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Tenable (NASDAQ:TENB) Q3: Beats On Revenue, Quarterly Guidance In Line


Jack Winthrop /
2022/10/25 4:16 pm EDT
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Cybersecurity software maker Tenable (NASDAQ:TENB) reported Q3 FY2022 results topping analyst expectations, with revenue up 26% year on year to $174.8 million. The company expects that next quarter's revenue would be around $181 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Tenable made a GAAP loss of $18.7 million, down on its loss of $16.2 million, in the same quarter last year.

Is now the time to buy Tenable? Access our full analysis of the earnings results here, it's free.

Tenable (TENB) Q3 FY2022 Highlights:

  • Revenue: $174.8 million vs analyst estimates of $170.2 million (2.72% beat)
  • EPS (non-GAAP): $0.15 vs analyst estimates of $0.03 ($0.12 beat)
  • Revenue guidance for Q4 2022 is $181 million at the midpoint, below analyst estimates of $182.3 million
  • Free cash flow of $31.5 million, up 22.2% from previous quarter
  • Gross Margin (GAAP): 77.9%, down from 80.4% same quarter last year

"We are very pleased with our performance in the third quarter, highlighted by better than expected top-line results, significant operating leverage and strong free cash flow,” said Amit Yoran, Chairman and CEO of Tenable.

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.

The 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 Growth

As you can see below, Tenable's revenue growth has been strong over the last two years, growing from quarterly revenue of $112.2 million in Q3 FY2020, to $174.8 million.

Tenable Total Revenue

This quarter, Tenable's quarterly revenue was once again up a very solid 26% year on year. On top of that, revenue increased $10.5 million quarter on quarter, a very strong improvement on the $4.97 million increase in Q2 2022, which shows acceleration of growth, and is great to see.

Guidance for the next quarter indicates Tenable is expecting revenue to grow 21.4% year on year to $181 million, slowing down from the 26.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 19.9% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Profitability

What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. Tenable's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 77.9% in Q3.

Tenable Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.77 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite it going down over the last year, this is still a good gross margin that allows companies like Tenable to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from Tenable's Q3 Results

With a market capitalization of $3.64 billion Tenable is among smaller companies, but its more than $548 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Tenable outperform Wall St’s expectations this quarter. And we were also glad to see good revenue growth. Overall, it seems to us that this was an ok quarter for Tenable. The company is flat on the results and currently trades at $34.23 per share.

Should you invest in Tenable right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.