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Cybersecurity software maker Tenable (NASDAQ:TENB) reported Q2 CY2024 results topping analysts' expectations, with revenue up 13.4% year on year to $221.2 million. On the other hand, next quarter's revenue guidance of $223 million was less impressive, coming in 2.3% below analysts' estimates. It made a non-GAAP profit of $0.31 per share, improving from its loss of $0.13 per share in the same quarter last year.
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Tenable (TENB) Q2 CY2024 Highlights:
- Revenue: $221.2 million vs analyst estimates of $218.5 million (1.2% beat)
- Adjusted Operating Income: $42.78 million vs analyst estimates of $35.27 million (21.3% beat)
- EPS (non-GAAP): $0.31 vs analyst estimates of $0.24 (31.6% beat)
- Revenue Guidance for Q3 CY2024 is $223 million at the midpoint, below analyst estimates of $228.1 million
- The company dropped its revenue guidance for the full year from $904 million to $892 million at the midpoint, a 1.3% decrease
- Gross Margin (GAAP): 77.9%, in line with the same quarter last year
- Free Cash Flow of $28.66 million, down 39.2% from the previous quarter
- Billings: $221.1 million at quarter end, up 8.8% year on year
- Market Capitalization: $5.60 billion
Founded in 2002 by three cybersecurity veterans, Tenable (NASDAQ:TENB) provides software as a service that helps companies understand where they are exposed to cyber security risk and how to reduce it.
Vulnerability ManagementThe demand for cybersecurity is growing as more and more businesses are moving their data and processes into the cloud, which along with a major increase in employees working remotely, has increased their exposure to attacks and malware. Additionally, the growing array of corporate IT systems, applications and internet connected devices has increased the complexity of network security, all of which has substantially increased the demand for software meant to protect data breaches.
Sales GrowthAs you can see below, Tenable's revenue growth has been decent over the last three years, growing from $130.3 million in Q2 2021 to $221.2 million this quarter.
This quarter, Tenable's quarterly revenue was once again up 13.4% year on year. We can see that Tenable's revenue increased by $5.28 million quarter on quarter, which is a solid improvement from the $2.66 million increase in Q1 CY2024. This acceleration of growth was a great sign.
Next quarter's guidance suggests that Tenable is expecting revenue to grow 10.7% year on year to $223 million, slowing down from the 15.3% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 13.1% over the next 12 months before the earnings results announcement.
Gross Margin & Pricing PowerWhat makes the software-as-a-service model so attractive is that once the software is developed, it usually doesn't cost much to provide it as an ongoing service.
These costs include servers, licenses, and certain personnel, and leverage on them can decide the winners in competitive markets because they determine how much can be invested into new products, sales, and talent.
Tenable's robust unit economics are better than the broader software industry, an output of its asset-lite business model and pricing power. They also enable the company to fund large investments in new products and sales during periods of rapid growth to achieve higher operating profits at scale. As you can see below, it averaged an impressive 77.4% gross margin over the last year. Said differently, roughly $77.43 was left to spend on selling, marketing, and R&D for every $100 in revenue.
Tenable produced a 77.9% gross profit margin in Q2, which is in line with the same quarter last year. Zooming out, the company's full-year margin has remained steady over the past 24 months, suggesting its input costs have been stable and it isn't under pressure to lower prices.
Key Takeaways from Tenable's Q2 Results It was encouraging to see Tenable narrowly top analysts' revenue expectations this quarter. On the other hand, its full-year revenue guidance was below expectations and its revenue guidance for next quarter missed Wall Street's estimates. Overall, this quarter could have been better and the outlook is weighing on the stock. The stock traded down 14.7% to $39.25 immediately following the results.
