night, recent cyber-security IPO, Tenable (TENB 30.07, -2.18, -6.76%), issued 2Q18 results and
provided upside guidance for both Q3 and FY18, but, shares are sliding lower
this morning nonetheless. It's difficult to pinpoint exactly where the
disappointment lies, because, TENB actually outperformed its own Q2 guidance
that it provided in its IPO prospectus, and, its outlook was certainly
If we were to nit-pick, perhaps it could be that its billings guidance for FY18 suggests some slow down in growth to 34% from 49% in FY17. However, as the company grows, some deceleration should be expected. TENB is still growing at solid double-digit rates. Another possibility is that TENB did take a step backwards in terms of achieving profitability as expenses were ratcheted higher, and as gross margin slipped a bit.
Another explanation for the weakness today may simply be that investors in its IPO were sitting on sizable 40% gains. With its first quarterly report now in the rear view, often a positive catalyst for a recent IPO, some investors may be locking in those gains today.
As we noted above, TENB provided guidance for Q2 in its IPO prospectus. Specifically, it projected revenue of $62.3-$63.3 mln and billings of $76-$77 mln. It actually slightly outperformed its own expectations, reporting revenue of $63.6 mln (+44%) and billings of $77.4 mln (+39%). A key catalyst for the top-line growth was the addition of 282 new enterprise customers, up 30% year/year. Additionally, it added 33 net new $100K+ annual recurring customers, hitting 340 in total.
These metrics helped it to exceed analysts' bottom line estimates of a loss of ($0.20) by posting a loss of ($0.18)/share. However, the magnitude of beat could have been greater had non-GAAP gross margin not slipped to 85% from 88%. Furthermore, its Sales & Marketing expense ramped up by 51%, outpacing revenue growth, which played a major role in its operating loss expanding to ($16.4) mln from ($9.2) mln.
The good news, though, is that cash flow from operations improved to a positive $200K from a cash burn of ($1.0) mln in 2Q17.
TENB also issued upside guidance for 3Q18 and FY18. For Q3, it expects a loss per share of ($0.19)-($0.18) versus the ($0.23) consensus, on revenue of $66-$66.5 mln. For FY18, it sees a loss per share of ($0.72)-($0.70) versus the ($0.79) expectation on revenue of $260-$260 mln compared to the $257.5 mln estimate.
To conclude, TENB's first quarterly report as a public company was solid from a growth standpoint, and as it relates to expectations. That said, there are a couple blemishes (slip in margin, wider operating losses) that some investors may be looking at and using as a reason to lock in gains if they were involved with the IPO. All in all, there were more positives than negatives in our opinion.
- OUR VIEW
- LEARNING CENTER