Tenable Holdings, Inc.

Greetings and welcome to Tenable Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn this conference over to your host, Ms. Erin Carney, Senior Director of Investor Relations. Thank you, ma'am. You may begin your presentation.

Thank you, Operator, and thank you all for joining us on today's conference call to discuss Tenable's second quarter 2021 financial results. With me on today's call are Amit Yaran, Tenable's Chief Executive Officer, and Stephen, Chief Financial Officer. Prior to this call, we issued a press release announcing our financial results for the quarter. You can find the press release on the IR website at tenable.com. Before we begin, let me remind you that we will make forward-looking statements during the course of this call, including statements relating to Tenable's guidance and expectations for the third quarter and full year 2021, growth and drivers in Tenable's business, changes in the threat landscape and in the security industry and our competitive position in the market, growth in our customer demand for and adoption of our solutions, planned innovation and new products and services, Tenable's expectations regarding long-term profitability and the impact of COVID-19 on our business and on the global economy. These forward-looking statements involve risks and uncertainties, some of which are beyond our control, which could cause actual results to differ materially from those anticipated by these statements. You should not rely upon forward-looking statements as a prediction of future events. Forward-looking statements represent our management's beliefs and assumptions only as of today and should not be considered representative of our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. For further discussion of the material risks and other important factors that could affect our actual results, please refer to those contained in our most recent quarterly report on Form 10-Q. and subsequent reports that we file with the SEC, which are available on the SEC website at sec.gov. In addition, during today's call, we will discuss non-GAAP financial measures. These non-GAAP financial measures are in addition to, and not a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their closest GAAP equivalent. Our earnings release that we issued today includes GAAP to non-GAAP reconciliations for these measures and is also available on the investor relations section of our website. I'll now turn the call over to Amit.

Thank you, Erin, and thank you all for joining us today. Today I'll highlight our strong Q2 results in continued leadership in the market the traction we're seeing in cross-sell, and how our differentiated approach to cyber exposure is successfully addressing a critical need in the market. With that, let me first touch on our Q2 results. We've continued to build on the strong momentum in Q1 as reflected in our impressive Q2 results. Our calculated current building accelerated growth to 23% year-over-year, driven in part by a shift to cloud, growing cross-sell opportunities, and persisting threats and cyber incidents across IT and OT environments. We also had strong cash flow in the quarter, saw an expansion of our non-GAAP operating margin, and had a four penny beat in EPS from the high end of our GAIA range. Finally, in July, we entered into a credit agreement consisting of $375 million secured term loan and $50 million secured revolving credit facility take advantage of historically low interest rates, and bolster our balance sheet to support growth. Steve will discuss the quarter in greater detail, but we're incredibly excited about where we are and our ability to fuel the business going forward. We're seeing an increased focus on cybersecurity across all areas, including the presidential executive orders, congressional attention, focus from private industry and corporate leadership and boards of directors, increased security budgets, and desire to understand cyber risk are being driven by high-profile cyber incidents and business-impacting outages. The importance placed on prevention and risk management has never been more prominent. A holistic strategic VM program is fundamental to proper risk management. The prominence of VM continues to drive growth opportunities for Tenable. We are very optimistic about what we are seeing in the core VM market. We continue to see good greenfield opportunities, as surprisingly, many large enterprises still do not have a formal VM program. In addition, we believe that attacks like those against Microsoft and Colonial Pipeline continue to elevate discussions about risk at the board level and drive the adoption of our cyber exposure solutions. We saw strong growth in our core VM offerings in the quarter, particularly of our cloud platform, Tenable.io. Our pipeline remains healthy as customers grapple with how to get continuous visibility into their assets and understand their exposure to emerging threats. Our competitive differentiation continues to strengthen as we execute on our best-of-breed strategy. We continue to see very strong win rates. We believe our technology is considered more accurate and covers a broader set of asset types with more insightful analytics and reporting. For example, according to third party and company research, we have more than 20 plus percent greater coverage of CVEs than our competitors and test our products to Six Sigma accuracy. We believe our technology leadership and best-of-breed focus is one of many reasons why we continue to drive market share gains and competitive differentiation. A great example of this is a seven-figure win in the quarter that's a reflection of the market desire for differentiated technologies. A large government agency was looking to expand their asset coverage as well as meet continually evolving internal compliance policies and regulatory requirements. By combining our passive sensing and active scanning, they can continuously identify new assets coming online and monitor the network for a variety of sensitive security-related information. Our strategy has been to leverage our foundational understanding and expertise of VM and expand around tightly aligned use cases. Equally as important to our core portfolio is the ability to scale our solutions as digital transformation continues to broaden the attack surface. This holistic cyber exposure approach is resonating with customers, as is the continuous dynamic assessment of assets and user permissions, along with the means to prioritize remediation based on risk, which has never been more important than it is today. We saw continued strength across all our cross-sell motions, including EP, OT, and particularly around the growing opportunity with AD. Starting with our cloud offerings, we continue to help our customers secure their cloud environments. This remains an area of focus for our business as it's increasingly important to our customers. IO has grown faster than SE for several quarters in a row, which we expect to continue to be a common theme. We saw continued traction with frictionless assessments And we're excited about the long-term outlook for enabling customers to assess assets across public cloud environments without the need to perform active scans or install agents. EP continues to see strong traction, which we think validates the importance of our holistic approach. A great example of the benefit of EP is Ontario Health, where they have multiple unique solutions across a number of acquired organizations. They chose Tenable EP to standardize and provide complete coverage across all of their entities. Another area of importance for Tenable is operational technology or industrial control systems. As assets and utilities, manufacturing and data centers come online, the convergence between OT and IT is accelerating. While these environments are extremely complex, understanding these hybrid environments has become a priority. given recent examples of high visibility breaches and corresponding outages. The sales cycles can be more lengthy. However, early deployments have been successful, and we see expanded business opportunities as customers deploy in a more programmatic fashion across their global facilities. In the quarter, we had a great six-figure cross-sell win with a large public utility provider looking to gain visibility into their entire attack surface. Their positive experience as a current Tenable customer and trust in in the Tenable partnership helps give them the confidence that Tenable OT will meet their needs. Finally, while we're still in the early stages with Tenable AD, the important role this product plays in identifying risk cannot be overstated. Microsoft Active Directory is incredibly complex and exceedingly susceptible to compromise, making it one of the most targeted assets within an enterprise. The vast majority of ransomware attacks go after Active Directory. including many recent high-profile breaches and headlines. Tenable AD provides insights into the weaknesses of and active attacks against Active Directory deployments and identifies misconfigurations, making it foundational to securing cloud workloads, securing remote work, and adopting zero-trust architectures. We're seeing very strong early traction of our solution and an excited pace of pipeline creation. An example of this is a large transportation and logistics company that is an existing Tenable.io customer. Given our track record with IO and their need to increase the visibility of Intimus configurations, we looked into Tenable to help them secure their AD environment. This is a reflection of our strong reputation and the size of the Active Directory security opportunity, which remains almost entirely unaddressed. We're aggressively growing pipeline across both Tenable customers and other organizations, noting, however, that we expect Tenable AD sales to play out along longer enterprise sales cycles. Our platform provides a holistic view of cyber risk across the various technologies and compute environments that now make up the corporate attack surface. This enables customers to continuously and confidently manage cyber risk based on business risk. Helping organizations answer fundamental questions such as how exposed am I, how at risk am I, and what should I be doing about it continue to drive our focus and investment. In answering those key questions, enterprises have to grapple with everything from policy and compliance to early detection of vulnerabilities to securing their cloud infrastructure. By leveraging our core strengths, we have earned the trust of our customers to broaden our product sets. and help them solve for increased risk associated with digital transformation. Our vast experience and broad platform allow us to integrate tremendous amounts of data in one place to holistically assess cyber risk. Our long history in vulnerability management combined with this vast data set and experience in managing risk differentiates us from our competitors. Against the backdrop of persistent threats and systems outages, causing business disruption, enterprises today are not looking for good enough security solutions. Decades of companies trying to launch sub-part platforms are in part responsible for the catastrophic situation that is security today. We believe enterprises are looking for best-in-class independent audit capabilities, which can tightly integrate with the security enterprise infrastructure investments which they've already made. Leveraging a best-of-breed platform to perform this independent audit of security can achieve the required checks and balances that enterprises are looking for. We're starting off to a great start in the first half of the year and are excited about our outlook. Foundational drivers like shift to cloud and zero trust combined with ransomware and high profile breaches have increased budget and prioritization of cybersecurity and cyber risk management. In summary, we're very pleased with our Q2 results and we believe they reflect continued momentum across all areas of our business, which fuels our enthusiasm for the long term. I'll now turn the call over to Steve.