Reports Q3. Tenable Holdings reported Q3 results of $201.5mn and $0.23 compared to street expectations for $195.8mn and $0.16. We had expected results in Q3 of $200.8mn and $0.20. The key driver of improved performance was lower operating expenses and better gross margins - 80.3% in Q3 vs. 77.7% in Q2.

Slower Enterprise Customer Adds. Tenable saw new enterprise wins of 386 in Q3, down from 426 in Q2 and down 32% from 508 in Q3 2022. New six figure + customers grew by 56 in Q3 down from 64 in Q2 and down from 89 additions to this category in Q3 2022. Tenable cited slower mid-market selling during Q3 as drivers of slower total customer wins.

Acquires Ermetic, No Boost to Outlook. Tenable closed the acquisition of cloud security solution company Ermetic on October 2. While private, we believe Ermetics revenues were between $15-25mn per year and was a company that had raised nearly $100mn in capital. Tenable had a previous full year revenue mid-point guide of $787mn and raised the mid-point for FY23 to $791mn. This $4mn increase is offset by $2mn upside in revenues versus guidance in Q3, suggesting the true increase is only $2mn even including Ermetic. We believe this all adds up to a small cut in core Tenable revenue expectations for Q4, which we view as a concern.

Valuation Remains a Challenge. Tenable's Q3 results were somewhat positive against expectations but the outlook has raised several areas of concern. Against this backdrop, we expect Tenable valuation to be compressed further. We maintain our Hold rating on shares of Tenable primarily based on valuation concerns compared to the growth rate outlook. Tenable currently trades at a P/E of 55.5x our FY24 EPS estimate of $0.80 compared to the peer group at 22.4x.

TENB

Tenable Holdings

CyberSecurity

Reports Solid Q3, Outlook Wobbly with Acquired Revenues and CCB Guide Cut

Prepares to Report Q3, New Growth Drivers Key to Improved Outlook

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