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Tenable's (NASDAQ:TENB) Q3 Sales Top Estimates, Stock Soars


Kayode Omotosho /
2021/10/26 4:16 pm EDT
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Cybersecurity software maker Tenable (NASDAQ:TENB) reported Q3 FY2021 results topping analyst expectations, with revenue up 23.4% year on year to $138.6 million. Guidance also exceeded expectations with next quarter revenues guided to $144 million, or 1.39% above analyst estimates. Tenable made a GAAP loss of $16.2 million, down on its loss of $5.85 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 FY2021 Highlights:

  • Revenue: $138.6 million vs analyst estimates of $134.6 million (3.01% beat)
  • EPS (non-GAAP): $0.07 vs analyst estimates of $0.02 ($0.05 beat)
  • Revenue guidance for Q4 2021 is $144 million at the midpoint, above analyst estimates of $142 million
  • Free cash flow of $18.4 million, up 23% from previous quarter
  • Gross Margin (GAAP): 80.4%, down from 82.7% same quarter last year

"We delivered outstanding top- and bottom-line results driven by unprecedented demand for our enterprise offerings, as we added a record number of new enterprise platform customers in the quarter," 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 and are becoming exposed to attacks and malware. Employees working remotely have also made it harder for companies to keep their networks secure, thereby increasing demand for software that helps protect from breaches.

Sales Growth

As you can see below, Tenable's revenue growth has been strong over the last year, growing from quarterly revenue of $112.2 million, to $138.6 million.

Tenable Total Revenue

This quarter, Tenable's quarterly revenue was once again up a very solid 23.4% year on year. On top of that, revenue increased $8.4 million quarter on quarter, a solid improvement on the $7.07 million increase in Q2 2021. Happily, that's a slight re-acceleration of growth.

Analysts covering the company are expecting the revenues to grow 18% over the next twelve months, although estimates are likely to change post earnings.

There are others doing even better than Tenable. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 400% since the IPO in December. 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, licences, technical support and other necessary running expenses was at 80.4% in Q3.

Tenable Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.80 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 great 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 $5.64 billion Tenable is among smaller companies, but its more than $651.8 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 revenue expectations this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 7.3% on the results and currently trades at $55.52 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.