Cymptom, a platform that proactively measures, maps and prioritizes probable attack paths, and enables security teams to preemptively focus response ahead of and during breaches. Through a share purchase agreement, we acquired 100% of Cymptom's equity in exchange for cash consideration, net of cash acquired, for $23.0 million.
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Cash consideration, net of cash acquired, was preliminarily allocated as follows:
(in thousands)
Intangible assets$4,113 
Goodwill18,960 
Other liabilities, net(113)
Total purchase price
$22,960 
We are still finalizing the allocation of the purchase price, which may change as additional information becomes available related to acquired intangible assets and income taxes.
Acquired intangible assets and their estimated useful lives at the date of acquisition are as follows:
Intangible Assets
(dollars in thousands)
CostEstimated Useful Life
Acquired technology
$4,1137 years
Acquired intangible assets$4,113 
The results of operations of Cymptom 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 statements of operations.
In general and administrative expense, we recognized $1.3 million and $2.2 million of acquisition-related transaction costs in the three months ended March 31, 2022 and 2021, respectively.
Goodwill and Acquired Intangible Assets
The changes in the carrying amount of goodwill are as follows:
(in thousands)
Balance at December 31, 2021
$261,614 
Acquired goodwill18,960 
Balance at March 31, 2022
$280,574 
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 Cymptom to our customers. The acquired goodwill is not tax deductible.
Acquired intangible assets subject to amortization are as follows:
March 31, 2022December 31, 2021
(in thousands)Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying AmountAccumulated AmortizationNet Carrying Amount
Acquired technology$86,037 $(12,890)$73,147 $81,924 $(10,499)$71,425 
Trade name390 (316)74 390 (279)111 
$86,427 $(13,206)$73,221 $82,314 $(10,778)$71,536 
Amortization of acquired intangible assets was $2.4 million and $0.6 million in the three months ended March 31, 2022 and 2021, respectively. At March 31, 2022, our acquired intangible assets are expected to be amortized over an estimated weighted average period of 7.4 years.
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At March 31, 2022, estimated future amortization of acquired intangible assets is as follows:
(in thousands)
Year ending December 31,
2022(1)
$7,993 
202310,637 
202410,603 
202510,603 
202610,419 
Thereafter
22,966 
Total
$73,221 
_______________
(1)    Represents the nine months ending December 31, 2022.
7. Leases
We have operating leases for office facilities and finance leases for office equipment. The components of lease expense were as follows:
Three Months Ended March 31,
(in thousands)
20222021
Operating lease cost
$1,817 $1,869 
Rent expense for short-term leases and finance lease costs in the three months ended March 31, 2022 and 2021 were not material.
Supplemental information related to leases was as follows:
March 31, 2022December 31, 2021
Operating leases
Weighted average remaining lease term
9.1 years9.2 years
Weighted average discount rate
5.5%5.5%
In the three months ended March 31, 2022 and 2021, we did not obtain any right-of-use assets in exchange for lease liabilities.
Maturities of operating lease liabilities at March 31, 2022 were as follows:
(in thousands)
Year ending December 31,
2022(1)
$4,655 
20238,214 
20248,349 
20258,189 
20267,410 
Thereafter
37,421 
Total lease payments
74,238 
Less: Imputed interest
(16,989)
Total
$57,249 
_______________
(1)    Represents the nine months ending December 31, 2022.
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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)March 31, 2022
Term loan$374,063 
Less: Unamortized debt discount and issuance costs(7,349)
Term loan, net of issuance costs366,714 
Less: Term loan, net, current (1)
(2,651)
Term loan, net of issuance costs (net of current portion)$364,063 
_______________
(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 LIBOR, subject to a 0.50% floor. 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.
Our Term Loan is recorded at its carrying value. At March 31, 2022, the carrying value of our Term Loan approximated the fair value of our Term Loan as the terms and interest rate approximate market rates. 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 March 31, 2022 were as follows:
(in thousands)
Year ending December 31,
2022(1)
$2,813 
20233,750 
20243,750 
20253,750 
20263,750 
Thereafter
356,250 
Total
$374,063 
_______________
(1)    Represents the nine months ending December 31, 2022.
We may be subject to mandatory Term Loan prepayments related to the excess cash flow provisions beginning in 2023.
The Revolving Credit Facility bears interest at a rate, depending on first lien net leverage, ranging from 2.00% to 2.50% over LIBOR and matures on July 7, 2026. Additionally, we will pay a commitment fee during the term ranging from 0.25% to 0.375% per annum of the average daily undrawn portion of the revolving commitments based on the first lien net leverage ratio. The Revolving Credit Facility contains a $15.0 million letter of credit sublimit. At March 31, 2022, we were in compliance with the covenants under the Credit Agreement and there were no amounts outstanding under the Revolving Credit Facility.
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9. Commitments and Contingencies
Commitments
In July 2021, we entered into a contract with Amazon Web Services, Inc. for cloud services from August 2021 through July 2024. Under the terms of the contract, we committed to spend $43.7 million, $46.8 million and $50.1 million in contract years one, two and three, respectively, for a total of $140.6 million. If we do not meet the minimum purchase obligation during any of those years, we will be required to pay the difference. As of March 31, 2022, we have met our commitment for the first year of our contract with AWS.
Letters of Credit
At March 31, 2022, we had $5.7 million of standby letters of credit related to our grant agreements with the State of Maryland and our operating leases. Collateral for our letters of credit was classified as restricted cash in cash and cash equivalents.
10. Stock-Based Compensation
At March 31, 2022, there were 22.0 million shares available for grant under our 2018 Equity Incentive Plan.
Stock-based compensation expense included in the consolidated statements of operations was as follows:
Three Months Ended March 31,
(in thousands)
20222021
Cost of revenue
$1,513$937
Sales and marketing
10,0656,296
Research and development
6,4634,156
General and administrative
7,3575,563
Total stock-based compensation expense
$25,398$16,952
At March 31, 2022, the unrecognized stock-based compensation expense related to unvested restricted stock units ("RSUs") was $311.1 million, which is expected to be recognized over an estimated remaining weighted average period of 3.2 years.
At March 31, 2022, the unrecognized stock-based compensation expense related to unvested performance stock units ("PSUs") was $9.1 million, which is expected to be recognized over an estimated remaining weighted average period of 3.9 years.
At March 31, 2022, the unrecognized stock-based compensation expense related to outstanding stock options was $1.0 million, which is expected to be recognized over an estimated remaining weighted average period of 0.2 years.
At March 31, 2022, the unrecognized stock-based compensation expense related to our 2018 ESPP was $10.1 million, which is expected to be recognized over an estimated weighted average period of 0.9 years.
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RSUs and PSUs
A summary of our RSU and PSU activity is presented below:
RSUsPSUs
(in thousands, except for per share data)
Number
of Shares
Weighted
Average
Grant Date Fair Value
Number
of Shares
Weighted
Average
Grant Date Fair Value
Unvested balance at December 31, 20215,781$37.74 $ 
Granted
3,470 45.68 209 44.97 
Vested
(809)37.98   
Forfeited
(312)37.04   
Unvested balance at March 31, 20228,13041.13 20944.97 
Our PSUs vest over a period of four years and are subject to defined performance and service conditions. The grant date fair value is based on the estimated fair value of our common stock on the date of grant. Our PSUs are expensed over the service period using the accelerated attribution method.
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, 20216,731$9.21 5.5$308,677
Granted
 
Exercised
(293)8.82 12,947
Forfeited/canceled
(57)16.13 
Outstanding at March 31, 20226,3819.17 5.1310,264
Exercisable at March 31, 20225,9648.69 5.0292,848
2018 Employee Stock Purchase Plan
At March 31, 2022, there were 7.7 million shares reserved for issuance under our 2018 Employee Stock Purchase Plan ("2018 ESPP").
In the three months ended March 31, 2022, employees purchased 255,697 shares of our common stock at a weighted average price of $34.73 per share, resulting in $8.9 million of cash proceeds.
At March 31, 2022, there was $2.0 million of employee contributions to the 2018 ESPP included in accrued compensation.
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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:
Three Months Ended March 31,
20222021
Expected term (in years)
0.52.0
0.52.0
Expected volatility
42.8% — 51.7%
52.0% — 59.4%
Risk-free interest rate
0.1%
0.1%
Expected dividend yield
11. Income Taxes
In the three months ended March 31, 2022, the provision for income taxes included $1.7 million of income taxes in foreign jurisdictions in which we conduct business, $0.8 million of current expense from the restructuring of our research and development operations in Israel, partially offset by $0.4 million of deferred tax benefits related to the Alsid acquisition. Additionally, the provision for income taxes included $0.7 million of discrete expense items, primarily withholding taxes on sales to customers.
The provision for the three months ended March 31, 2021 included $1.1 million income taxes in foreign jurisdictions in which we conduct business and $2.8 million of current expense from the restructuring of our research and development operations in Israel, which were partially offset by $1.2 million of discrete benefits related to a Supreme Court decision in India on the taxability of software license payments to nonresidents and the associated withholding taxes and $1.4 million of other discrete benefits. Additionally, the provision for income taxes included $0.5 million of discrete expense items, primarily withholding taxes on sales to customers.
12. Net Loss Per Share
The following table sets forth the computation of basic and diluted net loss per share:
Three Months Ended March 31,
(in thousands, except per share data)20222021
Net loss$(24,506)$(7,748)
Weighted-average shares used to compute net loss per share, basic and diluted109,524 104,531 
Net loss per share, basic and diluted
$(0.22)$(0.07)
The following potentially dilutive securities have been excluded from the diluted per share calculations because they would have been antidilutive:
March 31,
(in thousands)20222021
RSUs8,130 5,716 
Stock options6,381 8,814 
Shares to be issued under the 2018 ESPP47 58 
Total14,558 14,588 
13. Geographic Information
We operate as one operating segment. Our Chief Executive Officer, who is our chief operating decision maker, reviews financial information on a consolidated basis for purposes of making operating decisions, allocating resources, and evaluating financial performance.
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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 March 31,
(in thousands)20222021
The Americas$99,500 $80,595 
Europe, Middle East and Africa43,139 29,266 
Asia Pacific16,729 13,328 
Revenue$159,368 $123,189 
Customers located in the United States accounted for 56% and 59% of revenue in the three months ended March 31, 2022 and 2021, respectively. No other country accounted for 10% or more of revenue in the periods presented.
Our property and equipment, net by geographic area is summarized as follows:
(in thousands)March 31, 2022December 31, 2021
United States$35,958 $33,579 
International3,640 3,254 
Property and equipment, net$39,598 $36,833 
14. Subsequent Events
In April 2022, we entered into a definitive agreement to acquire Bit Discovery, Inc. ("Bit Discovery"), a leader in external attack surface management (EASM). Adding Bit Discovery's EASM capabilities to our solutions will provide customers with a comprehensive view of their attack surface and help identify and eliminate areas of risk. We agreed to acquire Bit Discovery for $44.5 million in cash, subject to customary purchase price adjustments, and expect the acquisition close later in the second quarter of 2022.
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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, 2021, or the 10-K, filed with the Securities and Exchange Commission on February 25, 2022. 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 II, Item 1A of this Form 10-Q and in our other filings with the SEC. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. 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 Cyber Exposure solutions. Cyber Exposure is a discipline for managing, measuring and comparing cybersecurity risk in the digital era.
We have continued to expand and diversify our platform offerings from traditional vulnerability management (VM) solutions, which include Tenable.sc and Nessus, to our cloud exposure solutions, which include Tenable.ep, Tenable.io, Tenable.cs, Tenable Web Scanning, or Tenable.io WAS, Tenable.ad and Tenable.ot. Our platform offerings 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, DevOps environments, Active Directory and Identity environments, and Industrial IoT and OT environments. We also provide deep analytics to help organizations score, trend and compare their cyber exposure over time, and communicate cyber risk in business terms to make better strategic decisions. Our platform offerings integrate and analyze data from our native collectors alongside IT asset, vulnerability and threat data from third-party systems and applications to prioritize security issues for remediation and focus an organization’s resources based on risk and business criticality.
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 from perpetual licenses and from the related ongoing maintenance.
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 enterprise platform offerings to our distributors, which in turn sell to our resellers, which then sell to end users, which we call customers.
Many of our enterprise platform customers initially use either our free or paid version of Nessus, one of the most widely deployed vulnerability assessment solutions in the cybersecurity industry. Nessus, which is sold on a stand-alone basis and is the technology that underpins our enterprise platform offerings, is designed to quickly and accurately identify security vulnerabilities, configuration issues and malware. Our free version of Nessus, Nessus Essentials, allows for vulnerability assessment over a limited number of IP addresses. We believe many of our Nessus customers begin with Nessus Essentials and subsequently upgrade to Nessus Professional, the paid version of Nessus; however, we expect a significant number of users to continue to use Nessus Essentials. 
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Revenue in the three months ended March 31, 2022 and 2021 was $159.4 million and $123.2 million, respectively, representing year-over-year growth of 29%. Our recurring revenue, which includes revenue from subscription arrangements for software and cloud-based solutions and maintenance associated with perpetual licenses, represented 95% and 94% of revenue in the three months ended March 31, 2022 and 2021, respectively. Our net loss in the three months ended March 31, 2022 and 2021 was $24.5 million and $7.7 million, respectively. Our cash flow from operating activities was $32.9 million and $38.6 million in the three months ended March 31, 2022 and 2021, respectively.
COVID-19 Update
We have not seen a significant adverse impact on our business from the pandemic as of March 31, 2022. We continue to monitor the impact of the COVID-19 pandemic on our customers, partners, employees and service providers.
Financial Highlights
Below are our key financial results:
Three Months Ended March 31,
(in thousands, except per share data)20222021
Revenue$159,368 $123,189 
Loss from operations(17,548)(5,802)
Net loss(24,506)(7,748)
Net loss per share, basic and diluted
(0.22)(0.07)
Net cash provided by operating activities32,862 38,625 
Purchases of property and equipment(4,811)(1,061)
Factors Affecting Our Performance
Product Leadership
Our enterprise platform offerings provide visibility into the broadest range of traditional and modern IT assets across cloud and on-premises environments. We are intensely focused on continued innovation and ongoing development of our enterprise platform offerings that empower organizations to understand and reduce their Cyber Exposure. Additionally, we continue to expand the capabilities of our Nessus products, specifically as they relate to the ability to scan for and detect the rapidly expanding volume of vulnerabilities.
We intend to continue to invest in our engineering capabilities and marketing activities to maintain our position in the highly-competitive market for cybersecurity solutions. Our results of operations may fluctuate as we make these investments to drive increased customer adoption and usage.
New Enterprise Platform Customer Acquisition
We believe that our customer base provides a significant opportunity to expand sales of our enterprise platform offerings and that our ability to continue to grow the number of enterprise platform customers will increase future opportunities for renewals and follow-on sales. We believe that we have significant room to increase our market share.
We expect to grow our enterprise platform customers by continuing to expand our sales organization and leveraging our channel partner network, which we believe will allow us to identify new enterprise customers, enter new markets, including internationally, as well as to convert more of our existing Nessus Professional customers to enterprise platform customers.
We will continue to invest in our partner network and sales and marketing capability in order to grow domestically and internationally.
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Retaining and Expanding Revenue from Existing Customers
Our enterprise platform offerings utilize IT asset-based or IP address-based pricing models. Once enterprise customers have licensed our platform offerings, they typically seek broader coverage over their traditional IT assets, including networking infrastructure, desktops and on-premises servers. As customers launch new applications or migrate existing applications to the cloud and deploy web applications, containers, IoT and OT, they often increase the scope of their subscriptions and/or add additional perpetual licenses to our enterprise platforms.
We are also focused on upselling customers from Nessus Professional to our enterprise platform offerings. Nessus Professional customers are typically organizations or independent security consultants that use Nessus Professional for a single vulnerability assessment at a point in time. We seek to convert these customers to our enterprise platform offerings, which provide continuous visibility and insights into their attack surface, as their needs develop.
Further, we plan to expand existing platform capabilities and launch new products, which we believe will drive new product purchases and follow-on purchases over time, thereby contributing to customer renewals. We believe that there is a significant opportunity to drive additional sales to existing customers, and we expect to invest in sales and marketing and customer success personnel and activities to achieve additional revenue growth from existing customers. However, our ability to increase sales to existing customers will depend on a number of factors, including satisfaction or dissatisfaction with our products and services, competition, pricing, current economic conditions or overall changes in our and our clients' spending levels.
We evaluate our ability to expand sales with existing customers by assessing our dollar-based net expansion rate on a last twelve months, or LTM, basis. We have historically calculated our dollar-based net expansion rate as follows:
Denominator: To calculate our dollar-based net expansion rate as of the end of a reporting period, we first determine the annual recurring revenue, or ARR, from all active subscriptions and maintenance from perpetual licenses as of the last day of the same reporting period in the prior year. This represents recurring payments that we expect to receive in the next 12-month period from the cohort of customers that existed on the last day of the same reporting period in the prior year.
Numerator: We measure the ARR for that same cohort of customers representing all subscriptions and maintenance from perpetual licenses based on customer orders as of the end of the reporting period.
We calculate dollar-based net expansion rate by dividing the numerator by the denominator.
Our dollar-based net expansion rate for the three months ended March 31, 2022 exceeded 110% on an LTM basis. Our dollar-based net expansion rate may fluctuate from quarter to quarter as a result of a number of factors, including our existing customers' satisfaction with our solutions, the pricing of our solutions and the ability of competing solutions and the pricing thereof.
We also utilize an alternative dollar-based net expansion rate to assess our ability to expand sales with existing customers and evaluate the performance of our sales team. This alternative dollar-based net expansion rate is based on the methodology described above, but excludes the annual contract value of prior period multi-year sales from ARR in the numerator and the denominator of the calculation. We believe this methodology more closely aligns with the renewal and expansion goals established for our sales team, because it measures net expansion by customers with contracts up for renewal during the period. Applying this methodology would have increased the dollar-based net expansion rate by two to three percentage points for each of the fiscal quarters in 2021 and the first fiscal quarter in 2022.
Investing in Business Growth
Since our founding, we have invested significantly in growing our business. We intend to continue to invest in sales and marketing to grow our sales team, expand brand and Cyber Exposure awareness and optimize our channel partner network. We also intend to continue to invest in our research and development team to further our technological leadership position in Cyber Exposure and enhance the functionality of our solutions. Any investments we make in our sales and marketing and research and development teams will occur in advance of experiencing the benefits from such
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investments, so it may be difficult for us to determine if we are efficiently allocating resources in those areas. We expect to acquire businesses, technology and/or development personnel that will expand and enhance the functionality of our platform offerings. These investment activities could increase our net losses over the short term if our revenue growth does not increase at higher rates. However, we expect that these investments will ultimately benefit our results of operations.
Key Operating and Financial Metrics
To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain operating metrics and non-GAAP financial measures, as described below, to understand and evaluate our core operating and financial performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance the overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.
We believe that these operating metrics and non-GAAP financial measures provide useful information about our operating and financial performance, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important metrics used by management for financial and operational decision-making. We include these operating metrics and non-GAAP financial measures to present our operating and financial performance using a management view and because we believe that