Tenable Holdings, Inc. (TENB) Q3 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals strong performance in the U.S. federal vertical, optimistic revenue guidance, and robust enterprise customer growth. The integration of Apex and focus on AI security are strategic positives. Management's confidence in sustaining billings levels and the positive sentiment in the Q&A further support a positive outlook. Despite some lack of clarity on long-term billings, the overall sentiment is positive, suggesting a stock price increase in the short term.
Key Financial Performance
Revenue $252.4 million, representing growth of 11.2% year-over-year. The growth was underpinned by a solid foundation of renewal business, strong Tenable One adoption, and better-than-expected contribution from professional services.
Recurring Revenue 95% of total revenue, consistent with prior performance, indicating strong subscription-based business.
Calculated Current Billings (CCB) $267.5 million, a year-over-year increase of 7.7%. This growth was driven by new platform growth and changes in upfront billing patterns.
Short-term Remaining Purchase Obligations (CRPO) Grew 12.9% year-over-year, reflecting increasing contract durations and strong platform adoption.
Net Dollar Expansion Rate 106%, in line with expectations, indicating stable customer retention and expansion.
Non-GAAP Gross Margin 81.6%, an increase from 81.4% in Q3 2024, showing steady improvement in profitability.
Non-GAAP Income from Operations $58.9 million or 23.3% of revenue, compared to $45 million or 19.8% of revenue in Q3 2024. This increase reflects operational leverage and targeted investments, including an 18% growth in R&D expenses.
Non-GAAP Earnings Per Share $0.42, compared to $0.32 in Q3 2024, an increase of 31.3%, driven by higher profitability and a decrease in diluted shares outstanding.
Cash and Short-term Investments $383.6 million, reflecting strong liquidity.
Unlevered Free Cash Flow $58.5 million, compared to $60.8 million in Q3 2024. Year-to-date unlevered free cash flow increased by 24.7% to $189.6 million, driven by operational efficiency.
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Operating Highlights
Tenable One adoption: Strong growth with Tenable One, representing approximately 40% of new business in Q3 2025. Launched Tenable AI Exposure to address risks associated with generative AI.
R&D Investments: R&D spending increased by over 20% year-to-date, focusing on innovations in Tenable One and AI-driven solutions.
Platform Integrations: Surpassed 300 validated integrations in the Tenable One platform, enhancing its open and interconnected ecosystem.
Customer Growth: Added 437 new enterprise platform customers in Q3 2025, a 13% increase compared to Q3 2024.
Global Expansion: Strong momentum globally, with half of new customers adopting exposure solutions.
Revenue Growth: Achieved 11% year-over-year revenue growth, reaching $252.4 million in Q3 2025.
Profitability: Non-GAAP income from operations increased to $58.9 million, representing 23.3% of revenue.
Recurring Revenue: Maintained a high percentage of recurring revenue at 95%.
Shift to Preemptive Security: Tenable is leading a shift from reactive to preemptive cybersecurity, driven by AI advancements and exposure management.
Customer Wins: Secured major contracts, including a global real estate firm, a national electric utility provider, and a public sector technology provider, emphasizing Tenable One's capabilities.
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Risk or Challenges
AI-driven threat landscape: AI is reshaping the threat landscape, making attacks faster, more automated, and sophisticated. This exposes the limitations of traditional reactive defenses and increases the urgency for preemptive security measures.
Customer complexity in hybrid environments: Many customers face challenges managing risk across hybrid environments with assets spread across on-prem infrastructure, multiple cloud providers, and third-party systems. This complexity can lead to visibility gaps and operational inefficiencies.
Operational technology (OT) security: The convergence of IT and OT environments, especially in critical sectors like energy, creates challenges in integrating security frameworks and protecting national-scale infrastructure.
Vulnerability prioritization: Enterprises are overwhelmed with vulnerability findings, making it difficult to determine which risks require immediate action. This can lead to inefficiencies in remediation efforts.
Regulatory and compliance pressures: Organizations, especially those in sensitive sectors like public utilities and government, face increasing regulatory and compliance requirements, adding complexity to their security operations.
Market shift to preemptive security: The shift from reactive to preemptive security requires significant changes in mindset, technology adoption, and investment, which can be challenging for organizations to implement effectively.
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Guidance & Outlook
Revenue Expectations: For Q4 2025, revenue is expected to range between $249.1 million and $253.1 million, representing a year-over-year increase of 6.5% at the midpoint. For full year 2025, revenue guidance has been raised to a range of $988 million to $992 million, representing a year-over-year increase of 10.0% at the midpoint.
Operating Income: Non-GAAP income from operations for Q4 2025 is expected to range between $55.7 million and $59.7 million, or 23.0% of revenue at the midpoint. For full year 2025, non-GAAP operating income guidance has been raised to a range of $211 million to $215 million, or 21.5% of revenue at the midpoint, representing a year-over-year increase of 100 basis points.
Earnings Per Share (EPS): Non-GAAP EPS for Q4 2025 is expected to range between $0.39 and $0.43, flat at the midpoint compared to Q4 2024. For full year 2025, non-GAAP EPS guidance has been raised to a range of $1.51 to $1.54, representing year-over-year growth of 18.2% at the midpoint.
Capital Allocation: The company plans to continue share repurchases, with $250 million of repurchase authorization remaining, as part of its capital allocation strategy.
Market Trends and Strategic Direction: The company anticipates a significant shift in cybersecurity spending from reactive post-breach technologies to preemptive security approaches, driven by advancements in AI. This shift is expected to benefit Tenable's exposure management platform, Tenable One.
Product and R&D Investments: R&D investments have increased by over 20% year-to-date, focusing on innovations in Tenable One, including AI-driven capabilities and integrations with third-party tools. The company plans to continue investing in preemptive security solutions and expanding its ecosystem.
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Shareholder Return Plan
Share Repurchase Program: During the third quarter, we repurchased 2 million shares for $60 million. In total, we have now repurchased 8.3 million shares for $300 million since November 2023 and have $250 million of repurchase authorization remaining. We intend to continue to repurchase shares, which we believe is an effective use of capital.
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Key Q&A
Q:Can you discuss the performance of the U.S. federal vertical this quarter and its historical performance during prior shutdowns?
A:The U.S. federal vertical performed in line with expectations this quarter, which is notable given the seasonally high mix of U.S. federal business. Historically, the company has demonstrated the ability to execute during government shutdowns.
Q:What is implied by the deceleration of revenue in Q4 within the full-year guidance, and what scenarios might lead to upside?
A:The deceleration in Q4 is due to it being a seasonally smaller federal quarter with minimal exposure. The company feels positive about the pipeline and renewals, with a couple of million dollars potentially at play. Upside could come from strong pipeline execution and renewals.
Q:What impact might the expiration of CISA 2015 have on CVE reporting and the core VM business?
A:Based on feedback from customers and partners, no significant negative impact is anticipated at this time. The company will monitor the situation closely.
Q:Are there any changes to the guidance philosophy with the new CFO?
A:No substantial changes to the guidance philosophy. The CFO is pleased with the high-functioning team and the focus on the right priorities.
Q:How was the billings guidance range determined, and what factors influenced it?
A:The guidance range reflects increased positivity about the year due to strong Q3 results and visibility into Q4. The midpoint guidance for CCB increased by $1 million, which flows into revenue and operating income guidance.
Q:Can you provide insights into enterprise customer additions and trends in $100,000 ACV customers?
A:The company added 437 new enterprise platform customers, one of the strongest quarters to date. Larger deals are being transacted, with deal sizes increasing by 50% to 90% compared to standalone VM.
Q:What efforts are underway to capitalize on the OT market and simplify environments for customers?
A:The company is focusing on the convergence of OT and IT assets, with increased visibility and responsibility for CISOs. Investments in R&D are aimed at unifying visibility, normalizing data, and leveraging AI to secure the AI attack surface.
Q:What percentage of the customer base is on Tenable One, and what is the potential for upselling?
A:Approximately 3,000 out of 18,000 enterprise customers are using Tenable One, representing 40% of total new sales. There is significant opportunity to expand within existing customers and further traction within the customer base.
Q:Where does exposure management rank in customer budgets, and what is the confidence in sustaining current billings levels?
A:Exposure management is gaining traction and visibility, with budgets increasingly allocated to it. The company is focused on 2025 and believes it is well-positioned for the long term.
Q:How is the company addressing AI innovation and security?
A:The company is leveraging AI to contextualize risk, enable autonomous remediation, and secure the AI attack surface. Investments are focused on unifying visibility, normalizing data, and leveraging AI for proactive security.
Q:What is the traction with the Apex acquisition and AI exposure?
A:The Apex acquisition has been integrated into the platform, enabling the discovery of AI applications and shadow AI. AI exposure allows inspection at the prompt level and is foundational to the company's broader AI strategy.
Q:How are integrations contributing to deal velocity and sizes?
A:Integrations enable the company to assess a wide range of domains and ingest data from other security providers, delivering unified visibility, insights, and action to customers.
Q:What are the biggest unlocks to accelerate the platform mix as a percentage of new business?
A:The company is focusing on expanding within its installed base, monetizing third-party asset types, and leveraging AI innovations. Pricing, packaging strategies, and marketing are also being evaluated.
Q:What is the demand environment across different market segments and geographies?
A:Demand was even across the board, with strong results in U.S. Federal and new customer additions. The platform's traction and ability to deliver unified visibility and insights are resonating with customers.
Q:How is the company positioned in the competitive cloud security market?
A:The company is focusing on a consolidation story around its platform, enabling hybrid security across on-prem, cloud, OT, and identity. Displacements of competitors like Wiz and incumbent VM players highlight its competitive positioning.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the inorganic contribution to billings for the quarter and year, stating it was 'very insignificant.' Additionally, they did not provide clarity on 2026 billings expectations, emphasizing a focus on 2025 instead.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
AI analytics
Brown
CISOs
IDC
RD
Tenable exposure
Tenable vendor
action attack
attacker
challenge
complexity
compliance
connectivity
cybersecurity
defense
domain
ecosystem
exposure Council
exposure industry
exposure maturity
firm
framework
gap
industry shift
infrastructure
insight action
intelligence context
journey
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maturity model
mindset
party tool
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platform enterprise
shift exposure
silo
step
strength
transformation
visibility insight
vulnerability security
world
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