Core Insights - Tenable has been recognized as a Leader in the inaugural 2025 Gartner Magic Quadrant for Exposure Assessment Platforms, achieving the highest position for Ability to Execute and the furthest right for Completeness of Vision [1] - The company has also been named a Leader in both the IDC MarketScape: Worldwide Exposure Management 2025 Vendor Assessment and The Forrester Wave™: Unified Vulnerability Management, Q3 2025 [2] Company Overview - Tenable's mission focuses on helping organizations understand and mitigate risk, evolving from traditional IT vulnerability identification to a comprehensive view of risk across various modern attack surfaces, including AI, cloud, IT, identity, third-party, web applications, and operational technology [3] - The Tenable One Exposure Management Platform is designed to provide a complete view of risk, enabling organizations to identify and address vulnerabilities quickly [3] Strategic Approach - The recognition from Gartner is seen as validation of Tenable's proactive strategy in identifying changes in the attack surface and providing customers with tools to monitor and mitigate exposures [4] - Tenable emphasizes a risk-based analytics approach and boasts an ecosystem of over 300 integrations, which allows more than 44,000 organizations to manage cyber risk effectively [4] Market Position - The Tenable One platform is positioned at the forefront of the market's transition to exposure management, with Gartner introducing the term Continuous Threat Exposure Management (CTEM) to describe this proactive approach [5] - Tenable's early adoption of exposure management has solidified its status as a market leader in the shift from traditional vulnerability management [5] Future Outlook - The company asserts that with the rise of AI weaponization, a preemptive approach to cybersecurity is essential, and Tenable One is the only platform that provides a holistic view of the attack surface [6]

Core Insights - Tenable Holdings, Inc. specializes in vulnerability management within the cybersecurity sector, competing with companies like Rapid7, Varonis Systems, Qualys, Elastic N.V., and Smartsheet [1] Financial Performance - Tenable's Return on Invested Capital (ROIC) is -0.97%, which is below its Weighted Average Cost of Capital (WACC) of 7.12%, indicating inefficient capital utilization [2][5] - In contrast, Rapid7 has a positive ROIC of 0.79% against a WACC of 5.36%, demonstrating better capital efficiency [2] - Varonis Systems shows a strong performance with a ROIC of 9% and a WACC of 6.18%, resulting in a ROIC to WACC ratio of 1.45, indicating effective capital use [3] - Qualys leads the sector with a ROIC of 28% and a WACC of 6.32%, achieving a ROIC to WACC ratio of 4.42, highlighting its superior capital efficiency [3][5] - Both Elastic N.V. and Smartsheet have negative ROICs, with Elastic at -64.50% and Smartsheet at -2.84%, suggesting challenges in generating returns above their cost of capital [4][5]

Group 1 - Cyber attacks are on the rise, making sophisticated cybersecurity solutions essential for protection [1] - Tenable, with a market capitalization of $3.5 billion, is smaller than industry leaders but has a significant addressable market and has increased its 2025 revenue forecast, indicating business momentum [2] - Tenable stock is currently 52% below its record high from 2022, presenting a potential buying opportunity [2] Group 2 - Tenable's Nessus platform is widely deployed for vulnerability management, scanning systems and networks for weaknesses [4] - Nessus has over 2 million users, providing a large customer base for cross-selling additional products [5] - Tenable has developed a suite of cybersecurity solutions to protect identities, manage assets, and secure cloud networks [5] Group 3 - Tenable One is a comprehensive exposure management platform that aggregates various products, including AI-powered solutions [6] - The ExposureAI feature within Tenable One identifies potential attack paths and assists cybersecurity managers in threat mitigation [6] - Tenable One accounted for 40% of new business in the third quarter, highlighting its role in customer acquisition [7] Group 4 - Tenable specializes in exposure management within the cybersecurity industry and offers a platform that combines its best products [8] - The stock trades at a significant discount compared to peers, indicating potential investment opportunities [8]

Revenue and Income - Revenue for the three months ended September 30, 2025, was $252,440,000, representing a 11.2% increase from $227,088,000 in the same period of 2024[88] - Net income for the three months ended September 30, 2025, was $2,260,000, compared to a net loss of $9,211,000 in the same period of 2024[88] - For the nine months ended September 30, 2025, total revenue was $738,872,000, an increase of 11% from $664,290,000 in 2024[144] - Subscription revenue increased by $23,657,000, or 11%, to $232,211,000, while professional services and other revenue rose by 35% to $9,141,000[134] Customer Metrics - Recurring revenue accounted for 95% of total revenue for the three months ended September 30, 2025, consistent with 96% in the same period of 2024[88] - The number of new enterprise platform customers added in the three months ended September 30, 2025, was 437, a 13% increase from 386 in the same period of 2024[98] - The number of customers with annual contract values of $100,000 or greater increased by 16% to 2,156 as of September 30, 2025, from 1,853 in 2024[98] - The dollar-based net expansion rate for the twelve months ended September 30, 2025, was 106%, slightly down from 108% in 2024[101] Operating Performance - Calculated current billings for the three months ended September 30, 2025, were $267,506,000, up from $248,441,000 in the same period of 2024, reflecting a growth of 7.4%[93] - Free cash flow for the three months ended September 30, 2025, was $51,630,000, compared to $52,711,000 in the same period of 2024[96] - The company reported a gross margin of 78% for both the three and nine months ended September 30, 2025[144] - Gross profit for the three months ended September 30, 2025, was $195,687,000, reflecting an 11% increase from $176,589,000 in 2024[135] Expenses - Total operating expenses for the three months ended September 30, 2025, were $188,551,000, up from $178,672,000 in 2024, marking a 5% increase[136] - Research and development expenses increased by 17% to $56,265,000 for the three months ended September 30, 2025, up from $48,020,000 in 2024[138] - Sales and marketing expenses for the three months ended September 30, 2025, were $99,949,000, a slight increase of 1% from $99,083,000 in 2024[136] - General and administrative expenses included $15.5 million in termination benefits related to the passing of the Chairman and CEO for the nine months ended September 30, 2025[128] Non-GAAP Metrics - For the three months ended September 30, 2025, the company reported a non-GAAP income from operations of $58.913 million, compared to $44.975 million for the same period in 2024, representing a 31% increase[106] - The non-GAAP operating margin improved to 23.3% in Q3 2025, up from 19.8% in Q3 2024[106] - Non-GAAP net income for the nine months ended September 30, 2025, was $137.125 million, compared to $107.925 million for the same period in 2024, reflecting a 27% increase[108] - The diluted non-GAAP earnings per share increased to $0.42 for Q3 2025, compared to $0.32 for Q3 2024, marking a 31% rise[108] Cash Flow and Investments - Net cash provided by operating activities for the nine months ended September 30, 2025, was $183,720,000, compared to $136,357,000 in the same period of 2024[96] - Cash and cash equivalents totaled $171.9 million, with short-term investments at $211.7 million as of September 30, 2025[154] - Deferred revenue reached $810.5 million, with $639.6 million expected to be recognized as revenue in the next 12 months[157] - The company acquired Vulcan and Apex for a combined $196.2 million in cash in 2025[158] Other Financial Metrics - The provision for income taxes for the three months ended September 30, 2025, was $550,000, a significant decrease of 90% from $5,328,000 in 2024[140] - Interest income decreased by $4.99 million (28%) to $12.6 million, while interest expense decreased by $2.97 million (12%) to $21.36 million[152] - Provision for income taxes decreased by $2.35 million (22%) to $8.39 million[153] - The Term Loan interest rates ranged from 7.18% to 7.22% from January to September 2025[162]

Core Insights - Tenable Holdings, Inc. specializes in vulnerability management within the cybersecurity sector, competing with companies like Rapid7, Varonis Systems, Qualys, Elastic N.V., and Smartsheet [1] Financial Performance - Tenable's Return on Invested Capital (ROIC) is -0.97%, which is below its Weighted Average Cost of Capital (WACC) of 7.20%, indicating insufficient returns to cover capital costs [2] - Rapid7 has a positive ROIC of 1.29% against a WACC of 5.90%, resulting in a ROIC to WACC ratio of 0.22, suggesting better capital efficiency than Tenable, though still not optimal [3] - Varonis Systems demonstrates a stronger performance with a ROIC of 9% and a WACC of 6.26%, leading to a ROIC to WACC ratio of 1.43, indicating superior returns on invested capital [3] - Qualys exhibits the highest ROIC of 27.75% and a WACC of 6.58%, resulting in a ROIC to WACC ratio of 4.21, showcasing the best capital utilization among its peers [4]

Market Overview - The stock market is currently perceived as incredibly expensive, particularly in light of weaker-than-expected earnings reports, especially among consumer-facing stocks [1] Analyst Background - Gary Alexander has extensive experience covering technology companies on Wall Street and working in Silicon Valley, providing insights into current industry themes [1]

Core Insights - Tenable reported revenue of $252.44 million for the quarter ended September 2025, reflecting an 11.2% increase year-over-year and surpassing the Zacks Consensus Estimate of $247.52 million by 1.99% [1] - The company's EPS for the quarter was $0.42, up from $0.32 in the same quarter last year, exceeding the consensus EPS estimate of $0.37 by 13.51% [1] Financial Performance Metrics - Current Billings were reported at $267.51 million, exceeding the six-analyst average estimate of $264.72 million [4] - Subscription revenue reached $232.21 million, compared to the estimated $228.77 million, marking an 11.3% increase year-over-year [4] - Revenue from Professional services and other was $9.14 million, surpassing the average estimate of $7.3 million, representing a significant 35.1% year-over-year growth [4] - Revenue from Perpetual license and maintenance was $11.09 million, slightly below the average estimate of $11.1 million, indicating a 5.8% decline year-over-year [4] Stock Performance - Tenable's shares have returned +4.1% over the past month, outperforming the Zacks S&P 500 composite's +3.8% change [3] - The stock currently holds a Zacks Rank 4 (Sell), suggesting potential underperformance relative to the broader market in the near term [3]

Core Insights - Tenable (TENB) reported quarterly earnings of $0.42 per share, exceeding the Zacks Consensus Estimate of $0.37 per share, and up from $0.32 per share a year ago, representing an earnings surprise of +13.51% [1] - The company achieved revenues of $252.44 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.99% and increasing from $227.09 million year-over-year [2] - Tenable has consistently surpassed consensus EPS and revenue estimates over the last four quarters [2] Earnings Performance - The earnings surprise for the latest quarter was +13.51%, following a previous surprise of +13.33% in the prior quarter [1][2] - The current consensus EPS estimate for the upcoming quarter is $0.44, with expected revenues of $251.11 million, and for the current fiscal year, the EPS estimate is $1.50 on revenues of $985.48 million [7] Stock Performance and Outlook - Tenable shares have declined approximately 22.9% year-to-date, contrasting with the S&P 500's gain of 17.2% [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating expectations of underperformance in the near future [6] Industry Context - The Internet - Software industry, to which Tenable belongs, is currently ranked in the top 30% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

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Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $252.4 million, representing an 11.2% year-over-year growth [20] - Non-GAAP gross margin was 81.6%, an increase from 81.4% in Q3 2024 [21] - Non-GAAP income from operations was $58.9 million, or 23.3% of revenue, compared to $45 million, or 19.8% of revenue in Q3 2024 [21] - Non-GAAP earnings per share for the quarter was $0.42, an increase of 31.3% from $0.32 in Q3 2024 [22] - Cash and short-term investments totaled $383.6 million, with unleveraged free cash flow of $58.5 million for the quarter [22][23] Business Line Data and Key Metrics Changes - Tenable One, the exposure management platform, represented approximately 40% of new business during the quarter [7] - 437 new enterprise platform customers were added, a 13% increase compared to Q3 2024 [7] - The percentage of recurring revenue remained high at 95% [20] Market Data and Key Metrics Changes - Tenable was recognized as a leader in exposure management by Forrester and IDC during Q3 [13] - The company reported a net dollar expansion rate of 106% [21] Company Strategy and Development Direction - The company is focusing on a shift from reactive to preemptive security, driven by advancements in AI [8][9] - Significant investments in R&D, up over 20% year-to-date, are aimed at enhancing Tenable One [10] - The company is building a comprehensive exposure management platform that integrates various security tools and data sources [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the pipeline and renewal business, indicating minimal exposure to potential government shutdown impacts [31][38] - The company raised its full-year guidance for calculated current billings and revenue, reflecting confidence in sustained growth [24][25] Other Important Information - The company repurchased 2 million shares for $60 million during the quarter, totaling 8.3 million shares repurchased for $300 million since November 2023 [23] - The company launched Tenable AI Exposure to help organizations manage risks associated with generative AI [10] Q&A Session Summary Question: Performance in U.S. Federal vertical - Management noted strong performance in the public sector and U.S. Federal, in line with expectations despite potential shutdowns [31] Question: Impact of CISA 2015 expiration on CVE reporting - Management does not anticipate significant negative impacts from the expiration based on current feedback [39] Question: Changes to guidance philosophy - Management indicated no substantial changes to guidance philosophy, emphasizing a high-functioning team [45] Question: Billings guidance and visibility - Management expressed increased positivity about the year due to strong Q3 performance and visibility into Q4 [47] Question: AI innovation roadmap - Management is considering both organic growth and M&A for AI innovations, focusing on proactive security [74] Question: Percentage of customers on Tenable One - Approximately 3,000 out of 18,000 enterprise customers are using Tenable One, with significant upsell opportunities [64] Question: Demand environment across markets - Demand was consistent across various sectors, with strong performance in new customer acquisitions [92] Question: Multi-cloud support and cloud security performance - Management noted active discussions regarding multi-cloud support and expressed optimism about cloud business growth [99]