Shares of Tenable Holdings (TENB 1.34%) were down 16.8% as of 2:15 p.m. ET, even after the cybersecurity exposure management company announced strong quarterly results and raised its forward revenue and earnings outlook. The market appears to be concerned over Tenable's reduced guidance for calculated current billings (CCB) -- a key measure for future growth.
On the former, Tenable's quarterly revenue grew 15% year over year, to $201.5 million, translating to an adjusted non-GAAP (generally accepted accounting principles) net income of $27.7 million, or $0.23 per share. Analysts, on average, were looking for earnings of $0.18 per share on revenue of $198.4 million.
On Tenable's strong execution, RPO growth
Tenable chairman and CEO Amit Yoran credited the company's quarterly beat to a combination of solid execution, outperformance in the public sector (which he noted had little to no impact on CCB), and strength in the U.S. federal market, with multiple seven-figure deals reflected in remaining performance obligations (RPO) growth of 15%. Tenable added 386 new enterprise platform customers during the quarter, including 58 net new customers generating revenue of $100,000 or more.
The company also generated better-than-expected unlevered free cash flow of $48.2 million during the quarter, up from $34.8 million the same year-ago period.
What's next for Tenable stock?
For the fourth quarter of 2023, Tenable expects revenue of $204 million to $208 million, with adjusted net income per share of $0.13 to $0.14. Both ranges were roughly in line with consensus estimates. As such -- in light of its quarterly beat -- Tenable increased its full-year 2023 guidance to call for revenue of $789.4 million to $793.4 million (up from $783 million to $791 million previously), and adjusted earnings per share of $0.68 to $0.69 (up from $0.65 to $0.69 before).
Curiously, however, Tenable also lowered its outlook for unlevered free cash flow to a range of $168 million to $173 million (down from $180 million to $185 million previously). The company additionally reduced its guidance for 2023 calculated current billings to be in the range of $862 million to $870 million (down from $879 million to $887 million previously).
During the subsequent conference call, management explained free cash flow is expected to take a roughly $15 million hit related to costs from Tenable's acquisition of Ermetic, which was completed in early October. As for the lowered CCB guidance, they noted that the company is seeing "some softness" in new-logo mid-market deals that began during the third quarter and is expected to persist into 2024, so they thought it prudent to be more cautious in their billings outlook until those trends subside.
In the end, this was a perfectly solid quarter, with decent top- and bottom-line results. But with concerns over future growth lingering -- and until we see signs of an improvement in calculated billings -- it's no surprise to see the stock falling under pressure.
