Tenable (NASDAQ:TENB) Surprises With Q4 Sales, Stock Soars

Kayode Omotosho /
2024/02/06 4:09 pm EST

Cybersecurity software maker Tenable (NASDAQ:TENB) announced better-than-expected results in Q4 FY2023, with revenue up 15.5% year on year to $213.3 million. On the other hand, the company expects next quarter's revenue to be around $213 million, slightly below analysts' estimates. It made a non-GAAP profit of $0.25 per share, improving from its profit of $0.12 per share in the same quarter last year.

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Tenable (TENB) Q4 FY2023 Highlights:

  • Revenue: $213.3 million vs analyst estimates of $206.7 million (3.2% beat)
  • EPS (non-GAAP): $0.25 vs analyst estimates of $0.14 ($0.11 beat)
  • Revenue Guidance for Q1 2024 is $213 million at the midpoint, below analyst estimates of $214.4 million
  • Management's revenue guidance for the upcoming financial year 2024 is $900 million at the midpoint, missing analyst estimates by 0.7% and implying 12.7% growth (vs 17% in FY2023)
  • Free Cash Flow of $35.76 million, down 11.3% from the previous quarter
  • Gross Margin (GAAP): 77.1%, up from 75.5% in the same quarter last year
  • Market Capitalization: $5.49 billion

“We delivered a strong Q4, including better-than-expected results on the top and bottom line,” 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.

Vulnerability Management

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 $149 million in Q4 FY2021 to $213.3 million this quarter.

Tenable Total Revenue

This quarter, Tenable's quarterly revenue was once again up 15.5% year on year. We can see that Tenable's revenue increased by $11.78 million quarter on quarter, which is a solid improvement from the $6.49 million increase in Q3 2023. Shareholders should applaud the re-acceleration of growth.

Next quarter's guidance suggests that Tenable is expecting revenue to grow 12.8% year on year to $213 million, slowing down from the 18.5% year-on-year increase it recorded in the same quarter last year. For the upcoming financial year, management expects revenue to be $900 million at the midpoint, growing 12.7% year on year compared to the 16.9% increase in FY2023.

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Cash Is King

If you've followed StockStory for a while, you know that we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills. Tenable's free cash flow came in at $35.76 million in Q4, up 34% year on year.

Tenable Free Cash Flow

Tenable has generated $141.1 million in free cash flow over the last 12 months, an impressive 17.7% of revenue. This high FCF margin stems from its asset-lite business model and strong competitive positioning, giving it the option to return capital to shareholders or reinvest in its business while maintaining a cash cushion.

Key Takeaways from Tenable's Q4 Results

It was good to see Tenable beat analysts' revenue and earnings expectations this quarter and deliver solid free cashflow. That stood out as a positive in these results. On the other hand, its revenue guidance slightly missed analysts' expectations. Overall, the results were still solid. The stock is up 6% after reporting and currently trades at $50.5 per share.

Tenable may not have had the best quarter, but does that create an opportunity to invest right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research 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 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.