Tenable Holdings, Inc.

Greetings. Welcome to the Tenable 3Q 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. Please note this conference is being recorded. I will now turn the conference over to your host, Aaron Carney, Senior Director of Investor Relations. Thank you. You may begin.

Thank you, Operator, and thank you all for joining us on today's conference call to discuss Tenable's third quarter 2021 financial results. With me on the call today are Amit Yaran, Tenable's Chief Executive Officer, and Steve Vince, 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 be making forward-looking statements during the course of this call, including statements relating to Tenable's guidance and expectations for the fourth quarter and full year 2021, growth and drivers in Tenable's business, changes in the threat landscape in the security industry, and our competitive position in the market, growth in our customer demand for and adoption of our solutions, the potential benefits of our acquisitions, including our recent acquisition of Accurix, 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 equivalents. 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 Amin.

Thank you, Erin, and thank you all for joining us today. Today I'll discuss our financial performance in Q3 our strong execution on our newer products, including OT, AD, and cloud, and how our security solutions combine to create a differentiated platform and capabilities. With that, let me first touch on our Q3 results. We are incredibly pleased with our performance in the third quarter. We delivered accelerated growth at scale, highlighted by 25% CCB growth this quarter, which is up from the 23% CCB growth we reported last quarter. Our impressive results on the top line are also accompanied by a sizable beat in EPS and free cash flow. This growth is being driven by traction across all of our products during the quarter, validating our platform approach. That said, there are a few areas of particular strength that are important to call out. In the third quarter, we saw notable interest in traction with Tenable AD. Securing identities is quickly becoming one of the most critical initiatives with respect to zero-trust customer implementations. Identities are also known areas of weakness and are highly targeted by ransomware. Customers have grappled with how to secure their Active Directory environments and Tenable AD is playing out exactly as we had hoped. It has opened the door to more opportunities for us. Tenable AD is a unique solution that combines a security audit of identities and ongoing attack detection in a lightweight platform. As mentioned, Tenable AD outperformed in its first quarter of availability. We believe the traction in the short time since acquisition will continue as we see strong pipeline and great opportunity for Tenable in the identity market. We also saw customers increasing focus on securing their operational technologies. The convergence between OT and IT is accelerating, and understanding these complex environments has become a priority, given all the recent examples of converged high visibility breaches and corresponding outages. Tenable's native OT capabilities work seamlessly with our deep understanding of IT, creating dramatically differentiated results. Customer OT and IT systems are increasingly interdependent, resulting in expanded business opportunities to deploy our security solutions in a more programmatic fashion across their global facilities. While starting from a small base, Temple OT is one of the fastest growing areas of our portfolio. A recent seven-figure win and massive cross-sell with a forestry company helps validate these key investments. They've been using Temple SC and IO, and as we were looking to secure both their AD and OT environments, Temple became the very obvious choice as a unified way of managing cyber risk. To further serve our customers, we're also expanding our AD and OT ecosystems. During the quarter, we announced a global strategic partnership with Splunk to secure Active Directory and converged OT environments. The clear takeaway is that we're executing well on our strategic investments in AD and OT in an era where securing these technologies is of great importance and in high demand. We see tremendous traction with our existing cloud capabilities and our acquisition of Acurex augments and extends these capabilities in dramatic ways. Cloud usage has greatly accelerated and matured from a lift and shift virtualization of on-prem infrastructures to one that is cloud native, where infrastructures are defined in code and deployed as needed. Infrastructure as code allows operations at cloud scale with just-in-time operational efficiency. Accuracy's technology integrates into customers' public and private cloud deployments and integrates with their development and build pipelines. As code is checked in, it is assessed to assure that the infrastructure and systems defined comply with the organization's security policies, compliance requirements, and best practices. Flaws are identified before cloud infrastructure and applications are deployed into production. Together, Tenable and Acurex's infrastructure as code platform can not only identify these flaws in advance, but can automatically remediate them before launching them into production. Once applications and systems are stood up at runtime, Tenable's container security and frictionless assessment capabilities deliver market-leading assessment of drift and security exposure. Acurex also provides CSPM functionality. Our capability to secure cloud environments spans the entire needs spectrum from the left in development, pre-production phase, through to the right in runtime and deployment and operational phase. We believe this is among the most holistic approaches to modern cloud security available in the market. Sentinel continues to aggressively differentiate our core VM capabilities, and we have also started bringing new products to market in some of the most exciting segments of the security space, risk analytics, OT, identity, and cloud security. While these products are demonstrating their compelling value propositions, we're most excited about our ability to integrate these technologies onto our unified platform. Doing so will deliver increasingly unique capabilities. We lead the market in our ability to deliver a unified understanding of converged IT OT environments. We're the only company which can provide an understanding of AD security implications in OT environments. With the addition of Acurex, our infrastructure as code offering leaps to the leading edge of cloud native capabilities. Integrating this shift left pre-deployment technology with our deep understanding of security at runtime through containers, frictionless assessment, and CSPM will allow Tenable to deliver a complete code-to-cloud experience to the market, one that I believe no other company matches. The strategic nature of our platform approach to our products should not be underestimated. It comes as no surprise that we continue to see strong demand for Tenable EP, our unified platform. EP combines Tenable I.O., Container, Web Application, and Lumen into one platform, enabling customers to understand risk, prioritize actions, and get the benchmarking they require so that they can focus on what's really important. We identify key risks and automate the process for what to do about it. A great example of this is a six-figure Nessus Peril upsell and competitive displacement. They purchased Tenable EP to consolidate risk analytics for multiple programs into a common platform for holistic visibility and prioritization. We are seeing strong, and we believe, sustainable momentum and expanding use cases as we bolster our platform of products, and in the coming periods, we intend to create greater leverage and unique and differentiated capabilities by bringing these products closer together. Finally, before I turn the call over to Steve, I'm excited to invite all of you to a virtual investor day we'll be holding on December 15th. We'll be sending out more detailed information in the coming weeks and hope you can attend.