Tenable Holdings, Inc.

Greetings. Welcome to the Tenable Q4 2023 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. I will now turn the conference over to your host, Aaron Carney, Vice President of Investing Relations. You may begin.

Thank you, Operator, and thank you all for joining us on today's conference call to discuss Tenable's fourth quarter and full year 2023 financial results. With me on the call today are Amit Yoran, 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 make forward-looking statements during the course of this call including statements relating to our guidance and expectations for the first quarter and full year 2024, growth and drivers in our 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, including Tenable One, planned innovation and new products and services, the potential benefits and financial impact of our recent acquisition of AirMedic, our expectations regarding the cost savings associated with optimizing our go-to-market efforts, and our expectations regarding long-term profitability and free cash flow. These forward 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 a 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 annual report on Form 10-K, our quarterly report on Form 10-Q, for the quarter ended September 30, 2023, 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. Today I'll touch on our financial performance in the quarter, discuss the evolution of the business, and the momentum we're seeing in our unified platform and broader exposure solutions. We're very pleased with our results in Q4, which came in better than expected and included 14% CCP growth and 17% operating margin. For the full year, operating margin was 15%, and over 500 basis point improvement year over year. We continue to be focused on delivering balanced growth, and Q4 is a good example of what we can achieve. Underlying our strong results is healthy customer demand. In Q4, inclusive of Learnetic, we added 156 new six-figure customers, and we had another good quarter for seven-figure customers. The takeaway here is that we're increasingly landing larger customers and helping our customers secure additional asset types across their attack channels. This is a testament to the importance of exposure management, our market-leading products, and the vendor consolidation we can deliver to our customers. To that end, we continue to see great traction with Tenable One, OT, Cloud, and Identity, which collectively represent 50% of our new business in the quarter. This momentum gives us the confidence to make additional changes in the business. Since our IPO, we have successfully broadened our offerings. Through a balance of organic and inorganic investments, we have significantly scaled our business. Today, we are winning deals not just in VM, but also in cloud, OT, and identity. Perhaps more exciting is that we are able to take all of this data across multiple products and asset types and bring it together in our unified platform. These individual products have proven themselves to be highly competitive or best-in-class technologies, and they are now core to our offerings and selling motions. This evolution has now put us in a position to begin optimizing our go-to-market efforts, including reducing our reliance on sales specialists, overlay teams, and streamlining layers of management. This is a natural maturation for Tenable, and we are making these changes with an eye toward driving higher levels of productivity and efficiency for our sellers. These changes to our go-to-market and supporting functions resulted in a 5% reduction of our workforce, which is reflected in our guidance today. We are striking the right balance between efficiently running a business and investing in areas that can drive future growth. With that, I'll dive a little deeper into some of our product updates. I'll start with Tenable Cloud Security, a key area of focus for companies as more and more workloads move to the cloud. This represents one of our largest opportunities, over $16 billion in total addressable market. It's growing faster than the overall cyber market. Specifically, we have been committed to delivering a highly competitive scheme app to simplify and efficiently cut through the complexity of cloud environments so that security teams can identify difficult-to-detect problems and remediate them. Tenable Cloud Security is helping organizations address some of the most difficult challenges in cybersecurity by enabling security professionals to understand the complex relationships across assets, identities, and their entitlements. Customers are using Tenable Cloud Security to reduce risk associated with an explosion in the volume and permission of users and machine identities in the cloud. Since the acquisition of Omedic, we have integrated platform capabilities and migrated over 1,000 customers onto our consolidated CNAP capability. Feedback from these customers has been incredibly positive. Customers are highlighting the ease of deployment and the seamlessly integrated experience they are having with our full CNAP solution. Additionally, we are hearing that Temple Cloud is delivering value and critical insights that other vendors miss. Many of these customers are already increasing the number of cloud resources they are assessing. Another area where we're seeing strong demand and competitive differentiation is in OT. We're increasingly recognized as a key player in this market. We've closed deals with some of the largest global energy, healthcare, and leading manufacturing companies. We believe our success is a result of a number of factors, including the competitive capabilities of our product and our very large and global customer base. These customers rely on us to help evaluate cyber risk, and our ability to provide that coverage and understanding across both OT and IT is a major strategic differentiator. Between our technology leadership and our significant customer base and distribution, we are winning and taking share in this critical market. We'll continue to be committed to providing market leading discrete products to customers. That said, over time, we expect to have more and more of our customer engagements driven by Tenable One as our platform matures and as the diversity of data and analytics continue to improve. When combined, these highly competitive products bring even more context and understanding through our unified platform. Tenable One continues to be one of our fastest growing products. Silent solutions, even those that are best in class, cannot deliver the insights customers need to efficiently and effectively secure their environment. Tenable One delivers differentiated analytics and critical attack path analysis. Customers are finding tremendous value in the clarity and analytics that we can deliver for some of their vulnerable and critical assets. Additionally, customers are able to leverage Tenable One to consolidate multiple use cases and products on a single platform to address a broader use case. As a result, Tenable One doubled this year and is over 20% of our new business and mid-teens in total sales. And we continue to see customers shifting to convert multiple asset types as identity and cloud are two of the areas that drove outperformance in the quarter. Last quarter, we talked about using the next few quarters to execute on our product roadmap and integrate Hermetic. We are really pleased with our progress in optimizing the business, integrating Hermetic, and expanding the value proposition of our platform. As companies, regulators, and society as a whole continue to focus on cybersecurity, understanding and managing risk will remain an increasingly important area of focus. We believe we help customers understand and manage risk better than anyone and will continue to be laser-focused on delivering best-in-class products. We intend to do this with an approach that balances growth and margin. I'll now turn the call over to Steve for further commentary on our financial results and outlook.