Tenable Holdings, Inc.

tenable Q2 2024 earnings conference call. At this time, all participants are in a listen-only mode. A brief 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. It is now my pleasure to introduce your host, Ms. Erin Carney, Senior Director, Investor Relations. Thank you, Ms. Carney. You may begin.

Thank you, Operator, and thank you all for joining us on today's conference call to discuss Tenable's second quarter 2024 financial results. With me on the call today are Amin Yaran, our Chief Executive Officer, and Steve Vince, our 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 our IR website at tenable.com. We will make forward-looking statements during the course of this call, including statements related to our guidance and expectations for the third 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 1, planned innovation and new products and services, the potential benefits and financial impact of our recent acquisition of Eureka, and our expectations regarding long-term profitability and free cash flow. 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 beliefs and assumptions only as of today and should not be considered representative of our views as of any subsequent date. And 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 annual report on Form 10-K and subsequent reports that we file with the FCC. In addition, all of our financial results we will discuss today are non-GAAP financial measures, with the exception of revenue. 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 press release includes GAAP to non-GAAP reconciliations for these measures. I'll now turn the call over to Amin.

Thank you, Aaron. We delivered mixed results for the quarter with lower than expected CCB, but without performance in revenue and earnings. Exposure management continues to generate demand, particularly for Tenable One and cloud security as key priority areas for CISOs. Before I get into the quarter, I'd like to first comment briefly on the recent CrowdStrike outage. This incident highlights the importance of independent cybersecurity assessments and the negative global consequences of creating single points of failure with any one vendor. Excessive reliance on any one vendor reduces enterprise resilience, just as deviating from best-of-breed platforms increases exposure to risk. Boards have fiduciary responsibility to oversee cyber hygiene, and we expect that regulators will play an increasingly critical role in promoting resiliency and requiring transparency. We believe the path forward for modern organizations lies in interoperable, best-of-breed platforms that empower enterprises to reduce risk and improve cyber hygiene. Now, on to the quarter. A few areas stood out as notable in Q2. First, customers continued to highly scrutinize their spend and rigorously prioritize their investments. Second, and this is a positive trend for us, is that exposure management is gaining increasing momentum in the industry among customers and analysts. Customers need and want to understand their level of risk across their attack surface, from their IT environment, to the cloud, to their critical infrastructure. And we believe that has resulted in strong traction for Tenable One. And third, as customers increasingly rely on cloud, we are seeing strong momentum for our cloud exposure solution. In fact, one of our largest deals for the quarter was for a cloud security product with a major financial services company. And we'll talk more about that in a few minutes. Let me dig deeper on that first point on spending patterns that we noticed in Q2. We continue to see a great deal of customer scrutiny around cyber spending. This makes it more difficult to transact and close new deals as new projects and procurements are getting the greatest scrutiny. This trend becomes more apparent as deal sizes get larger. These two dynamics were more pronounced in our vulnerability management business in Q2 than what we had seen historically. And while our mid-shift to our faster-growing exposure solutions is healthy, it is not enough to offset the cyclical impact of our traditional standalone VM business. While VM is becoming more cyclical, we remain the clear leader. VM continues to drive initial Tenable One adoption and lays the groundwork for future upsell opportunities. Our win rates continue to be very strong. Exposure management is becoming increasingly critical for customers. We pioneered this category knowing that point products leave customers with an incomplete view of actual risk in their environments. This is where Tenable shines. Tenable One, our exposure management platform, provides a unified approach and consolidates visibility across asset types to deliver insights that individual products alone cannot provide. And there's also compelling ORI to customers who consolidate spend and reduce complexity in their security stack. We are expanding into budgets beyond VM and broadening our reach within enterprises. Tenable has become a trusted source of truth for boards, and executives needing to understand their businesses' exposure and risk. We're seeing this play out in our product mix as Tenable One represented 30% of new business in Q2. We are also seeing increased utilization with different asset types, which allows customers to leverage features such as attack path analytics, visualize the riskiest exposures and toxic combinations, and enables customers to quickly assess and safeguard their business. We're also seeing significant momentum in cloud security. Prioritization of cloud security spend coupled with our CNAP offering resulted in strong growth in our cloud security for the quarter. Tenable Cloud Security delivers immediate value as an exceptionally user-friendly multi-cloud solution. We're starting to land technical wins with large, sophisticated enterprises. In fact, this is the second quarter in a row that one of our largest deals included cloud security. As I mentioned, the Fortune 100 financial services company selected us this quarter for Keem, which is an integral piece to CNAP. Their other cloud security provider for CNAP was not able to deliver visibility in identity for cloud, but we are the best provider to meet their needs. During the quarter, we acquired Eureka, a leading data security posture management company, adding discovering and securing data to tenable clouds. We're excited to add enhanced DSPM to our CNAP offering, which we expect to happen this year. We're also expanding our generative AI capabilities to maximize customer value. Along with integrating AI into our products, we're also seeing rapid adoption of our exposure management platform to identify where and how AI is operating in customer environments. We introduced two new capabilities in Q2. First, an AI security posture management capability within our cloud security offering that detects AI misconfigurations in services like AWS Bedrock and Azure OpenAI and ensures compliance with their organization's security policies. Second, we now provide runtime detection to identify AI software libraries and browser plugins that may be in use within the enterprise. We believe this is an innovative capability to alert security teams where the unauthorized use of AI may be taking place in their environments. As we look ahead, we are going to focus on optimizing the business by investing in areas that matter most to our customers while continuing to drive profitability in the business. We will continue to enhance our CMAP offering, add additional features to Tenable One, and leverage AI to drive efficiency in our products and to solve problems for our customers. On that note, Steve will go into more detail, but we are introducing our 2025 unlevered free cash flow target of $280 to $290 million today. We believe this is a strong initial target representing our commitment to deliver durable cash flow growth, and we look forward to updating you as we get through the second half of the year. We'll continue to evaluate the appropriate level of investment and resources going forward to strike the right balance of growth and profitability. This is an exciting time for Tenable. We're leveraging our leadership position in VM, seeing major momentum in cloud, and delivering broader exposure management platforms. Despite challenges for this quarter, I am confident in our long-term strategy and our ability to grow over the ensuing years. I'll now turn the call over to Steve for further commentary on our financial results and outlook.