10q10k10q10k.net

What changed in Tenable Holdings, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Tenable Holdings, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+316 added−295 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-24)

Top changes in Tenable Holdings, Inc.'s 2023 10-K

316 paragraphs added · 295 removed · 239 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

45 edited+11 added−9 removed36 unchanged
Biggest changeAll of the above products, now available in Tenable One, continue to be offered as standalone solutions, alongside the following: • Tenable.sc : our on-premises Vulnerability Management offering that provides a risk-based view of an organization’s IT, security and compliance posture so organizations can quickly identify, investigate and prioritize their assets and vulnerabilities based on risk assessment and predictive analytics, and provide insightful remediation guidance. • Tenable.ot : our Operational Technology Security solution that provides threat detection, asset tracking, vulnerability management, and configuration control capabilities to protect OT environments, including industrial networks.
Biggest changeWe believe this capability is critical to help security executives effectively translate technical information and communicate cybersecurity risk to a non-technical audience, including the C-suite and the board of directors, to enable them to make better strategic decisions on where to focus investment to maximize cybersecurity risk reduction. • Tenable Attack Surface Management : our External Attack Surface Management solution continuously maps the internet, enabling security teams to discover connections to internet-facing assets so they can assess the cybersecurity posture of their entire external attack surface. • Tenable Security Center : our on-premises Vulnerability Management offering that provides a risk-based view of an organization’s IT, security and compliance posture so organizations can quickly identify, investigate and prioritize their assets and vulnerabilities based on risk assessment and predictive analytics, and provide insightful remediation guidance. 6 Table of Contents • Tenable OT Security : our Operational Technology Security solution that provides threat detection, asset tracking, vulnerability management, and configuration control capabilities to protect OT environments, including industrial networks.
The complexity of the modern attack surface is a key driver behind the growing need for exposure management programs. Security teams are overwhelmed with the constant influx of data from the array of point solutions they are using to manage interconnected vulnerabilities, web applications, identity systems and cloud assets.
The complexity of the modern attack surface is a key driver behind the growing need for exposure management programs. Security teams are overwhelmed with the constant influx of data from the array of point solutions they are using to manage cloud assets, interconnected vulnerabilities, web applications, and identity systems.
We strive to be a career destination where employees from all backgrounds are welcome and empowered, are treated with fairness and respect, can make a difference, and have the opportunity to grow. Compensation, Benefits and Talent Development We provide robust compensation and benefits packages to attract and retain our talent.
We strive to be a career destination where employees from all backgrounds are welcome and empowered, are treated with fairness and respect, can make a difference, and have the opportunity to grow. Compensation, Benefits and Talent Development We provide robust compensation and benefits packages to attract and retain our employees.
Our dedicated Diversity and Inclusion Council and Employee Resource Groups – along with our committed leaders and managers – strive to attract and hire employees who bring broad diversity of background, thought and style into the company and foster a sense of inclusion to make them want to stay.
Our dedicated Diversity & Inclusion Council and Employee Resource Groups – along with our committed leaders and managers – strive to attract and hire employees who bring broad diversity of background, thought and style into the company and foster a sense of inclusion to make them want to stay.
Our competitors include: vulnerability management and assessment vendors, including Qualys and Rapid7; diversified security software and services vendors; endpoint security vendors with vulnerability assessment capabilities, including CrowdStrike; public cloud vendors and companies, such as Palo Alto Networks, that offer solutions for cloud security (private, public and hybrid cloud); and providers of point solutions that compete with some of the features present in our solutions.
Our competitors include: vulnerability management and assessment vendors, including Qualys and Rapid7; diversified security software and services vendors; endpoint security vendors with vulnerability assessment capabilities, including CrowdStrike; public cloud vendors and companies, such as Palo Alto Networks and Wiz, that offer solutions for cloud security (private, public and hybrid cloud); and providers of point solutions that compete with some of the features present in our solutions.
Item 1. Business Overview We are a leading provider of exposure management solutions. Exposure management is an effective discipline for managing, measuring and comparing cybersecurity risk in today's complex IT environments. 4 Table of Contents Organizations around the globe are accelerating their adoption of public and private cloud infrastructure, introducing internet-facing applications and embracing new identity management systems.
Item 1. Business Overview We are a leading provider of exposure management solutions. Exposure management is an effective discipline for measuring, comparing and reducing cybersecurity risk in today's complex IT environments. 4 Table of Contents Organizations around the globe are accelerating their adoption of public and private cloud infrastructure, introducing internet-facing applications and embracing new identity management systems.
The SEC’s website https://www.sec.gov contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 11 Table of Contents The contents of any website referred to in this Form 10-K are not intended to be incorporated into this Annual Report on Form 10-K or in any other report or document we file with the SEC.
The SEC’s website https://www.sec.gov contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The contents of any website referred to in this Form 10-K are not intended to be incorporated into this Annual Report on Form 10-K or in any other report or document we file with the SEC.
In order to be effective, we believe an exposure management platform must extend beyond traditional vulnerability management, which concentrates on the discovery and remediation of publicly disclosed Common Vulnerabilities and Exposures, or CVEs.
In order to be effective, an exposure management platform must extend beyond traditional vulnerability management, which concentrates on the discovery and remediation of publicly disclosed Common Vulnerabilities and Exposures, or CVEs.
We aim to incentivize our employees by aligning a portion of their compensation with the overall success of our business. In addition to base salary, our benefits packages include annual bonuses, equity awards, an employee stock purchase plan, retirement plans, along with health and wellness benefits.
We aim to incentivize our employees by aligning a portion of their compensation with the overall success of our business. In addition to base salary, our total rewards packages include annual bonuses, equity awards, an employee stock purchase plan, retirement plans, and health and wellness benefits.
Such obligations may include, without limitation, the Federal Trade Commission Act, the California Consumer Privacy Act of 2018, or the CCPA, the Colorado Privacy Act, Virginia’s 9 Table of Contents Consumer Data Protection Act, the European Union’s General Data Protection Regulation 2016/679, or EU GDPR, the EU GDPR as it forms part of the United Kingdom law by virtue of section 3 of the European Union (Withdrawal) Act of 2018, or UK GDPR, and the ePrivacy Directive.
Such obligations may include, without limitation, the Federal Trade Commission Act, the California Consumer Privacy Act of 2018, or the CCPA, the Colorado Privacy Act, Virginia’s Consumer Data Protection Act, the Connecticut Privacy Act, the Utah Consumer Privacy Act, the European Union’s General Data Protection Regulation 2016/679, or EU GDPR, the EU GDPR as it forms part of the United Kingdom law by virtue of section 3 of the European Union (Withdrawal) Act of 2018, or UK GDPR, and the ePrivacy Directive.
As we collect more data and ingest more data from third-party sources, we believe our data set will become even more valuable over time, which will allow us to continue to develop new analytical products and capabilities to our existing product suite over time. • Explore acquisition opportunities .
As we collect more data and ingest more data from third-party sources, we believe our data set will become even more valuable over time, which will allow us to continue to develop new analytical products and capabilities to our existing product suite over time. 7 Table of Contents • Explore acquisition opportunities .
Sales and Marketing Our sales strategy employs both a direct-touch approach through our sales forces and a low-touch approach through sales closed by our channel partners and transacted on our e-commerce website. Both direct-touch and channel-originated sales are fulfilled through our channel partnerships.
Sales and Marketing Our sales strategy employs both a direct-touch approach through our sales force and a low-touch approach through sales closed by our channel partners and on our e-commerce website. Both direct-touch and channel-originated sales are fulfilled through our channel partnerships.
Despite our efforts to protect our trade secrets and proprietary rights through intellectual property rights, licenses and confidentiality and invention assignment agreements, unauthorized parties may still attempt to copy, reverse engineer, misappropriate or otherwise obtain and use our software and technology.
Despite our efforts to protect our trade secrets and proprietary rights through intellectual property rights, licenses and confidentiality and invention assignment agreements, unauthorized parties may still attempt to copy, reverse engineer, misappropriate or otherwise obtain and use 9 Table of Contents our software and technology.
We have not experienced any work stoppages, and we consider our relations with our employees to be good. We believe in upholding a core set of values for our entire global workforce: • One Tenable : We are united as one Tenable team. We win together.
We have not experienced any work stoppages, and we consider our relations with our employees to be good. We believe in upholding a core set of values for our entire global workforce: • One Tenable : We work together and we win together.
We strive to be a career destination where employees from all backgrounds are welcome and empowered, treated with fairness and respect, presented with opportunities to make a difference, and provided opportunities to grow.
We strive to be a career destination where employees from all backgrounds are welcomed, treated with fairness and respect, empowered to make a difference, and provided opportunities to grow.
Diversity and Inclusion We seek to cultivate a diverse and inclusive workforce and environment to achieve exceptional business results. When we value and celebrate differences, we drive more innovation and grow closer to our customers, partners, and 10 Table of Contents communities.
Diversity and Inclusion We seek to cultivate a diverse and inclusive workforce and environment to achieve exceptional business results. When we value and celebrate differences, we drive more innovation and grow closer to our customers, partners, and communities.
Human Capital At December 31, 2022, we had 1,900 employees, including 796 employees located outside of the United States. None of our U.S. employees are represented by a labor union or covered by a collective bargaining agreement. Certain international employees are subject to collective bargaining agreements in connection with local labor laws.
Human Capital At December 31, 2023, we had 1,999 employees, including 898 employees located outside of the United States. None of our U.S. employees are represented by a labor union or covered by a collective bargaining agreement. Certain international employees are subject to collective bargaining agreements in connection with local labor laws.
Our key human capital objectives are to attract, retain and develop our highly talented existing and future employees, while cultivating a diverse and inclusive workforce and environment to achieve exceptional business results.
Our key human capital objectives are to attract, retain, engage, reward and develop our highly talented existing and future employees, while cultivating a diverse and inclusive workforce and culture to achieve exceptional business results.
We rely on a combination of trade secrets, copyrights, patents and trademarks, as well as contractual protections, to establish and protect our intellectual property rights and protect our proprietary technology. At December 31, 2022, we had 26 issued patents and 25 patent applications pending in the United States.
We rely on a combination of trade secrets, copyrights, patents and trademarks, as well as contractual protections, to establish and protect our intellectual property rights and protect our proprietary technology. At December 31, 2023, we had 38 issued patents and 21 patent applications pending in the United States.
For most organizations, the modern attack surface includes: • Identity and access management systems used to control user privileges, which are vulnerable to misconfigurations that can open up attack pathways within an organization; • An assortment of operational technology, or OT — such as industrial control systems, or ICS, and supervisory control and data acquisition, or SCADA, systems — which is increasingly internet-facing and is often linked to existing IT systems; • Personal devices, including mobile phones and tablets, internet of things, or IoT, devices and other types of “shadow IT” used by employees, often without the knowledge of the IT and security teams; and • Virtual machines, microservices, open-source code repositories, containers and other tools used by DevOps teams.
For most organizations, the modern attack surface includes: • Complex and dynamic multi-cloud environments, which organizations are rapidly adopting even as they face a shortage of cloud security expertise; • Identity and access management systems used to control machine identities, APIs and user privileges, which are vulnerable to misconfigurations that can open up attack pathways within an organization; • An assortment of operational technology, or OT — such as industrial control systems, or ICS, and supervisory control and data acquisition, or SCADA, systems — which is increasingly internet-facing and is often linked to existing IT systems; • Personal devices, including mobile phones and tablets, internet of things, or IoT, devices and other types of “shadow IT” used by employees, often without the knowledge of the IT and security teams; and • Virtual machines, microservices, open-source code repositories, containers and other tools used by DevOps teams.
We believe there is a substantial opportunity to increase adoption of our enterprise platform offerings. We have experienced growth in new enterprise platform customers due to improved product capabilities and investments in sales and marketing.
To accomplish these objectives, we intend to: • Continue to acquire new enterprise platform customers. We believe there is a substantial opportunity to increase adoption of our enterprise platform offerings. We have experienced growth in new enterprise platform customers due to improved product capabilities and investments in sales and marketing.
Our cash flows from operating activities were $131.2 million, $96.8 million and $64.2 million in 2022, 2021 and 2020, respectively. 5 Table of Contents Our Solutions With Tenable One, organizations can translate technical data about assets, vulnerabilities and threats into clear business insights and actionable intelligence for security executives and practitioners.
Our cash flows from operating activities were $149.9 million, $131.2 million and $96.8 million in 2023, 2022 and 2021, respectively. Our Solutions With Tenable One, organizations can translate technical data about assets, vulnerabilities and threats into clear business insights and actionable intelligence for security executives and practitioners.
Our issued patents expire between 2027 and 2040 and cover our network scanning, monitoring and analysis technologies and additional features of our platform offerings. At December 31, 2022, we had 18 registered trademarks and 2 trademark applications pending in the United States. We view our copyrights, trade secrets and know-how as a significant component of our intellectual property assets.
Our issued patents expire between 2027 and 2042 and cover our network scanning, monitoring and analysis technologies and additional features of our platform offerings. At December 31, 2023, we had 20 registered trademarks in the United States. We view our copyrights, trade secrets and know-how as a significant component of our intellectual property assets.
To be a functional part of an exposure management program, the platform needs to include information about configuration issues, vulnerabilities and attack paths across a spectrum of assets and technologies — including identity solutions, such as Active Directory; cloud configurations and deployments; and web applications. With these considerations in mind, we launched Tenable One in October 2022.
The platform must include information about configuration issues, vulnerabilities and attack paths across a spectrum of assets and technologies — including cloud configurations and deployments, identity solutions, such as Active Directory; and web applications. With these considerations in mind, we launched Tenable One in October 2022.
At December 31, 2022 and 2021, we had backlog of $14.7 million and $27.7 million, respectively. We expect substantially all of the backlog at December 31, 2022 to be invoiced within the following 12 months. 8 Table of Contents Competition The market for cybersecurity solutions is fragmented, intensely competitive and constantly evolving.
At December 31, 2023 and 2022, we had backlog of $23.4 million and $14.7 million, respectively. We expect the majority of the backlog at December 31, 2023 to be invoiced within the following 12 months. Competition The market for cybersecurity solutions is fragmented, intensely competitive and constantly evolving.
To support these initiatives, we build partnerships within our communities to support organizations and events that strive for greater representation of women and underrepresented minorities in cybersecurity, hold inclusion and bias mitigation training and offer targeted development opportunities to assist with career advancement.
To support these initiatives, we build partnerships within our communities to support organizations and events that strive for greater representation of women and underrepresented minorities in cybersecurity, hold inclusion training and offer targeted development opportunities to assist with career advancement. Environmental Stewardship We care deeply about the places where we live and work.
At December 31, 2022, we had approximately 43,000 customers. At December 31, 2022 our customers included approximately 60% of the Fortune 500 and approximately 40% of the Global 2000 and large government agencies. In 2022, 2021 and 2020, no single customer represented more than 2% of our revenue.
At December 31, 2023 our customers included approximately 65% of the Fortune 500 and approximately 50% of the Global 2000 and large government agencies. In 2023, 2022 and 2021, no single customer represented more than 2% of our revenue.
In 2022, 2021 and 2020 our total revenue was $683.2 million, $541.1 million and $440.2 million, respectively, representing year-over-year growth rates of 26% from 2021 to 2022 and 23% from 2020 to 2021. Our net loss was $92.2 million, $46.7 million and $42.7 million in 2022, 2021 and 2020, respectively.
In 2023, 2022 and 2021 our total revenue was $798.7 million, $683.2 million and $541.1 million, respectively, representing year-over-year growth rates of 17% from 2022 to 2023 and 26% from 2021 to 2022. Our net loss was $78.3 5 Table of Contents million, $92.2 million and $46.7 million in 2023, 2022 and 2021, respectively.
We continue to cultivate knowledge and affinity within this user base, which, when combined with our enterprise customers and Tenable Research, creates powerful network effects in the form of a 6 Table of Contents continuous feedback loop of data and insights.
We continue to cultivate knowledge and affinity within this user base, which, when combined with our enterprise customers and Tenable Research, creates powerful network effects in the form of a continuous feedback loop of data and insights. We use these learnings to expand our assessment capabilities and coverage, continually optimize our solutions and inform our product strategy and innovation priorities.
We provide a variety of educational resources for cybersecurity practitioners and leaders, as well as DevOps teams, OT practitioners and identity and access management practitioners, including a community forum where customers can ask questions of our experts and their peers. We execute marketing programs targeted at new customer acquisition, customer retention and cross-selling and up-selling of products across our platform.
We provide a variety of educational resources for cybersecurity practitioners and leaders, as well as cloud security teams, DevOps teams, OT practitioners and identity and access management practitioners, including a community forum where customers can ask questions of our experts and their peers.
Tenable One incorporates these Tenable products: • Tenable.io : our cloud-delivered software-as-a-service, or SaaS, Vulnerability Management offering that provides organizations with a risk-based view of traditional and modern attack surfaces.
AI and ML improves vulnerability prioritization and the ability to accurately gauge the risk posed by identities and entitlements across cloud and on-premise environments. Tenable One incorporates these Tenable products: • Tenable Vulnerability Management : our cloud-delivered software-as-a-service, or SaaS, vulnerability management offering that provides organizations with a risk-based view of traditional and modern attack surfaces.
In July 2022, we introduced Nessus Expert , which adds Infrastructure as Code, or IaC, scanning along with external attack surface discovery capabilities to identify all domains and subdomains that make up an organization’s external-facing attack surface.
We believe these data and insights will also fuel and strengthen our benchmarking capabilities over time. Nessus Expert adds Web App scanning capabilities, Infrastructure as Code, or IaC, scanning along with external attack surface discovery capabilities to identify all domains and subdomains that make up an organization’s external-facing attack surface.
We promote and support employee development and organizational effectiveness by providing high-quality learning and development programs as well as tuition assistance programs. These programs are designed to meet individual, team and organizational needs and objectives. We strive to enhance learning and development programs to create a better workplace environment and to build a better Tenable.
We promote and support employee development and organizational effectiveness by providing high-quality learning and development programs as well as tuition assistance programs. These programs are designed to meet individual, team and organizational needs and objectives, enabling our workforce to grow professionally and increase their impact to the business.
Tenable.ot is sold as a stand-alone solution and integrates with Tenable.io and Tenable.sc. In addition, our Nessus product line is one of the most widely deployed vulnerability assessment solutions in the cybersecurity industry and underpins our enterprise platform. Since the introduction of Nessus in 1998, an extensive community of Nessus users has emerged.
All of the above products, now available in Tenable One, continue to be offered as standalone solutions. In addition, our Nessus product line is one of the most widely deployed vulnerability assessment solutions in the cybersecurity industry and underpins our enterprise platform. Since the introduction of Nessus in 1998, we have built and nurtured an extensive community of Nessus users.
We believe ongoing and timely development of new products and features is imperative to maintaining our competitive position. We continue to invest in development of our solutions across our global research and development team.
Frequent updates from Tenable Research ensure the latest vulnerability checks, zero-day research, and configuration benchmarks are available within our exposure management solutions. 8 Table of Contents We believe ongoing and timely development of new products and features is imperative to maintaining our competitive position. We continue to invest in development of our solutions across our global research and development team.
Our principal executive offices are located at 6100 Merriweather Drive, Columbia, Maryland 21044. Our telephone number is (410) 872-0555. Our website address is www.tenable.com.
Tenable Holdings, Inc. was incorporated in Delaware in October 2015. In November 2015, Tenable Network Security, Inc. was merged into a wholly owned subsidiary and in 2017 was renamed as Tenable, Inc. Our principal executive offices are located at 6100 Merriweather Drive, Columbia, Maryland 21044. Our telephone number is (410) 872-0555. Our website address is www.tenable.com.
We use a two-tiered channel model whereby we sell our enterprise platform offerings to our distributors, which in turn sell to our resellers, which then sell to end users, which we call customers. 7 Table of Contents Our customers are located in over 170 countries and include enterprises of all sizes and span a wide range of industries, including manufacturing, energy and industrials; technology, media and telecommunications; banking, insurance and finance; government, education and non-profit; healthcare; and retail and consumer.
Our customers are located in over 170 countries and include organizations of all sizes and span a wide range of industries, including manufacturing, energy and industrials; technology, media and telecommunications; banking, insurance and finance; government, education and non-profit; healthcare; and retail and consumer. At December 31, 2023, we had approximately 44,000 customers.
We speak straight and we do the right thing. • Deliver Results : We set high goals, take bold risks, measure honestly and deliver results that exceed expectations. • What We Do Matters : The work that we do makes a difference in the world.
We speak candidly and we always do the right thing. • What We Do Matters : The work that we do makes a difference in the world.
Our health and welfare benefits include health and life insurance, paid time off, family leave, and employee assistance programs. We are committed to a hybrid workplace strategy where employees have the flexibility to define the environment where they can do their best work.
Our health and wellness benefits include medical and life insurance, paid time off, family leave, and employee 10 Table of Contents assistance programs. We are committed to a structured hybrid workplace strategy which both allows flexibility and recognizes the value of in-person collaboration and community.
Our channel partners include distributors, value-added resellers, system integrators and managed security service providers. Our marketing efforts focus on cultivating brand awareness and leveraging our brand strength with Nessus, building demand across all segments with a specific emphasis on our enterprise customers and delivering tailored marketing programs focused on security executives, functional managers, security practitioners, managed service providers and consultants.
We are focused on building demand across all segments with a specific emphasis on our enterprise customers and delivering tailored marketing programs for security executives, functional managers, security practitioners, managed service providers and consultants. Our marketing efforts are also designed to create a broad community and establish the Tenable brand as a trusted resource of credible educational information.
Tenable.io is designed with views, workflows and dashboards to deliver a complete and continuous view of all assets, both known and previously unknown, and any associated vulnerabilities, internal and regulatory compliance violations, misconfigurations and other cybersecurity issues, prioritize these issues for remediation based on risk assessment and predictive analytics, and provide insightful remediation guidance. • Tenable.io Web Application Scanning : our easy-to-use, comprehensive and automated Vulnerability Scanning for modern web applications, which allows organizations to quickly configure and manage web app scans, enabling them to identify vulnerabilities and prioritize remediation. • Tenable Lumin Exposure View : our measurement tool, which leverages our expansive knowledge base of assets and vulnerabilities coupled with data science insights, to help our customers objectively score, trend and benchmark cyber risk across their organizations, including by business unit or geography, for comparison and best practices.
Tenable Cloud Security provides cloud security teams the tools they need to apply security and compliance policies, prioritize security gaps and remediate risks that matter most across multi-cloud environments. • Tenable Identity Exposure : our solution to secure Active Directory environments by enabling users to find and fix existing weaknesses before they are exploited and detect and respond to ongoing attacks in real time without the need to deploy agents or use privileged accounts. • Tenable Web App Scanning : our easy-to-use, comprehensive and automated Vulnerability Scanning for modern web applications, which allows organizations to quickly configure and manage web app scans, enabling them to identify vulnerabilities and prioritize remediation. • Tenable Lumin Exposure View : our measurement tool, which leverages our expansive knowledge base of assets and vulnerabilities coupled with data science insights, to help our customers objectively score, trend and benchmark cyber risk across their organizations, including by business unit or geography, for comparison and best practices.
Furthermore, our data is exported out to enrich third-party IT management and security systems. Our Growth Strategy Our objectives are to maintain our market leadership in exposure management and to capture our large market opportunity. To accomplish these objectives, we intend to: • Continue to acquire new enterprise platform customers.
Furthermore, our data is exported out to enrich third-party IT management and security systems. Our Growth Strategy Our objectives are to expand our market leadership in exposure management and to scale our business by capturing our large market opportunities in cloud identity and OT, while expanding our operating and free cash flow margins.
We believe that environmentally responsible operating practices are important to generating value for our stockholders, being a good partner with our customers and being a good employer to our employees. Energy consumption and usage within data centers is an important component of our day-to-day operations of our business. We outsource our data center needs to Amazon Web Services, or AWS.
Our energy consumption and usage within data centers is an important component of our day-to-day operations of our business. We outsource our data center needs to Amazon Web Services, or AWS. AWS, in addition to carefully choosing data center locations to mitigate environmental risk, has a long-term commitment to use 100% renewable energy.
Research and Development We continue to invest substantial resources in research and development to enhance our platform offerings by developing new features, functionality, and applications. Our engineering expertise combines extensive security product development experience with individuals who possess deep cloud and user interface design backgrounds.
Our engineering expertise combines extensive security product development experience with individuals who possess deep cloud and user interface design backgrounds. Our Tenable Research team is staffed by cybersecurity, cloud and data science experts who deliver exposure management intelligence, data science insights, alerts and security advisories.
Financial Information and Segments Segment and geographic information required by Part I, Item 1 of Form 10-K can be found in Note 1 and Note 13 of the Notes to our Consolidated Financial Statements included in Part II, Item 8, Financial Statements, of this Form 10-K.
Financial Information and Segments See Note 1 and Note 13 to our consolidated financial statements in this Annual Report on Form 10-K for segment and geographical information. 11 Table of Contents Corporate Information Tenable Network Security, Inc., our predecessor, was incorporated under the laws of the State of Delaware in 2002.
Removed
We believe this capability is critical to help security executives effectively translate technical information and communicate cybersecurity risk to a non-technical audience, including the C-suite and the board of directors, to enable them to make better strategic decisions on where to focus investment to maximize cybersecurity risk reduction. • Tenable.cs : our cloud-native Cloud Security solution enables security teams to continuously assess the security posture of their cloud environments by maintaining a current inventory of cloud assets for proactive analysis whenever a new vulnerability is published.
Added
Tenable One leverages artificial intelligence, or AI, and machine learning, or ML, to rapidly analyze and interpret vast data sets, deliver rapid prioritization of exposures and assets and the likelihood of exploit, deliver recommendations, and automates routine tasks and streamlines workflows.
Removed
Tenable.cs provides cloud security teams the tools they need to apply, monitor and report on security and compliance policies across multi-cloud environments. • Tenable.ad : our solution to secure Active Directory environments by enabling users to find and fix existing weaknesses before they are exploited and detect and respond to ongoing attacks in real time without the need to deploy agents or use privileged accounts. • Tenable.asm : our External Attack Surface Management solution continuously maps the internet, enabling security teams to discover connections to internet-facing assets so they can assess the cybersecurity posture of their entire external attack surface.
Added
Tenable Vulnerability Management is designed with views, workflows and dashboards to deliver a complete and continuous view of all assets, both known and previously unknown, and any associated vulnerabilities, internal and regulatory compliance violations, misconfigurations and other cybersecurity issues, prioritize these issues for remediation based on risk assessment and predictive analytics, and provide insightful remediation guidance. • Tenable Cloud Security : Built on innovative cloud-native application protection platform (CNAPP) technology, and leading cloud infrastructure entitlement management (CIEM) acquired with Ermetic in October 2023, Tenable Cloud Security enables security teams to continuously assess the security posture of their cloud environments by maintaining a current view of cloud assets and identities to minimize exposure and enforce a least privilege approach at scale.
Removed
We use these learnings to expand our assessment capabilities and coverage, continually optimize our solutions and inform our product strategy and innovation priorities. We believe these data and insights will also fuel and strengthen our benchmarking capabilities over time.
Added
We use a two-tiered channel model whereby we sell our enterprise platform offerings to our distributors, which in turn sell to our resellers, which then sell to end users, which we call customers.
Removed
Our marketing efforts are also designed around building community and establishing the Tenable brand as a trusted resource of credible educational information.
Added
Our channel partners include distributors, value-added resellers, system integrators and managed security service providers. Our marketing efforts focus on cultivating brand awareness and leveraging our track record of innovation in exposure management to expand into new markets.
Removed
Additionally, our Tenable Research team is staffed by cybersecurity and data science experts who deliver exposure management intelligence, data science insights, alerts and security advisories. Frequent updates from Tenable Research ensure the latest vulnerability checks, zero-day research, and configuration benchmarks are available within our exposure management solutions.
Added
We execute marketing programs targeted at new customer acquisition, customer retention and cross-selling and up-selling of products across our platform. Research and Development We continue to invest substantial resources in research and development to enhance our platform offerings by developing new features, functionality, and applications.
Removed
We are one team internally, with our customers, with our partners and in the market. • We Care : About our work, about our customers, about one another and about our communities.
Added
Our Tenable Research Team has developed AI-based research tools to help improve efficiency and effectiveness in processes such as reverse engineering, code debugging, web app security and visibility into cloud-based tools.
Removed
In addition to our global talent acquisition team receiving a diversity sourcing and recruiting certification, we have hired a team to help spearhead these initiatives. Environmental Stewardship Our Board and management team recognize that we have a role to play in environmental stewardship.
Added
We are part of one Tenable team - employees, customers, partners and other stakeholders. • Deliver Results: We set high goals, take bold risks, measure honestly and deliver results that exceed expectations. • We Care : We are committed to our work, our customers, our colleagues and our communities.
Removed
In 2014, AWS shared its long-term commitment to achieve 100 percent renewable energy usage for the global AWS infrastructure footprint. Additionally, our corporate headquarters is a LEED Certified Gold for Core Construction.
Added
Our Board and management team recognize that we have a role to play in environmental stewardship. We believe that environmentally responsible operating practices are important to generating value for our stockholders, being a good partner with our customers and being a good employer to our employees.
Removed
Corporate Information Tenable Network Security, Inc., our predecessor, was incorporated under the laws of the State of Delaware in 2002. Tenable Holdings, Inc. was incorporated in Delaware in October 2015. In November 2015, Tenable Network Security, Inc. was merged into a wholly owned subsidiary and in 2017 was renamed as Tenable, Inc.
Added
Aside from data center needs, greenhouse gas emissions and water and energy usage are not material factors in the day-to-day operations of our business. However, we believe that we can still play a part through environmentally sound practices. Tenable headquarters is a LEED Certified Gold for Core Construction.
Added
In addition, we have taken the following actions to enable environmental stewardship: • Implemented recycling in our offices; • Offer biodegradable to-go boxes to reduce food waste; • Have a strict policy for disposing of hardware; and • Transitioned to a travel portal that provides detail on our carbon footprint.
Added
Tenable and our employees have donated time and money to important environmental causes, such as healthy waterways and other clean-up efforts, recycling, carbon footprint mitigation and protection of threatened wildlife.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

103 edited+45 added−21 removed298 unchanged
Biggest changeFactors that could cause fluctuations in the market price of our common stock include the following: • actual or anticipated changes or fluctuations in our operating results; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments; • industry or financial analyst or investor reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • price and volume fluctuations in the overall stock market from time to time; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • failure to comply with the terms of the Credit Agreement; • sales of shares of our common stock by us or our stockholders; • failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property rights or our solutions, or third-party proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new or proposed laws or regulations or new interpretations of existing laws or regulations applicable to our business, including proposed changes to the U.S. corporate income tax rate and capital gains tax rates; • any major changes in our management or our Board of Directors; • general economic conditions and slow or negative growth of our markets; and • other events or factors, including those resulting from pandemics such as COVID-19, war, incidents of terrorism or responses to these events.
Biggest changeFactors that could cause fluctuations in the market price of our common stock include the following: • actual or anticipated changes or fluctuations in our operating results; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • announcements by us or our competitors of new products or new or terminated significant contracts, commercial relationships or capital commitments; • industry or financial analyst or investor reaction to our press releases, other public announcements and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • price and volume fluctuations in the overall stock market from time to time; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • failure to comply with the terms of the Credit Agreement; • sales of shares of our common stock by us or our stockholders; • failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property rights or our solutions, or third-party proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • new or proposed laws or regulations or new interpretations of existing laws or regulations applicable to our business, including proposed changes to the U.S. corporate income tax rate and capital gains tax rates; • any major changes in our management or our Board of Directors; • general economic conditions and slow or negative growth of our markets; and • other events or factors, including those resulting from public health crises such as pandemics or similar outbreaks, war, incidents of terrorism or responses to these events. 36 Table of Contents Recently, the stock markets have experienced extreme price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies, high rates of inflation and interest rates, disruptions in access to bank deposits or lending commitments due to bank failures and uncertainty about economic stability and concerns about an economic recession in the United States or other major markets, the ongoing military conflict between Ukraine and Russia, the ongoing conflict in the Middle East, increasing tensions between China and Taiwan and macroeconomic conditions.
In addition to data privacy and security laws, we may be contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future. Furthermore, we are bound by other contractual obligations relating to data privacy and security, and our efforts to comply with such obligations may not be successful.
In addition to data privacy and security laws, we are contractually subject to industry standards adopted by industry groups and may become subject to such obligations in the future. Furthermore, we are bound by other contractual obligations relating to data privacy and security, and our efforts to comply with such obligations may not be successful.
Our revenue and results of operations have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control, including: • the level of demand for our solutions; • the introduction of new products and product enhancements by existing competitors or new entrants into our market, and changes in pricing for solutions offered by us or our competitors; • the rate of renewal of subscriptions, and extent of expansion of assets under such subscriptions, with existing customers; • the mix of customers licensing our products on a subscription basis as compared to a perpetual license; • large customers failing to renew their subscriptions; • the size, timing and terms of our subscription agreements with new customers; • our ability to interoperate our solutions with our customers’ network and security infrastructure, including remote devices; • the timing and growth of our business, in particular through our hiring of new employees and international expansion; • network outages, security breaches, technical difficulties or interruptions with our solutions (including security breaches by our service providers or vendors); • changes in the growth rate of the markets in which we compete; • the length of the license term, amount prepaid and other material terms of subscriptions to our solutions sold during a period; • customers delaying purchasing decisions in anticipation of new developments or enhancements by us or our competitors or otherwise; • changes in customers’ budgets; • seasonal variations related to sales and marketing and other activities, such as expenses related to our customers; • our ability to increase, retain and incentivize the channel partners that market and sell our solutions; • our ability to integrate our solutions with our ecosystem partners’ technology; • our ability to integrate any future acquisitions of businesses; 18 Table of Contents • our brand and reputation; • the timing of our adoption of new or revised accounting pronouncements applicable to public companies and the impact on our results of operations; • our ability to control costs, including our operating expenses, such as personnel costs, third-party cloud infrastructure costs and facilities costs; • our ability to hire, train and maintain our direct sales force; • unforeseen litigation and intellectual property infringement; • fluctuations in our effective tax rate; • general economic and political conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers operate; and • other events or factors, including those resulting from pandemics such as COVID-19, war, incidents of terrorism or responses to these events, or an economic recession in the United States or other major markets.
Our revenue and results of operations have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control, including: • the level of demand for our solutions; • the introduction of new products and product enhancements by existing competitors or new entrants into our market, and changes in pricing for solutions offered by us or our competitors; • the rate of renewal of subscriptions, and extent of expansion of assets under such subscriptions, with existing customers; • the mix of customers licensing our products on a subscription basis as compared to a perpetual license; • large customers failing to renew their subscriptions; • the size, timing and terms of our subscription agreements with new customers; • our ability to interoperate our solutions with our customers’ network and security infrastructure, including remote devices; • the timing and growth of our business, in particular through our hiring of new employees and international expansion; • network outages, security breaches, technical difficulties or interruptions with our solutions (including security breaches by our service providers or vendors); • changes in the growth rate of the markets in which we compete; • the length of the license term, amount prepaid and other material terms of subscriptions to our solutions sold during a period; • customers delaying purchasing decisions in anticipation of new developments or enhancements by us or our competitors or otherwise; • changes in customers’ budgets; • seasonal variations related to sales and marketing and other activities, such as expenses related to our customers; • our ability to increase, retain and incentivize the channel partners that market and sell our solutions; • our ability to integrate our solutions with our ecosystem partners’ technology; • our ability to integrate any future acquisitions of businesses; • our brand and reputation; • the timing of our adoption of new or revised accounting pronouncements applicable to public companies and the impact on our results of operations; • our ability to control costs, including our operating expenses, such as personnel costs, third-party cloud infrastructure costs and facilities costs; 19 Table of Contents • our ability to hire, train and maintain our direct sales force; • unforeseen litigation and intellectual property infringement; • fluctuations in our effective tax rate; • general economic and political conditions, both domestically and internationally, as well as economic conditions specifically affecting industries in which our customers operate; and • other events or factors, including those resulting from public health crises such as pandemics or similar outbreaks, war, incidents of terrorism or responses to these events, or an economic recession in the United States or other major markets.
Furthermore, the Organization for Economic Co-operation and Development, or OECD, is leading work on proposals, commonly referred to as “BEPS 2.0”, which, if implemented, would make important changes to the international tax system.
Furthermore, the Organization for Economic Co-operation and Development, or OECD, is leading work on proposals, commonly referred to as “BEPS 2.0”, which, if and to the extent implemented, would make important changes to the international tax system.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, or if our solutions fail to detect vulnerabilities or incorrectly detect vulnerabilities, or if they contain undetected errors or defects, we could experience adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences. • Our future quarterly results of operations are likely to fluctuate significantly due to a wide range of factors, which makes our future results difficult to predict. • Our business and results of operations depend substantially on our customers renewing their subscriptions with us and expanding the number of IT assets or IP addresses under their subscriptions.
If our information technology systems or data, or those of third parties upon which we rely, are or were compromised, or if our solutions fail to detect vulnerabilities or incorrectly detect vulnerabilities, or if they contain undetected errors or defects, we could experience adverse consequences, including but not limited to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse consequences. 12 Table of Contents • Our future quarterly results of operations are likely to fluctuate significantly due to a wide range of factors, which makes our future results difficult to predict. • Our business and results of operations depend substantially on our customers renewing their subscriptions with us and expanding the number of IT assets or IP addresses under their subscriptions.
Our Credit Agreement imposes various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things: • pay dividends or distributions, repurchase equity, prepay, redeem or repurchase certain debt, and make certain investments; • incur additional debt and issue certain preferred stock; • provide guarantees in respect of obligations of other persons; • incur liens on assets; • engage in certain asset sales, including capital stock of our subsidiaries; • merge, consolidate with, or sell all or substantially all our assets to another person; • enter into transactions with affiliates; • enter into agreements that restrict distributions from our subsidiaries; • designate subsidiaries as unrestricted subsidiaries; and • prohibit certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to us.
Our Credit Agreement imposes various covenants that limit our ability and/or our restricted subsidiaries’ ability to, among other things: • pay dividends or distributions, repurchase equity, prepay, redeem or repurchase certain debt, and make certain investments; • incur additional debt and issue certain preferred stock; • provide guarantees in respect of obligations of other persons; • incur liens on assets; • engage in certain asset sales, including capital stock of our subsidiaries; • merge, consolidate with, or sell all or substantially all our assets to another person; • enter into transactions with affiliates; • enter into agreements that restrict distributions from our subsidiaries; 30 Table of Contents • designate subsidiaries as unrestricted subsidiaries; and • prohibit certain restrictions on the ability of restricted subsidiaries to pay dividends or make other payments to us.
Our new offerings or enhancements and changes to our existing offerings could fail to attain sufficient market acceptance for many reasons, including: • failure to predict market demand accurately, including changes in demand as a result of macroeconomic trends, in terms of functionality and to supply offerings that meets this demand in a timely fashion; 24 Table of Contents • defects, errors or failures; • negative publicity about their performance or effectiveness; • delays in releasing our new offerings or enhancements to our existing offerings to the market; • introduction or anticipated introduction of competing products by our competitors; • poor business conditions for our customers, including as a result of difficult macroeconomic conditions, causing them to delay or forgo IT purchases; and • reluctance of customers to purchase cloud-based offerings.
Our new offerings or enhancements and changes to our existing offerings could fail to attain sufficient market acceptance for many reasons, including: • failure to predict market demand accurately, including changes in demand as a result of macroeconomic trends, in terms of functionality and to supply offerings that meets this demand in a timely fashion; • defects, errors or failures; • negative publicity about their performance or effectiveness; • delays in releasing our new offerings or enhancements to our existing offerings to the market; • introduction or anticipated introduction of competing products by our competitors; • poor business conditions for our customers, including as a result of difficult macroeconomic conditions, causing them to delay or forgo IT purchases; and • reluctance of customers to purchase cloud-based offerings.
If we, our customers, or a third party upon which we rely, experience a security incident or other interruption, or are perceived to have experienced a security incident or other interruption, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting obligations and/or oversight; restrictions on processing information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions of our operations (including availability of data); financial loss (including by issuing credits to our customers); and other similar harm.
If we, our customers, or a third party upon which we rely, experience a security incident or other interruption, or are perceived to have experienced a security incident or other interruption, we may experience adverse consequences, such as government enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional reporting obligations and/or oversight; restrictions on processing information (including personal data); litigation (including class claims); indemnification obligations; negative publicity; reputational harm; monetary fund diversions; interruptions of our operations (including availability of data); financial loss (including by issuing credits to our customers); diversion of management attention; and other similar harm.
Although there have been legislative proposals to repeal or defer the capitalization requirement, there can be no assurance that the provision will be repealed or otherwise modified.
Although legislative proposals have been made to repeal or defer the capitalization requirement, there can be no assurance that the provision will be repealed or otherwise modified.
Our retention rate may also decline or fluctuate if our existing customers choose to reduce or delay technology spending in response to economic conditions, including those resulting from exchange rate fluctuations relative to the U.S. dollar that make our products more expensive to existing customers, decades-high inflation or an economic recession in the United States or other major markets, that could lead to decreased spending, as well as a result of a number of other factors, including our customers’ satisfaction or dissatisfaction with our software, the increase in the contract value of subscription and support contracts from new customers, the effectiveness of our customer support services, our pricing, the prices of competing products or services, mergers and acquisitions affecting our customer base, global economic conditions, and the other risk factors described in this Annual Report on Form 10-K.
Our retention rate may also decline or fluctuate if our existing customers choose to reduce or delay technology spending in response to economic conditions, including those resulting from exchange rate fluctuations relative to the U.S. dollar that make our products more expensive to existing customers, high rates of inflation and interest rates or concerns of an economic recession in the United States or other major markets, that could lead to decreased spending, as well as a result of a number of other factors, including our customers’ satisfaction or dissatisfaction with our software, the increase in the contract value of subscription and support contracts from new customers, the effectiveness of our customer support services, our pricing, the prices of competing products or services, mergers and acquisitions affecting our customer base, global economic conditions, and the other risk factors described in this Annual Report on Form 10-K.
Any success that we may experience in the future will depend in large part on our ability to, among other things: • maintain and expand our customer base; • increase revenue from existing customers through increased or broader use of our offerings within their organizations; • improve the performance and capabilities of our offerings through research and development or the integration of acquired products and capabilities; • continue to develop and expand our enterprise platform; • maintain or increase the rate at which customers purchase and renew subscriptions to our enterprise platform offerings; • continue to successfully expand our business domestically and internationally; and • successfully compete with other companies.
Any success that we may experience in the future will depend in large part on our ability to, among other things: • maintain and expand our customer base; 14 Table of Contents • increase revenue from existing customers through increased or broader use of our offerings within their organizations; • improve the performance and capabilities of our offerings through research and development or the integration of acquired products and capabilities; • continue to develop and expand our enterprise platform; • maintain or increase the rate at which customers purchase and renew subscriptions to our enterprise platform offerings; • continue to successfully expand our business domestically and internationally; and • successfully compete with other companies.
Our business operations are subject to interruption by natural disasters, including those related to the long-term effects of climate change, and other catastrophic events such as fire, floods, power loss, telecommunications failure, cyberattack, war or terrorist attack, or epidemic or pandemic, such as the COVID-19 pandemic.
Our business operations are subject to interruption by natural disasters, including those related to the long-term effects of climate change, and other catastrophic events such as fire, floods, power loss, telecommunications failure, cyberattack, war or terrorist attack, or epidemic or pandemic.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we 40 Table of Contents have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq, the SEC or other regulatory authorities.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our common stock could decline, and we could be subject to sanctions or investigations by the Nasdaq, the SEC or other regulatory authorities.
If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs.
If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. 32 Table of Contents Increased inflation rates can adversely affect us by increasing our costs, including labor and employee benefit costs.
Because our agreements with certain third-party service 16 Table of Contents providers, such as Amazon Web Services, or AWS, limit their liability for damages, we may not be able to recover a material portion of our liabilities to our customers and third parties arising from issues with such third-party service providers, such as AWS, in the event of an incident affecting the third parties’ systems.
Because our agreements with certain third-party service providers, such as Amazon Web Services, or AWS, limit their liability for damages, we may not be able to recover a material portion of our liabilities to our customers and third parties arising from issues with such third-party service providers, such as AWS, in the event of an incident affecting the third parties’ systems.
Noncompliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences.
Noncompliance with these laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension 39 Table of Contents and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences.
This also makes it difficult for us to rapidly increase our revenue growth through additional sales in any period, as revenue from new customers generally will be recognized over the term of the applicable agreement. We may not be able to scale our business quickly enough to meet our customers’ growing needs.
This also makes it difficult for us to rapidly 15 Table of Contents increase our revenue growth through additional sales in any period, as revenue from new customers generally will be recognized over the term of the applicable agreement. We may not be able to scale our business quickly enough to meet our customers’ growing needs.
We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees. Our ability to successfully pursue our growth strategy also depends on our ability to attract, motivate and retain our personnel. Competition for well-qualified employees in all aspects of our business is intense.
We cannot ensure that we will be able to retain the services of any members of our senior management or other key employees. 27 Table of Contents Our ability to successfully pursue our growth strategy also depends on our ability to attract, motivate and retain our personnel. Competition for well-qualified employees in all aspects of our business is intense.
The issuance of additional regulatory or accounting guidance related to existing or future tax laws, or changes to tax laws or regulations proposed or implemented by the current or a future U.S. presidential administration, Congress, or taxing authorities in other jurisdictions, including jurisdictions outside of the United States, could materially affect our tax obligations and effective tax rate.
The issuance of additional regulatory or accounting guidance related to existing or future tax laws, or changes to tax laws or regulations proposed or implemented by the current or a future U.S. presidential administration, Congress, or taxing authorities in other jurisdictions, including jurisdictions outside of the 40 Table of Contents United States, could materially affect our tax obligations and effective tax rate.
Further, the accounting rules and regulations are continually changing in ways that could impact our financial statements. The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
Further, the accounting rules and regulations are continually changing in ways that could impact our financial statements. 31 Table of Contents The preparation of financial statements in conformity with generally accepted accounting principles in the United States, or U.S. GAAP, requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.
These consequences include, but are not limited to: government enforcement actions (such as investigations, fines, penalties, audits, inspections, and similar actions); litigation (including class-action related claims); additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
These consequences include, but are not limited to: government enforcement actions (such as investigations, fines, penalties, audits, inspections, and similar actions); litigation (including class-action related claims) and mass arbitration demands; additional reporting requirements and/or oversight; bans on processing personal data; and orders to destroy or not use personal data.
To the extent that intellectual property claims are made against our customers based on their usage of our technology, we have certain obligations to indemnify and defend such customers from those claims. The term of our 33 Table of Contents contractual indemnity provisions often survives termination or expiration of the applicable agreement.
To the extent that intellectual property claims are made against our customers based on their usage of our technology, we have certain obligations to indemnify and defend such customers from those claims. The term of our contractual indemnity provisions often survives termination or expiration of the applicable agreement.
It is impossible to predict the extent to which our operations, or those of our partners or customers, will be impacted in the short and long term, or the ways in which the conflict may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.
It is impossible to predict the extent to which our operations, or those of our partners or customers, will be impacted in the short and long term, or the ways in which these conflicts may impact our business. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial.
Acquisitions involve many risks, including the following: • an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • we may encounter difficulties in, or may be unable to, successfully sell any acquired solutions; • an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • our use of cash to pay for an acquisition would limit other potential uses for our cash; and • if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants.
Acquisitions involve many risks, including the following: 28 Table of Contents • an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • we may encounter difficulties or unforeseen expenditures in integrating the business, technologies, products, personnel or operations of any company that we acquire, particularly if key personnel of the acquired company decide not to work for us; • an acquisition may disrupt our ongoing business, divert resources, increase our expenses and distract our management; • an acquisition may result in a delay or reduction of customer purchases for both us and the company acquired due to customer uncertainty about continuity and effectiveness of service from either company; • we may encounter difficulties in, or may be unable to, successfully sell any acquired solutions; • an acquisition may involve the entry into geographic or business markets in which we have little or no prior experience or where competitors have stronger market positions; • our use of cash to pay for an acquisition would limit other potential uses for our cash; • the issuance of additional stock in connection with an acquisition could result in substantial dilution to our existing stockholders; and • if we incur debt to fund such acquisition, such debt may subject us to material restrictions on our ability to conduct our business as well as financial maintenance covenants.
Any change in export or import laws and regulations or economic or trade sanctions, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws 38 Table of Contents and regulations could also result in decreased use of our products, or in our decreased ability to export or sell our products to existing or potential customers.
Any change in export or import laws and regulations or economic or trade sanctions, shift in the enforcement or scope of existing laws and regulations, or change in the countries, governments, persons or technologies targeted by such laws and regulations could also result in decreased use of our products, or in our decreased ability to export or sell our products to existing or potential customers.
These provisions include: • a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors; 36 Table of Contents • the ability of our Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairperson of our Board of Directors, Chief Executive Officer or president (in the absence of a chief executive officer) or a majority vote of our Board of Directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our amended and restated bylaws, which may inhibit the ability of an acquirer to affect such amendments to facilitate an unsolicited takeover attempt; • the ability of our Board of Directors, by majority vote, to amend our amended and restated bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our amended and restated bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.
These provisions include: • a classified Board of Directors with three-year staggered terms, which could delay the ability of stockholders to change the membership of a majority of our Board of Directors; • the ability of our Board of Directors to issue shares of preferred stock and to determine the price and other terms of those shares, including preferences and voting rights, without stockholder approval, which could be used to significantly dilute the ownership of a hostile acquirer; • the exclusive right of our Board of Directors to elect a director to fill a vacancy created by the expansion of our Board of Directors or the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our Board of Directors; • a prohibition on stockholder action by written consent, which forces stockholder action to be taken at an annual or special meeting of our stockholders; • the requirement that a special meeting of stockholders may be called only by the chairperson of our Board of Directors, Chief Executive Officer or president (in the absence of a chief executive officer) or a majority vote of our Board of Directors, which could delay the ability of our stockholders to force consideration of a proposal or to take action, including the removal of directors; • the requirement for the affirmative vote of holders of at least 66 2/3% of the voting power of all of the then outstanding shares of the voting stock, voting together as a single class, to amend the provisions of our amended and restated certificate of incorporation relating to the issuance of preferred stock and management of our business or our amended and restated bylaws, which may inhibit the ability of an acquirer to affect such amendments to facilitate an unsolicited takeover attempt; • the ability of our Board of Directors, by majority vote, to amend our amended and restated bylaws, which may allow our Board of Directors to take additional actions to prevent an unsolicited takeover and inhibit the ability of an acquirer to amend our amended and restated bylaws to facilitate an unsolicited takeover attempt; and • advance notice procedures with which stockholders must comply to nominate candidates to our Board of Directors or to propose matters to be acted upon at a stockholders’ meeting, which may discourage or deter a potential acquirer from conducting a solicitation of proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us. 38 Table of Contents These provisions may prohibit large stockholders, in particular those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time.
There is no guarantee that our solutions will detect all vulnerabilities or threats in our customers' systems, especially in light of the rapidly changing security landscape to which we must respond. Additionally, our solutions may falsely detect 17 Table of Contents vulnerabilities or threats that do not actually exist.
There is no guarantee that our solutions will detect all vulnerabilities or threats in our customers' systems, especially in light of the rapidly changing security landscape to which we must respond. Additionally, our solutions may falsely detect vulnerabilities or threats that do not actually exist.
These competitors may also offer their products at a lower price, which could increase pricing pressure on our offerings and cause the average sales price for our offerings to decline. These larger competitors are also often better positioned to withstand any significant reduction in capital spending, and will therefore 13 Table of Contents not be as susceptible to economic downturns.
These competitors may also offer their products at a lower price, which could increase pricing pressure on our offerings and cause the average sales price for our offerings to decline. These larger competitors are also often better positioned to withstand any significant reduction in capital spending, and will therefore not be as susceptible to economic downturns.
Many of the risks associated with usage of open source software cannot be eliminated, and could negatively affect our business, results of operations and financial condition. 34 Table of Contents Risks Related to An Investment in Our Common Stock Our stock price may be volatile, and the value of our common stock may decline.
Many of the risks associated with usage of open source software cannot be eliminated, and could negatively affect our business, results of operations and financial condition. Risks Related to An Investment in Our Common Stock Our stock price may be volatile, and the value of our common stock may decline.
We have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, deliberate or unintentional human or software errors, capacity constraints, fraud or security incidents.
We have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, deliberate or 17 Table of Contents unintentional human or software errors, capacity constraints, fraud or security incidents.
Additionally, our business depends upon the appropriate and successful implementation of our product by our customers. If our customers fail to use our solutions according to our specifications, our customers may suffer a security incident on their own systems or other adverse consequences.
Additionally, our business depends upon the appropriate and successful implementation of our product by our customers. If our customers fail to use our solutions according to our specifications, our customers may suffer a security incident on their own systems or other 18 Table of Contents adverse consequences.
We have registrations and/or pending applications for additional trademarks in the United States; however, we cannot assure you that any future trademark registrations will be issued for pending or future applications or 32 Table of Contents that any registered trademarks will be enforceable or provide adequate protection of our proprietary rights.
We have registrations and/or pending applications for additional trademarks in the United States; however, we cannot assure you that any future trademark registrations will be issued for pending or future applications or that any registered trademarks will be enforceable or provide adequate protection of our proprietary rights.
Our competitors include: vulnerability management and assessment vendors, including Qualys and Rapid7; diversified security software and services vendors; endpoint security vendors with nascent vulnerability assessment capabilities, including CrowdStrike; public cloud vendors and companies, such as Palo Alto Networks, that offer solutions for cloud security (private, public and hybrid cloud); and providers of point solutions that compete with some of the features present in our solutions.
Our competitors include: vulnerability management and assessment vendors, including Qualys and Rapid7; 13 Table of Contents diversified security software and services vendors; endpoint security vendors with nascent vulnerability assessment capabilities, including CrowdStrike; public cloud vendors and companies, such as Palo Alto Networks and Wiz, that offer solutions for cloud security (private, public and hybrid cloud); and providers of point solutions that compete with some of the features present in our solutions.
To the extent we are not able to obtain or maintain a facility security clearance, we may not be able to bid on or win new classified contracts, and existing contracts requiring a facility security clearance could be terminated. Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results.
To the extent we are not able to obtain or maintain a facility security clearance, we may not be able to bid on or win new classified contracts, and existing contracts requiring a facility security clearance could be terminated. 33 Table of Contents Any failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results.
Our current international operations and future initiatives will involve a variety of risks, including: • increased management, infrastructure and legal costs associated with having international operations; • reliance on channel partners; • trade and foreign exchange restrictions, including potential changes in trade relations arising from policy initiatives; • volatility of foreign exchange rates; • economic or political instability in foreign markets, including instability related to the United Kingdom’s recent exit from the European Union and the corresponding impact on its ongoing legal, political, and economic relationship with the European Union and heightened levels of inflation; • greater difficulty in enforcing contracts, accounts receivable collection and longer collection periods; • changes in regulatory requirements, including, but not limited to data privacy, data protection and data security regulations; • difficulties and costs of staffing, managing and potentially reorganizing foreign operations, including increased employee recruitment, training and retention costs related to global employment turnover trends and inflationary pressures in the labor market; • the uncertainty and limitation of protection for intellectual property rights in some countries; • costs of compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • differing labor regulations in foreign jurisdictions where labor laws are generally more advantageous to employees, including deemed hourly wage and overtime regulations in these locations; • costs of compliance with U.S. laws and regulations for foreign operations, including the FCPA, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell or provide our solutions in certain foreign markets, and the risks and costs of non-compliance; • requirements to comply with foreign privacy, data protection and information security laws and regulations and the risks and costs of noncompliance; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, and irregularities in, financial statements; • the potential for political unrest, pandemics, acts of terrorism, hostilities or war, including the invasion of Ukraine by Russia; • management communication and integration problems resulting from cultural differences and geographic dispersion; • costs associated with language localization of our solutions; and • costs of compliance with multiple and possibly overlapping tax structures and regimes.
Our current international operations and future initiatives will involve a variety of risks, including: • increased management, infrastructure and legal costs associated with having international operations; • reliance on channel partners; • trade and foreign exchange restrictions, including potential changes in trade relations arising from policy initiatives; • volatility of foreign exchange rates; • economic or political instability in foreign markets, including instability related to the United Kingdom’s recent exit from the European Union and the corresponding impact on its ongoing legal, political, and economic relationship with the European Union and heightened levels of inflation; 26 Table of Contents • greater difficulty in enforcing contracts, accounts receivable collection and longer collection periods; • changes in regulatory requirements, including, but not limited to data privacy, data protection and data security regulations; • difficulties and costs of staffing, managing and potentially reorganizing foreign operations, including increased employee recruitment, training and retention costs related to global employment turnover trends and inflationary pressures in the labor market; • the uncertainty and limitation of protection for intellectual property rights in some countries; • costs of compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • differing labor regulations in foreign jurisdictions where labor laws are generally more advantageous to employees, including deemed hourly wage and overtime regulations in these locations; • costs of compliance with U.S. laws and regulations for foreign operations, including the FCPA, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell or provide our solutions in certain foreign markets, and the risks and costs of non-compliance; • requirements to comply with foreign privacy, data protection and information security laws and regulations and the risks and costs of noncompliance; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, and irregularities in, financial statements; • the potential for political unrest, public health crises such as pandemics or similar outbreaks, acts of terrorism, hostilities or war, including the conflict between Ukraine and Russia, the ongoing conflict in the Middle East and increasing tensions between China and Taiwan; • management communication and integration problems resulting from cultural differences and geographic dispersion; • costs associated with language localization of our solutions; and • costs of compliance with multiple and possibly overlapping tax structures and regimes.
The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board, the Securities and Exchange Commission, or SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. In addition, many companies’ accounting disclosures are being subjected to heightened scrutiny by regulators and the public.
The accounting rules and regulations that we must comply with are complex and subject to interpretation by the Financial Accounting Standards Board, the SEC, and various bodies formed to promulgate and interpret appropriate accounting principles. In addition, many companies’ accounting disclosures are being subjected to heightened scrutiny by regulators and the public.
In addition, we might devote substantial time and effort to a particular 20 Table of Contents unsuccessful sales effort, and as a result, we could lose other sales opportunities or incur expenses that are not offset by an increase in revenue, which could harm our business.
In addition, we might devote substantial time and effort to a particular unsuccessful sales effort, and as a result, we could lose other sales opportunities or incur expenses that are not offset by an increase in revenue, which could harm our business.
In particular, we expect to continue to expend substantial financial and other resources on: • public cloud infrastructure and computing costs; • research and development related to our offerings, including investments in our research and development team; • sales and marketing, including a significant expansion of our sales organization, both domestically and internationally; • continued international expansion of our business; and • general and administrative expense, including legal and accounting expenses related to being a public company.
In particular, we expect to continue to expend substantial financial and other resources on: • public cloud infrastructure and computing costs; • research and development related to our offerings, including investments in our research and development team; • sales and marketing, including a significant expansion of our sales organization, both domestically and internationally; • continued international expansion of our business; and • general and administrative expense.
If we are unable to obtain adequate 28 Table of Contents financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.
In addition to computer “hackers,” threat actors, personnel (such as through theft or misuse), "hacktivists," organized criminal threat actors, sophisticated nation-states and nation-state-supported actors now engage and are expected to continue to engage in cyber-attacks.
In addition to computer “hackers,” threat actors, personnel (such as through theft or misuse), "hacktivists," organized criminal 16 Table of Contents threat actors, sophisticated nation-states and nation-state-supported actors now engage and are expected to continue to engage in cyber-attacks.
In 2022, 2021 and 2020, we derived 92%, 92% and 91%, respectively, of our revenue from subscriptions and perpetual licenses sold through channel partners, and the percentage of revenue derived from channel partners may continue to increase in future periods.
In 2023, 2022 and 2021, we derived 93%, 92% and 92%, respectively, of our revenue from subscriptions and perpetual licenses sold through channel partners, and the percentage of revenue derived from channel partners may continue to increase in future periods.
Macroeconomic uncertainty, including foreign exchange rates, inflation and concerns about economic recessions in the United States or other major markets, have and could continue to impact the budgets and purchasing decisions and processes of certain of our customers and prospective customers, some of whom have added additional controls on expenditures and require additional internal approvals of expenditures, even if relatively small in dollar amount, all of which could lengthen our average sales cycle.
Macroeconomic uncertainty, including foreign exchange rates, inflation, disruptions in access to bank deposits or lending commitments due to bank failures and uncertainty about economic stability, and concerns about economic recessions in the United States or other major markets, have and could continue to impact the budgets and purchasing decisions and processes of certain of our customers and prospective customers, some of whom have added additional controls on expenditures and require additional internal approvals of expenditures, even if relatively small in dollar amount, all of which could lengthen our average sales cycle.
If our customers do not maintain or renew their subscriptions or renew on less favorable terms, or if we are unable to expand our customers’ use of our software, our business, results of operations, and financial condition may be harmed. 19 Table of Contents We must maintain and enhance our brand.
If our customers do not maintain or renew their subscriptions or renew on less favorable terms, or if we are unable to expand our customers’ use of our software, our business, results of operations, and financial condition may be harmed.
Our failure or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences. • We rely on our third-party channel partner network of distributors and resellers to generate a substantial amount of our revenue. • We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales and technology professionals, and our ability to increase our customer base will depend to a significant extent on our ability to expand our sales and marketing operations. 12 Table of Contents Risks Related to Our Business and Industry We have a history of losses and may not achieve or maintain profitability in the future.
Our failure or perceived failure to comply with such obligations could lead to regulatory investigations or actions; litigation; fines and penalties; disruptions of our business operations; reputational harm; loss of revenue or profits; loss of customers or sales; and other adverse business consequences. • We rely on our third-party channel partner network of distributors and resellers to generate a substantial amount of our revenue. • We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales and technology professionals, and our ability to increase our customer base will depend to a significant extent on our ability to expand our sales and marketing operations.
For all of these reasons, we may not be able to compete successfully against our current or future competitors. We may not be able to sustain our revenue growth rate in the future. From 2021 to 2022, our revenue grew from $541.1 million to $683.2 million, representing year over year growth of 26%.
For all of these reasons, we may not be able to compete successfully against our current or future competitors. We may not be able to sustain our revenue growth rate in the future. From 2022 to 2023, our revenue grew from $683.2 million to $798.7 million, representing year over year growth of 17%.
The CCPA applies to personal data of business representatives and employees and provides for administrative fines for noncompliance (up to $7,500 per violation).
The 21 Table of Contents CCPA applies to personal data of business representatives and employees and provides for fines for noncompliance (up to $7,500 per intentional violation).
Recent and future acquisitions could disrupt our business and adversely affect our business operations and financial results. We have in the past acquired products, technologies and businesses from other parties, and we expect to expand our current business by acquiring additional businesses or technologies in the future.
Recent and future acquisitions could disrupt our business and adversely affect our business operations and financial results. We have acquired products, technologies and businesses from other parties, such as our October 2023 acquisition of Ermetic, and we expect to expand our current business by acquiring additional businesses or technologies in the future.
An event of default under the Credit Agreement could also lead to a default under the terms of certain of our other agreements. Any such event of default or any exercise of rights and remedies by our creditors could seriously harm our business. The phase-out, replacement or unavailability of LIBOR could adversely affect our indebtedness.
An event of default under the Credit Agreement could also lead to a default under the terms of certain of our other agreements. Any such event of default or any exercise of rights and remedies by our creditors could seriously harm our business.
These threats include but are not limited to: social-engineering attacks (including through phishing attacks); credential harvesting; malicious code (such as viruses and worms); malware (including as a result of persistent threat intrusions); denial-of-service attacks (such as credential stuffing); personnel misconduct or error; ransomware attacks; supply-chain attacks; software bugs; server malfunctions; software or hardware failures; loss of data or other information technology assets; adware; telecommunications failures, and other similar threats.
These threats include but are not limited to: social-engineering attacks (including through deep fakes, which may be increasingly more difficult to identify as fake, and phishing attacks); credential harvesting; malicious code (such as viruses and worms); malware (including as a result of advanced persistent threat intrusions); denial-of-service attacks, credential stuffing; personnel misconduct or error; ransomware attacks; supply-chain attacks; software bugs; server malfunctions; software or hardware failures; loss of data or other information technology assets; adware; telecommunications failures; attacks enhanced or facilitated by artificial intelligence and other similar threats.
These proposals are based on two “pillars”, involving the allocation of taxing rights in respect of certain multinational enterprises above a fixed profit margin to the jurisdictions in which they carry on business (referred to as the Pillar One proposal) and imposing a minimum effective tax rate on certain multinational enterprises (referred to as the Pillar Two proposal).
These proposals are based on two “pillars”, involving the allocation of taxing rights in respect of certain multinational enterprises above a fixed profit margin to the jurisdictions in which they carry on business (subject to certain revenue threshold rules which we do not currently meet but expect to meet in the future), referred to as the Pillar One proposal, and imposing a minimum effective tax rate on certain multinational enterprises, referred to as the Pillar Two proposal.
At December 31, 2022, we had 26 issued patents and 25 patent applications pending in the United States relating to our technology.
At December 31, 2023, we had 38 issued patents and 21 patent applications pending in the United States relating to our technology.
At December 31, 2022 we had U.S. federal, state and foreign net operating loss carryforwards, or NOLs, of $407.4 million, $233.5 million, and $315.5 million, respectively, available to offset future taxable income, some of which will begin to expire in 2030.
At December 31, 2023 we had U.S. federal, state and foreign net operating loss carryforwards, or NOLs, of $372.5 million, $246.6 million, and $469.3 million, respectively, available to offset future taxable income, some of which will begin to expire in 2030.
Ingram Micro, Inc., a distributor, accounted for 38%, 39% and 43% of our revenue in 2022, 22 Table of Contents 2021 and 2020, respectively, and 36% of our accounts receivable as of December 31, 2022 and 32% as of December 31, 2021.
Ingram Micro, Inc., a distributor, accounted for 36%, 38% and 39% of our revenue in 2023, 2022 and 2021, respectively, and 32% of our accounts receivable at December 31, 2023 and 36% at December 31, 2022.
A component of our growth strategy is dependent on our continued international expansion, which adds complexity to our operations. We market and sell our solutions and professional services throughout the world and have personnel in many parts of the world. International operations generated 44% and 42% of our revenue in 2022 and 2021, respectively.
We market and sell our solutions and professional services throughout the world and have personnel in many parts of the world. International operations generated 45% and 44% of our revenue in 2023 and 2022, respectively. Our growth strategy is dependent, in part, on our continued international expansion.
Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine has resulted, and could continue to result, in market disruptions, including significant volatility in commodity prices, credit and capital markets, disruption in the energy market as well as supply chain interruptions.
The length, scale and impact of these military conflicts are highly unpredictable and could continue to result in market disruptions, including significant volatility in commodity prices, credit and capital markets, disruption in the energy market as well as supply chain interruptions.
If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline.
We do not control these analysts or the content and opinions included in their reports. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline.
Any loss of the right to use any of this data could result in 27 Table of Contents delays in the provisioning of our offerings until equivalent data is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business.
In the future, this data may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use any of this data could result in delays in the provisioning of our offerings until equivalent data is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business.
These covenants may: • limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, or other general business purposes; • limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions, or other general business purposes; • require us to use a substantial portion of our cash flow from operations to make debt service payments; • limit our flexibility to plan for, or react to, changes in our business and industry; • place us at a competitive disadvantage compared to less leveraged competitors; and • increase our vulnerability to the impact of adverse economic and industry conditions. 29 Table of Contents If we are unable to successfully manage the limitations and decreased flexibility on our business due to our significant debt obligations, we may not be able to capitalize on strategic opportunities or grow our business to the extent we would be able to without these limitations.
These covenants may: • limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions, or other general business purposes; • limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions, or other general business purposes; • require us to use a substantial portion of our cash flow from operations to make debt service payments; • limit our flexibility to plan for, or react to, changes in our business and industry; • place us at a competitive disadvantage compared to less leveraged competitors; and • increase our vulnerability to the impact of adverse economic and industry conditions.
Although we expect that we could receive similar services from other third parties, if any of our arrangements with third parties, including AWS, are terminated, we could experience interruptions on our platform and in our ability to make our platform available to customers, as well as downtime, delays and additional expenses in arranging alternative cloud infrastructure services.
Although we expect that we could receive similar services from other third parties, if any of our arrangements with third parties, including AWS, are terminated, we could experience interruptions on our platform and in our ability to make our platform available to customers, as well as downtime, delays and additional expenses in arranging alternative cloud infrastructure services. 20 Table of Contents Organizations may be reluctant to purchase our enterprise platform offerings that are cloud-based due to the actual or perceived vulnerability of cloud solutions.
For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers. Additionally, some of our customer contracts require us to host personal data locally.
For example, certain privacy laws, such as the GDPR and the CCPA, require our customers to impose specific contractual restrictions on their service providers.
For example, in recent years the COVID-19 pandemic, decades-high inflation and concerns about an economic recession in the United States or other major markets resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets. The Federal Reserve recently raised interest rates multiple times in response to concerns about inflation and is expected to continue to raise rates.
For example, in recent years the COVID-19 pandemic, high rates of inflation, high interest rates and concerns about an economic recession in the United States or other major markets resulted in widespread unemployment, economic slowdown and extreme volatility in the capital markets.
Additionally, we may incur substantial professional fees and expend significant management efforts, and we may need to hire additional staff with the appropriate experience and compile systems and processes necessary to adopt these new standards and disclosure or governance requirements. Unstable market and economic conditions may have material adverse consequences on our business, financial condition and share price.
Additionally, we may incur substantial professional fees and expend significant management efforts, and we may need to hire additional staff with the appropriate experience and compile systems and processes necessary to adopt these new standards and disclosure or governance requirements.
Although we monitor our use of open source software in an effort both to comply with the terms of the applicable open source licenses and to avoid subjecting our software to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our product or operate our business.
If we were to fail to comply with the terms of such open source software licenses, such failures could result in costly litigation, lead to negative public relations or require that we quickly find replacement software which may be difficult to accomplish in a timely manner. 35 Table of Contents Although we monitor our use of open source software in an effort both to comply with the terms of the applicable open source licenses and to avoid subjecting our software to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our product or operate our business.
We may be unable to rapidly and efficiently adjust our cost structure in response to significant revenue declines, which could adversely affect our operating results. 14 Table of Contents We recognize substantially all of our revenue ratably over the term of our subscriptions and, to a lesser extent, perpetual licenses ratably over an expected period of benefit and, as a result, downturns in sales may not be immediately reflected in our operating results.
We recognize substantially all of our revenue ratably over the term of our subscriptions and, to a lesser extent, perpetual licenses ratably over an expected period of benefit and, as a result, downturns in sales may not be immediately reflected in our operating results.
Nation-state actors and nation-state-supported actors may engage in such attacks for geopolitical reasons and in conjunction with military conflicts and defense activities, including the ongoing invasion of Ukraine by Russia.
Nation-state actors and nation-state-supported actors may engage in such attacks for geopolitical reasons and in conjunction with military conflicts and defense activities, including the ongoing conflict between Ukraine and Russia, the ongoing conflict in the Middle East, and rising tensions between China and Taiwan.
We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies.
Our failure to secure, protect and enforce our intellectual property rights could seriously adversely affect our brand and adversely impact our business. 34 Table of Contents We may be subject to intellectual property rights claims by third parties, which are extremely costly to defend, could require us to pay significant damages and could limit our ability to use certain technologies.
If we fail to maintain compatibility of our cloud platform and our other solutions with our customers’ network and security infrastructures, including for remote devices, our customers may not be able to fully utilize our solutions, and we may, among other consequences, lose or fail to increase our market share and experience reduced demand for our services, which would materially harm our business, operating results and financial condition. 15 Table of Contents Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliability and accuracy of our data, solutions, infrastructure and those of third parties upon which we rely.
If we fail to maintain compatibility of our cloud platform and our other solutions with our customers’ network and security infrastructures, including for remote devices, our customers may not be able to fully utilize our solutions, and we may, among other consequences, lose or fail to increase our market share and experience reduced demand for our services, which would materially harm our business, operating results and financial condition.
Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect and enforce our intellectual property rights could seriously adversely affect our brand and adversely impact our business.
Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights.
To the extent such events impact our corporate headquarters, other facilities, or off-premises infrastructure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our software development, lengthy interruptions in our services, breaches of data security and loss of critical data, all of which could have an adverse effect on our future operating results. 31 Table of Contents Our business, financial condition and results of operations could be materially adversely affected by any negative impact on the global economy and capital markets resulting from the ongoing invasion of Ukraine by Russia or any other geopolitical tensions.
To the extent such events impact our corporate headquarters, other facilities, or off-premises infrastructure, we may be unable to continue our operations and may endure system interruptions, reputational harm, delays in our software development, lengthy interruptions in our services, breaches of data security and loss of critical data, all of which could have an adverse effect on our future operating results.
Our growth strategy is dependent, in part, on our continued international expansion. We expect to conduct a significant amount of our 25 Table of Contents business with organizations that are located outside the United States, particularly in Europe and Asia.
We expect to conduct a significant amount of our business with organizations that are located outside the United States, particularly in Europe and Asia.
The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not control these analysts or the content and opinions included in their reports.
If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline. The trading market for our common stock will depend, in part, on the research and reports that securities or industry analysts publish about us or our business.
Any failure or delays in our computer systems could cause service interruptions or slower system performance. If sustained or repeated, these performance issues could reduce the attractiveness of our enterprise platform to customers. These performance issues could result in lost customer opportunities and lower renewal rates, any of which could hurt our revenue growth, customer loyalty and reputation.
Any failure or delays in our computer network and infrastructure systems could cause service interruptions or slower system performance. If sustained or repeated, these performance issues could reduce the attractiveness of our enterprise platform to customers.
Although we endeavor to comply with all data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third parties upon which we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
Moreover, despite our efforts, our personnel or third parties upon which we rely may fail to comply with such obligations, which could negatively impact our business operations and compliance posture.
If the mix of profits and losses, our ability to use tax assets and attributes, our assessment of the need for valuation allowances, effective tax rates by jurisdiction or other factors are different than those estimated, our actual tax rate could be materially different than forecasted, which could have a material impact on our business, financial condition and results of operations. 39 Table of Contents Our operating results may be negatively affected if we are required to pay additional taxes, including sales and use tax, value added tax, or other transaction taxes, and we could be subject to liability with respect to all or a portion of past or future sales.
If the mix of profits and losses, our ability to use tax assets and attributes, our assessment of the need for valuation allowances, effective tax rates by jurisdiction or other factors are different than those estimated, our actual tax rate could be materially different than forecasted, which could have a material impact on our business, financial condition and results of operations.
Some of our revenue is derived from contracts with U.S. government entities, as well as subcontracts with higher-tier contractors. As a result, we are subject to federal contracting regulations, including the Federal Acquisition Regulation, or 23 Table of Contents the FAR.
Some of our revenue is derived from contracts with U.S. government entities, as well as subcontracts with higher-tier contractors. As a result, we are subject to federal contracting regulations, including the Federal Acquisition Regulation, or the FAR. Under the FAR, certain types of contracts require pricing that is based on estimated direct and indirect costs, which are subject to change.
If we are unable to successfully manage the challenges of international expansion and operations, our business and operating results could be adversely affected. 26 Table of Contents We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales and technology professionals, and our ability to increase our customer base will depend to a significant extent on our ability to expand our sales and marketing operations.
We rely on the performance of highly skilled personnel, including senior management and our engineering, professional services, sales and technology professionals, and our ability to increase our customer base will depend to a significant extent on our ability to expand our sales and marketing operations.
We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all. We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months and the foreseeable future.
We expect that our existing cash and cash equivalents will be sufficient to meet our anticipated cash needs for working capital and capital expenditures for at least the next 12 months and the foreseeable future.
Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standard or reasonable security measures to protect our information technology systems and proprietary, confidential, and sensitive information, including personal data. While we have implemented security measures designed to protect against security incidents, there can be no assurance that these measures will be effective.
Certain data privacy and security obligations may require us to implement and maintain specific security measures, industry-standard or reasonable security measures to protect our information technology systems and proprietary, confidential, and sensitive information, including personal data.
A portion of our revenue is generated from subscriptions and perpetual licenses sold to domestic governmental entities, foreign governmental entities and other heavily regulated organizations, which are subject to a number of challenges and risks. A portion of our revenue is generated from subscriptions and perpetual licenses sold to governmental entities in the United States.
A portion of our revenue is generated from subscriptions and perpetual licenses sold to governmental entities in the United States.
Under the FAR, certain types of contracts require pricing that is based on estimated direct and indirect costs, which are subject to change. In connection with our U.S. government contracts, we may be subject to government audits and review of our policies, procedures, and internal controls for compliance with contract terms, procurement regulations, and applicable laws.
In connection with our U.S. government contracts, we may be subject to government audits and review of our policies, procedures, and internal controls for compliance with contract terms, procurement regulations, and applicable laws.

… 89 more changes not shown on this page.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

1 edited+8 added−1 removed4 unchanged
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock trades on the Nasdaq Global Select Market under the ticker symbol "TENB." Holders of Record At December 31, 2022, we had 18 holders of record.
Biggest changeItem 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information for Common Stock Our common stock trades on the Nasdaq Global Select Market under the ticker symbol "TENB." Holders of Record At December 31, 2023, we had 22 holders of record.
Removed
Unregistered Sales of Equity Securities None. Issuer Purchases of Equity Securities None. 42 Table of Contents
Added
Unregistered Sales of Equity Securities On October 2, 2023, in connection with our acquisition of Ermetic, we issued 311,160 shares of restricted common stock to certain key Ermetic employees.
Added
These shares have not been registered under the Securities Act of 1933, as amended, or the securities laws of any state of the United States in reliance upon certain exemptions from registration under said acts and may not be offered or sold absent to registration or pursuant to an exemption therefrom.
Added
The foregoing did not involve any underwriters, underwriting discounts or commissions, or any public offering. The sales were exempt from registration under the Securities Act in reliance on Section 4(a)(2) of the Securities Act (and Regulation D or Regulation S promulgated thereunder) as transactions by an issuer not involving any public offering.
Added
The recipients of the securities represented their intentions to acquire the securities for investment only and not with a view to, or for sale in connection with, any distribution thereof, and appropriate legends were placed on the share certificates issued.
Added
The shares are deemed restricted securities, and unless so registered, may not be offered or sold in the United States except pursuant to an exemption from the registration requirements of the Securities Act. All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.
Added
The shares issued were subject to vesting agreements and were unvested as of their issuance.
Added
The shares are subject to forfeiture if these employees do not continue to provide services for the specified vesting period. 45 Table of Contents Issuer Purchases of Equity Securities A summary of stock repurchases during the three months ended December 31, 2023 is presented below: (in thousands, except for per share data) Shares Purchased Average Price Paid Per Share Total Number of Shares Purchased as Part of Publicly Announced Plan (1) Approximate Dollar Value of Shares that May Yet Be Purchased Under Plan (1) Shares purchased October 1, 2023 to October 31, 2023 — $ — — $ — Shares purchased November 1, 2023 to November 30, 2023 24 $ 41.09 24 $ 99,001 Shares purchased December 1, 2023 to December 31, 2023 332 $ 41.98 332 $ 85,066 356 $ 41.92 (1) On November 27, 2023, we announced that our Board of Directors authorized the repurchase of up to $100 million of our common stock.
Added
Repurchases under the share repurchase program may be made in the open market, in privately negotiated transactions, or in such other manner as determined by us, including through repurchase plans complying with the rules and regulations of the Securities and Exchange Commission. The authorization has no expiration date. 46 Table of Contents

Item 6. [Reserved]

Selected Financial Data — reserved (removed by SEC in 2021)

4 edited+0 added−1 removed1 unchanged
Biggest changeConsolidated Statements of Operations Data: Year Ended December 31, (in thousands, except per share data) 2022 2021 2020 2019 2018 Revenue $ 683,191 $ 541,130 $ 440,221 $ 354,586 $ 267,360 Cost of revenue (1) 154,789 106,396 77,554 60,818 43,167 Gross profit 528,402 434,734 362,667 293,768 224,193 Operating expenses: Sales and marketing (1) 349,430 270,158 224,277 228,035 173,344 Research and development (1) 143,560 116,432 101,687 87,064 76,698 General and administrative (1) 103,227 89,912 73,136 69,468 46,732 Total operating expenses 596,217 476,502 399,100 384,567 296,774 Loss from operations (67,815) (41,768) (36,433) (90,799) (72,581) Interest income 6,284 606 1,740 6,037 2,575 Interest expense (19,001) (7,502) (496) (207) (220) Other expense, net (4,757) (1,965) (1,885) (680) (931) Loss before income taxes (85,289) (50,629) (37,074) (85,649) (71,157) Provision (benefit) for income taxes 6,933 (3,952) 5,657 13,364 2,364 Net loss (92,222) (46,677) (42,731) (99,013) (73,521) Accretion of Series A and B redeemable convertible preferred stock — — — — (434) Net loss attributable to common stockholders $ (92,222) $ (46,677) $ (42,731) $ (99,013) $ (73,955) Net loss per share attributable to common stockholders, basic and diluted (2) $ (0.83) $ (0.44) $ (0.42) $ (1.03) $ (1.38) Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 111,321 106,387 101,009 96,014 53,669 _______________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, (in thousands) 2022 2021 2020 2019 2018 Cost of revenue $ 8,369 $ 4,446 $ 3,158 $ 2,817 $ 1,707 Sales and marketing 49,383 29,410 19,842 16,032 6,911 Research and development 31,499 20,593 14,794 8,911 5,804 General and administrative 31,382 24,956 21,779 15,683 8,453 Total stock-based compensation expense $ 120,633 $ 79,405 $ 59,573 $ 43,443 $ 22,875 43 Table of Contents (2) See Note 12 to our consolidated financial statements in this Annual Report on Form 10-K for details on the calculation of basic and diluted net loss per share attributable to common stockholders.
Biggest changeConsolidated Statements of Operations Data: Year Ended December 31, (in thousands, except per share data) 2023 2022 2021 2020 2019 Revenue $ 798,710 $ 683,191 $ 541,130 $ 440,221 $ 354,586 Cost of revenue (1) 183,577 154,789 106,396 77,554 60,818 Gross profit 615,133 528,402 434,734 362,667 293,768 Operating expenses: Sales and marketing (1) 393,450 349,430 270,158 224,277 228,035 Research and development (1) 153,163 143,560 116,432 101,687 87,064 General and administrative (1) 116,181 103,227 89,912 73,136 69,468 Restructuring 4,499 — — — — Total operating expenses 667,293 596,217 476,502 399,100 384,567 Loss from operations (52,160) (67,815) (41,768) (36,433) (90,799) Interest income 24,700 6,284 606 1,740 6,037 Interest expense (31,339) (19,001) (7,502) (496) (207) Other expense, net (8,602) (4,757) (1,965) (1,885) (680) Loss before income taxes (67,401) (85,289) (50,629) (37,074) (85,649) Provision (benefit) for income taxes 10,883 6,933 (3,952) 5,657 13,364 Net loss $ (78,284) $ (92,222) $ (46,677) $ (42,731) $ (99,013) Net loss per share, basic and diluted (2) $ (0.68) $ (0.83) $ (0.44) $ (0.42) $ (1.03) Weighted-average shares used to compute net loss per share, basic and diluted 115,408 111,321 106,387 101,009 96,014 _______________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, (in thousands) 2023 2022 2021 2020 2019 Cost of revenue $ 11,247 $ 8,369 $ 4,446 $ 3,158 $ 2,817 Sales and marketing 61,322 49,383 29,410 19,842 16,032 Research and development 37,225 31,499 20,593 14,794 8,911 General and administrative 35,533 31,382 24,956 21,779 15,683 Total stock-based compensation expense $ 145,327 $ 120,633 $ 79,405 $ 59,573 $ 43,443 (2) See Note 12 to our Consolidated Financial Statements in this Annual Report on Form 10-K for details on the calculation of basic and diluted net loss per share. 47 Table of Contents Consolidated Balance Sheet Data: December 31, (in thousands) 2023 2022 2021 2020 2019 Cash and cash equivalents $ 237,132 $ 300,866 $ 278,000 $ 178,223 $ 74,363 Short-term investments 236,840 266,569 234,292 113,623 137,904 Working capital (1) 129,635 273,007 265,556 108,891 35,319 Total assets 1,606,871 1,439,530 1,248,819 690,589 558,612 Deferred revenue, current and non-current 750,497 664,602 530,885 434,510 363,127 Term loan, net of issuance costs (net of current portion) 359,281 361,970 364,728 — — Accumulated deficit (825,035) (746,751) (654,529) (607,852) (565,121) Total stockholders' equity 346,344 270,866 215,313 150,665 98,905 _______________ (1) We define working capital as total current assets less total current liabilities.
The consolidated statements of operations data for the years ended December 31, 2019 and 2018 and consolidated balance sheet data as of December 31, 2020, 2019 and 2018 are from our audited financial statements not included in this Annual Report on Form 10-K.
The consolidated statements of operations data for the years ended December 31, 2020 and 2019 and consolidated balance sheet data as of December 31, 2021, 2020 and 2019 are from our audited financial statements not included in this Annual Report on Form 10-K.
See our consolidated financial statements in this Annual Report on Form 10-K for further details regarding our current assets and current liabilities. 44 Table of Contents
See our Consolidated Financial Statements in this Annual Report on Form 10-K for further details regarding our current assets and current liabilities. 48 Table of Contents
Item 6. Selected Financial Data The following selected consolidated statements of operations data for the years ended December 31, 2022, 2021 and 2020 and the selected consolidated balance sheet data as of December 31, 2022 and 2021 are derived from our audited consolidated financial statements included in this Annual Report on Form 10-K.
Item 6. Selected Financial Data The following selected consolidated statements of operations data for the years ended December 31, 2023, 2022 and 2021 and the selected consolidated balance sheet data at December 31, 2023 and 2022 are derived from our audited consolidated financial statements included in this Annual Report on Form 10-K.
Removed
Consolidated Balance Sheet Data: December 31, (in thousands) 2022 2021 2020 2019 2018 Cash and cash equivalents $ 300,866 $ 278,000 $ 178,223 $ 74,363 $ 165,116 Short-term investments 266,569 234,292 113,623 137,904 118,119 Working capital (1) 273,007 265,556 108,891 35,319 142,484 Total assets 1,439,530 1,248,819 690,589 558,612 460,612 Deferred revenue, current and non-current 664,602 530,885 434,510 363,127 289,903 Term loan, net of issuance costs (net of current portion) 361,970 364,728 — — — Accumulated deficit (746,751) (654,529) (607,852) (565,121) (466,108) Total stockholders' equity 270,866 215,313 150,665 98,905 121,763 _______________ (1) We define working capital as total current assets less total current liabilities.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

81 edited+13 added−21 removed86 unchanged
Biggest change(2) Free cash flow for the periods presented was impacted by: Year Ended December 31, (in thousands) 2022 2021 2020 Employee stock purchase plan activity $ 837 $ (283) $ 893 Acquisition-related expenses (2,655) (6,464) (738) Costs related to intra-entity asset transfers (838) — — Tax payment on intra-entity asset transfers (2,697) (2,808) — Proceeds from lease incentives — — 14,199 Capital expenditures related to new headquarters — (928) (17,241) 47 Table of Contents Free cash flow in 2022 was benefited by approximately $10 million due to prepayments of software subscription costs, insurance and rent in 2021 and 2020.
Biggest changeThe following table presents a reconciliation of net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow: Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by operating activities $ 149,855 $ 131,151 $ 96,765 Purchases of property and equipment (1,704) (9,359) (3,887) Capitalized software development costs (7,052) (9,789) (2,674) Free cash flow (1) $ 141,099 $ 112,003 $ 90,204 _______________ (1) Free cash flow for the periods presented was impacted by: Year Ended December 31, (in thousands) 2023 2022 2021 Cash paid for interest and other financing costs $ 34,323 $ 16,047 $ 4,978 Employee stock purchase plan activity 1,077 837 (283) Acquisition-related expenses (9,336) (2,655) (6,464) Costs related to intra-entity asset transfers — (838) — Tax payment on intra-entity asset transfers — (2,697) (2,808) Capital expenditures related to new headquarters — — (928) Free cash flow in 2022 was benefited by approximately $8 million from prepayments of software subscription costs, insurance and rent made in prior quarters. 51 Table of Contents Customer Metrics We believe that our customer base provides a significant opportunity to expand sales of our enterprise platform offerings.
Non-GAAP Net Income and Non-GAAP Earnings Per Share We use non-GAAP net income, which excludes stock-based compensation, acquisition-related expenses and amortization of acquired intangible assets, as well as the related tax impacts, and the tax impact and related costs of intra-entity asset transfers resulting from the internal restructuring of legal entities as well as deferred income tax benefits recognized in connection with acquisitions, to calculate non-GAAP earnings per share.
Non-GAAP Net Income and Non-GAAP Earnings Per Share We use non-GAAP net income, which excludes stock-based compensation, acquisition-related expenses, restructuring expenses and amortization of acquired intangible assets, as well as the related tax impacts, and the tax impact and related costs of intra-entity asset transfers resulting from the internal restructuring of legal entities as well as deferred income tax benefits recognized in connection with acquisitions, to calculate non-GAAP earnings per share.
(5) The tax impact of acquisitions in 2022 includes a deferred tax benefit of $1.2 million related to the Alsid acquisition and a reversal of the $2.5 million income tax benefit recognized for GAAP purposes related to the partial release of our valuation allowance associated with the Bit Discovery acquisition.
The tax impact of acquisitions in 2022 includes a deferred tax benefit of $1.2 million related to Alsid and reversal of the $2.5 million income tax benefit recognized for GAAP purposes related to the partial release of our valuation allowance associated with the Bit Discovery acquisition.
General and Administrative General and administrative expense consists of personnel costs for our executive, finance, legal, human resources and administrative departments. Additional expenses include travel and entertainment, professional fees, insurance, allocated overhead, and acquisition-related costs.
General and Administrative General and administrative expense consists of personnel costs for our executive, finance, legal, human resources and administrative departments. Additional expenses include travel and entertainment, professional fees, insurance, allocated overhead, and acquisition-related expenses.
Financing Activities From 2021 to 2022, net cash provided by financing activities decreased by $374.3 million, primarily due to the net proceeds from the issuance of our Credit Facility in 2021 of $365.7 million, a decrease of $6.5 million in the proceeds from the exercise of stock options and $3.8 million of principal payments made on our Term Loan in 2022, partially offset by a $1.1 million increase in proceeds from stock issued in connection with our employee stock purchase plan.
From 2021 to 2022, net cash provided by financing activities decreased by $374.3 million, primarily due to the net proceeds from the issuance of our Credit Facility in 2021 of $365.7 million, a decrease of $6.5 million in the proceeds from the exercise of stock options and $3.8 million of principal payments made on our Term Loan in 2022, partially offset by a $1.1 million increase in proceeds from stock issued in connection with our employee stock purchase plan.
Given the critical utility provided by the ongoing software updates and updated ability to identify network vulnerabilities included in maintenance, we combine the perpetual license and the maintenance into a single performance obligation. Perpetual license arrangements generally contain a material right related to the customer’s ability to renew maintenance at a price that is less than the initial license fee.
Given the critical utility provided by the ongoing software updates and updated ability to identify network vulnerabilities included in maintenance, we combine the perpetual license and the maintenance into a single performance obligation. Perpetual license arrangements generally contain a material right related to the customer’s ability to renew maintenance at a price that is less than the initial license fee.
We allocate the transaction price between the cybersecurity subscription provided in the initial contract and the material right related to expected contract renewals based on the hypothetical transaction price. We recognize the amount allocated to the combined license and maintenance performance obligation over the initial contractual period, which is generally one year.
We allocate the transaction price between the cybersecurity subscription provided in the initial contract and the material right related to expected contract renewals based on the hypothetical transaction price. We recognize the amount allocated to the combined license and maintenance performance obligation over the initial contractual period, which is generally one year.
Sales commissions on contract renewals are capitalized and amortized ratably over the contract term, with the exception of contracts with renewal periods that are one year or less, in which case the incremental costs are expensed as incurred.
Sales commissions on contract renewals are capitalized and amortized ratably over the contract term, with the exception of contracts with renewal periods that are one year or less, in which case the incremental costs are expensed as incurred.
Cost of revenue also includes cloud infrastructure costs, the costs related to professional services and training, depreciation, amortization of acquired and developed technology, hardware costs and allocated overhead costs, which consist of information technology and facilities. We intend to continue to invest additional resources in our cloud-based platform and customer support team as we grow our business.
Cost of revenue also includes cloud infrastructure costs, the costs related to professional services and training, depreciation, amortization of acquired and developed technology, hardware costs and allocated overhead costs, which consist of information technology, facilities and insurance. We intend to continue to invest additional resources in our cloud-based platform and customer support team as we grow our business.
Building on our existing products, Tenable One is designed to take advantage of the integrations that already exist with our partners and form the foundation of an exposure management program, alongside the other tools, such as endpoint detection and response (EDR) and firewalls, and required business processes.
Building on our existing products, Tenable One is designed to take advantage of the integrations that already exist with our partners and form the foundation of an exposure management program, alongside the other tools, such as endpoint detection and response and firewalls, and required business processes.
Estimating the fair value of stock options and purchase rights under the 2018 ESPP using the Black-Scholes option-pricing model requires assumptions as to the fair value of our underlying common stock, the estimated term of the option, the risk free interest rates, the expected volatility of the price of our common stock and the expected dividend yield.
Estimating the fair value of purchase rights under the 2018 ESPP using the Black-Scholes option-pricing model requires assumptions as to the fair value of our underlying common stock, the estimated term of the option, the risk free interest rates, the expected volatility of the price of our common stock and the expected dividend yield.
Any adjustments made after the measurement period will be reflected in the consolidated statements of operations. Acquisition-related transaction costs are expensed as incurred. Goodwill The excess purchase consideration over the fair value of acquired assets and liabilities is recorded as goodwill.
Any adjustments made after the measurement period will be reflected in the consolidated statements of operations. Acquisition-related costs are expensed as incurred. Goodwill The excess purchase consideration over the fair value of acquired assets and liabilities is recorded as goodwill.
Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors, including the timing of our acquisition of new customers and our renewals of and follow-on sales to existing customers, the costs associated with operating our cloud-based platform, the 51 Table of Contents extent to which we expand our customer support team and the extent to which we can increase the efficiency of our technology and infrastructure through technological improvements.
Gross profit, or revenue less cost of revenue, and gross margin, or gross profit as a percentage of revenue, have been and will continue to be affected by various factors, including the timing of our acquisition of new customers and our 55 Table of Contents renewals of and follow-on sales to existing customers, the costs associated with operating our cloud-based platform, the extent to which we expand our customer support team and the extent to which we can increase the efficiency of our technology and infrastructure through technological improvements.
Cost of Revenue, Gross Profit and Gross Margin Year Ended December 31, Change (dollars in thousands) 2022 2021 ($) (%) Cost of revenue $ 154,789 $ 106,396 $ 48,393 45 % Gross profit 528,402 434,734 93,668 22 % Gross margin 77 % 80 % The increase in cost of revenue of $48.4 million was primarily due to: • a $24.1 million increase in third-party cloud infrastructure costs; • a $13.8 million increase in personnel costs, primarily due to support for cloud-based products and an increase in headcount, including a $3.9 million increase in stock-based compensation; • a $4.9 million increase in the amortization of acquired intangible assets; • a $2.8 million increase in professional fees; • a $0.7 million increase in the cost of goods; • a $0.7 million increase in depreciation and amortization; • a $0.6 million increase in subscription costs; and • a $0.6 million increase in allocated overhead expenses.
Cost of Revenue, Gross Profit and Gross Margin Year Ended December 31, Change (dollars in thousands) 2022 2021 ($) (%) Cost of revenue $ 154,789 $ 106,396 $ 48,393 45 % Gross profit 528,402 434,734 93,668 22 % Gross margin 77 % 80 % The increase in cost of revenue of $48.4 million was primarily due to: • a $24.1 million increase in third-party cloud infrastructure costs; 61 Table of Contents • a $13.8 million increase in personnel costs, primarily due to support for cloud-based products and an increase in headcount, including a $3.9 million increase in stock-based compensation; • a $4.9 million increase in the amortization of acquired intangible assets; • a $2.8 million increase in professional fees; • a $0.7 million increase in the cost of goods; • a $0.7 million increase in depreciation and amortization; • a $0.6 million increase in subscription costs; and • a $0.6 million increase in allocated overhead expenses.
Operating Expenses Sales and Marketing Year Ended December 31, Change (dollars in thousands) 2022 2021 ($) (%) Sales and marketing $ 349,430 $ 270,158 $ 79,272 29 % The increase in sales and marketing expense of $79.3 million was primarily due to: • a $52.5 million increase in personnel costs, related to an increase in headcount, including a $20.0 million increase in stock-based compensation; • a $14.2 million increase in sales commissions; 54 Table of Contents • a $5.8 million increase in expenses for demand generation programs, including advertising, sponsorships, and brand awareness efforts; • a $5.4 million increase in selling expenses, including travel and meeting costs and software subscription costs; and • a $1.5 million increase in allocated overhead expenses.
Operating Expenses Sales and Marketing Year Ended December 31, Change (dollars in thousands) 2022 2021 ($) (%) Sales and marketing $ 349,430 $ 270,158 $ 79,272 29 % The increase in sales and marketing expense of $79.3 million was primarily due to: • a $52.5 million increase in personnel costs, related to an increase in headcount, including a $20.0 million increase in stock-based compensation; • a $14.2 million increase in sales commissions; • a $5.8 million increase in expenses for demand generation programs, including advertising, sponsorships, and brand awareness efforts; • a $5.4 million increase in selling expenses, including travel and meeting costs and software subscription costs; and • a $1.5 million increase in allocated overhead expenses.
(7) An adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares. 50 Table of Contents Components of Our Results of Operations Revenue We generate revenue from subscription arrangements for our software and cloud-based solutions, perpetual licenses, maintenance associated with perpetual licenses and professional services.
(7) An adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares. 54 Table of Contents Components of Our Results of Operations Revenue We generate revenue from subscription arrangements for our software and cloud-based solutions, perpetual licenses, maintenance associated with perpetual licenses and professional services.
The fair value of our RSUs and PSUs is based on the market price of our common stock on the date of grant.
The fair value of our RSUs, PSUs and restricted stock is based on the market price of our common stock on the date of grant.
(2) The tax impact of acquisition-related expenses is not material. (3) The costs related to the intra-entity asset transfers resulted from our internal restructuring of Cymptom. (4) The tax impact of the amortization of acquired intangible assets is included in the tax impact of acquisitions.
(2) The tax impact of acquisition-related expenses and restructuring expenses are not material. (3) The costs related to the intra-entity asset transfers resulted from our internal restructuring of Cymptom. (4) The tax impact of the amortization of acquired intangible assets is included in the tax impact of acquisitions.
(6) The tax impact of the intra-entity transfers are related to current tax expense based on the applicable Israeli tax rates resulting from our internal restructuring of Cymptom in 2022 and Indegy in 2021.
(6) The tax impact of the intra-entity transfers is related to current tax expense based on the applicable Israeli tax rates resulting from our internal restructuring of Cymptom in 2022 and Indegy in 2021.
The Revolving Credit Facility bears interest at a rate, depending on first lien net leverage, ranging from 2.00% to 2.50% over LIBOR and matures on July 7, 2026.
The Revolving Credit Facility bears interest at a rate, depending on first lien net leverage, ranging from 2.00% to 2.50% over SOFR and matures on July 7, 2026.
These services do not result in significant customization of our products. Professional services and other revenue is recognized as the services are performed. 62 Table of Contents Contracts with Multiple Performance Obligations In cases where our contracts with customers contain multiple performance obligations, the contract transaction price is allocated on a relative standalone selling price basis.
These services do not result in significant customization of our products. Professional services and other revenue is recognized as the services are performed. Contracts with Multiple Performance Obligations In cases where our contracts with customers contain multiple performance obligations, the contract transaction price is allocated on a relative standalone selling price basis.
With Tenable One, organizations can translate technical data about assets, vulnerabilities and threats into clear business insights and actionable intelligence for security executives and practitioners. The platform combines the broadest vulnerability coverage in the industry, spanning IT assets, cloud resources, containers, web apps and identity systems.
With Tenable One, organizations can translate technical data about assets, vulnerabilities and threats into clear business insights and actionable intelligence for security executives and practitioners. The platform combines broad, industry-leading vulnerability coverage in the industry, spanning IT assets, cloud resources, containers, web apps and identity systems.
The excess 64 Table of Contents purchase consideration over the fair value of acquired assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, a non-recurring Level 3 fair value measurement, we make estimates and assumptions, especially with respect to intangible assets such as identified acquired technology and trade names.
The excess purchase consideration over the fair value of acquired assets and liabilities is recorded as goodwill. When determining the fair value of assets acquired and liabilities assumed, a non-recurring Level 3 fair value measurement, we make estimates and assumptions, especially with respect to intangible assets such as identified acquired technology and trade names.
Even though we generated positive cash flows from operations and free cash flow in 2022, 2021 and 2020, we may not be able to sustain these cash flows.
Even though we generated positive cash flows from operations and free cash flow in 2023, 2022 and 2021, we may not be able to sustain these cash flows.
December 31, 2022 2021 2020 Number of customers with $100,000 and greater in annual contract value at end of period 1,420 1,095 837 Dollar-Based Net Expansion Rate Our dollar-based net expansion rate reflects both our customer retention and ability to drive additional sales to our existing customers.
December 31, 2023 2022 2021 Number of customers with $100,000 and greater in annual contract value at end of period 1,721 1,420 1,095 Dollar-Based Net Expansion Rate Our dollar-based net expansion rate reflects both our customer retention and ability to drive additional sales to our existing customers.
At December 31, 2022, we were in compliance with the covenants and at December 31, 2022, we had $0.2 million of standby letters of credit outstanding under our Revolving Credit Facility.
At December 31, 2023, we were in compliance with the covenants and at December 31, 2023, we had $0.2 million of standby letters of credit outstanding under the Revolving Credit Facility.
Prior to our IPO, we did not raise any primary institutional capital, and the proceeds of our Series A and Series B redeemable convertible preferred stock financings were used to repurchase shares of capital stock from former stockholders. We have generated significant operating losses, as reflected by our accumulated deficit of $746.8 million at December 31, 2022.
Prior to our IPO, we did not raise any primary institutional capital, and the proceeds of our Series A and Series B redeemable convertible preferred stock financings were used to repurchase shares of capital stock from former stockholders. We have generated significant operating losses, as reflected by our accumulated deficit of $825.0 million at December 31, 2023.
The $11.5 million increase in interest expense was primarily related to an increase in the variable rate of our Term Loan entered into in July 2021. The $2.8 million increase in other expense, net was primarily due to an increase in foreign exchange losses.
The $11.5 million increase in interest expense was primarily related to interest expense for our Term Loan entered into in July 2021. The $2.8 million increase in other expense, net was primarily due to an increase in foreign exchange losses.
Exposure management is an effective discipline for managing, measuring and comparing cybersecurity risk in today's complex IT environments. In October 2022, we launched our Tenable One Exposure Management Platform (Tenable One), which unifies a variety of data sources into a single exposure view to help organizations gain visibility, prioritize efforts and communicate cyber risks.
Exposure management is an effective discipline for managing, measuring and comparing cybersecurity risk in today's complex IT environments. Our Tenable One Exposure Management Platform, or Tenable One, unifies a variety of data sources into a single exposure view to help organizations gain visibility, prioritize efforts and communicate cyber risks.
New enterprise platform customers represent new customer logos during the periods presented and do not include customer conversions from Nessus Expert to enterprise platforms. (2) The number of new enterprise platform customers added in 2021 includes 95 legacy customers of companies we acquired.
New enterprise platform customers represent new customer logos during the periods presented and do not include customer conversions from Tenable Nessus Expert to enterprise platforms. (2) The number of new enterprise platform customers added in 2023 and 2021 include 104 and 95 legacy customers, respectively, of companies we acquired.
We define these non-GAAP financial measures as their respective GAAP measures, excluding the effects of stock-based compensation, acquisition-related expenses, costs related to the intra-entity asset transfers resulting from the internal restructuring of legal entities and amortization of acquired intangible assets. Acquisition-related expenses include transaction expenses and costs related to the intercompany transfer of acquired intellectual property.
We define these non-GAAP financial measures as their respective GAAP measures, excluding the effects of stock-based compensation, acquisition-related expenses, restructuring expenses, costs related to the intra-entity asset transfers resulting from the internal restructuring of legal entities and amortization of acquired intangible assets.
General and Administrative Year Ended December 31, Change (dollars in thousands) 2022 2021 ($) (%) General and administrative $ 103,227 $ 89,912 $ 13,315 15 % The increase in general and administrative expense of $13.3 million was primarily due to: • an $11.5 million increase in personnel costs, largely associated with an increase in headcount, including a $6.4 million increase in stock-based compensation; • a $1.9 million increase in professional fees; • a $0.9 million increase in software subscription costs; • a $0.9 million increase in indirect taxes such as VAT or GST; • a $0.8 million increase in costs related to intra-entity asset transfers; and • a $0.3 million increase in travel and meeting costs; partially offset by • a $4.1 million decrease in acquisition-related expenses; and • a $0.7 million decrease in allocated overhead expenses.
The amounts above are net of $2.4 million in savings due to the impact of foreign exchange rates. 62 Table of Contents General and Administrative Year Ended December 31, Change (dollars in thousands) 2022 2021 ($) (%) General and administrative $ 103,227 $ 89,912 $ 13,315 15 % The increase in general and administrative expense of $13.3 million was primarily due to: • an $11.5 million increase in personnel costs, largely associated with an increase in headcount, including a $6.4 million increase in stock-based compensation; • a $1.9 million increase in professional fees; • a $0.9 million increase in software subscription costs; • a $0.9 million increase in indirect taxes such as VAT or GST; • a $0.8 million increase in costs related to intra-entity asset transfers; and • a $0.3 million increase in travel and meeting costs; partially offset by • a $4.1 million decrease in acquisition-related expenses; and • a $0.7 million decrease in allocated overhead expenses.
We use a two-tiered channel model whereby we sell our enterprise platform offerings to our distributors, which in turn sell to our resellers, which then sell to end users, which we call customers. Revenue in 2022, 2021 and 2020 was $683.2 million, $541.1 million and $440.2 million, representing year-over-year growth of 26% and 23%, respectively.
We use a two-tiered channel model whereby we sell our enterprise platform offerings to our distributors, which in turn sell to our resellers, which then sell to end users, which we call customers. Revenue in 2023, 2022 and 2021 was $798.7 million, $683.2 million and $541.1 million, representing year-over-year growth of 17% and 26%, respectively.
In addition, our sales pipeline opportunities vary from quarter to quarter between new customers and expansion from existing customers, and we do not prioritize one over the other to maximize the dollar-based net expansion rate. We generally expect the dollar-based net expansion rate to range from 110% to 120%.
In addition, our sales pipeline opportunities vary from quarter to quarter between new customers and expansion from existing customers, and we do not prioritize one over the other to maximize the dollar-based net expansion rate.
The fair value of the 2018 ESPP purchase rights were estimated on the offering or modification dates based on the following assumptions: Year Ended December 31, 2022 2021 2020 Expected term (in years) 0.5 — 2.0 0.5 — 2.0 0.5 — 2.0 Expected volatility 42.8% — 61.0% 37.2% — 59.4% 41.6% — 60.1% Risk-free interest rate 0.1% — 3.4% 0.1% — 0.2% 0.1% — 0.9% Expected dividend yield — — — Business Combinations We account for business combinations by recognizing the fair value of acquired assets and liabilities.
The fair value of the 2018 ESPP purchase rights were estimated on the offering or modification dates based on the following assumptions: Year Ended December 31, 2023 2022 2021 Expected term (in years) 0.5 — 2.0 0.5 — 2.0 0.5 — 2.0 Expected volatility 46.9% — 58.1% 42.8% — 61.0% 37.2% — 59.4% Risk-free interest rate 4.8% — 5.4% 0.1% — 3.4% 0.1% — 0.2% Expected dividend yield — — — 68 Table of Contents Business Combinations We account for business combinations by recognizing the fair value of acquired assets and liabilities.
Calculated current billings in any one period may be impacted by the timing and amount of new sales transactions, the timing and amount of renewal transactions, including early renewals, as well as the timing and amount of multi-year prepaid contracts, all of which could favorably or unfavorably impact quarter-to-quarter and year-over-year comparisons.
Calculated current billings in any one period may be impacted by the timing and amount of new sales transactions, the timing and amount of renewal transactions, including early renewals, the mix of the amount of subscriptions and perpetual licenses, the timing of billing professional services, as well as the timing and amount of multi-year prepaid contracts, all of which could favorably or unfavorably impact quarter-to-quarter and year-over-year comparisons.
At December 31, 2022, we had other non-cancellable purchase obligations of $15.3 million due in the next twelve months and $9.0 million due thereafter. Additionally, we had $7.8 million of unrecognized tax benefits and $1.4 million of asset retirement obligations, the timing of payments for which is uncertain.
At December 31, 2023, we had other non-cancellable purchase obligations of $26.1 million due in the next twelve months and $22.1 million due thereafter. Additionally, we had $8.3 million of unrecognized tax benefits and $1.4 million of asset retirement obligations, the timing of payments for which is uncertain.
Investing Activities From 2021 to 2022, net cash used in investing activities decreased by $263.6 million, primarily due to a decrease in cash paid for acquisitions of $191.7 million and a net decrease in cash paid for short-term investments of $89.4 million in 2022, partially offset by an increase in capitalized software development costs of $7.1 million, an increase in purchases of property and equipment of $5.5 million and an increase in cash paid for other investments of $5.0 million.
Investing Activities From 2022 to 2023, net cash used in investing activities increased by $84.6 million, primarily due to an increase in cash paid for acquisitions of $176.5 million, partially offset by a $71.6 million net increase in sales of short-term investments, $10.0 million in cash paid for other investments in 2022, a $7.7 million decrease in purchases of property and equipment and a $2.7 million decrease in capitalized software development costs. 65 Table of Contents From 2021 to 2022, net cash used in investing activities decreased by $263.6 million, primarily due to a decrease in cash paid for acquisitions of $191.7 million and a net decrease in cash paid for short-term investments of $89.4 million in 2022, partially offset by an increase in capitalized software development costs of $7.1 million, an increase in purchases of property and equipment of $5.5 million and an increase in cash paid for other investments of $5.0 million.
(Benefit) Provision for Income Taxes Year Ended December 31, Change (dollars in thousands) 2021 2020 ($) (%) (Benefit) provision for income taxes $ (3,952) $ 5,657 $ (9,609) (170) % In 2021, the benefit for income taxes included: • $7.9 million of income tax benefits related to the partial release of our valuation allowance associated with the Accurics acquisition; • $2.9 million of discrete benefits primarily related to a Supreme Court decision in India on the taxability of software license payments to nonresidents and the associated withholding taxes; and • a $2.6 million deferred tax benefit related to the Alsid acquisition; partially offset by • $3.8 million of income taxes in foreign jurisdictions in which we conduct business; • $2.8 million of discrete expenses primarily related to withholding taxes on sales to customers; and • $2.8 million of current expense from the restructuring of our research and development operations in Israel.
In 2021, the benefit for income taxes included: 63 Table of Contents • $7.9 million of income tax benefits related to the partial release of our valuation allowance associated with the Accurics acquisition; • $2.9 million of discrete benefits primarily related to a Supreme Court decision in India on the taxability of software license payments to nonresidents and the associated withholding taxes; and • a $2.6 million deferred tax benefit related to the Alsid acquisition; partially offset by • $3.8 million of income taxes in foreign jurisdictions in which we conduct business; • $2.8 million of discrete expenses primarily related to withholding taxes on sales to customers; and • $2.8 million of current expense from the restructuring of our research and development operations in Israel.
Liquidity and Capital Resources At December 31, 2022, we had $300.9 million of cash and cash equivalents, which consisted of bank deposits and money market funds, and $266.6 million of short-term investments, which consisted of commercial paper, asset backed securities, certificates of deposit, U.S. Treasury and agency obligations, and corporate and supranational bonds.
Liquidity and Capital Resources At December 31, 2023, we had $237.1 million of cash and cash equivalents, which consisted of bank deposits and money market funds, and $236.8 million of short-term investments, which consisted of commercial paper, asset backed securities, certificates of deposit, U.S. Treasury and agency obligations, and corporate and supranational bonds.
The amounts above are net of $2.4 million in savings due to the impact of foreign exchange rates.
The amounts above are net of $0.7 million in savings due to the impact of foreign exchange rates.
Our cash flows from operating activities were $131.2 million, $96.8 million and $64.2 million in 2022, 2021 and 2020, respectively. 45 Table of Contents Financial Highlights Below are our key financial results: Year Ended December 31, (in thousands, except per share data) 2022 2021 2020 Revenue $ 683,191 $ 541,130 $ 440,221 Loss from operations (67,815) (41,768) (36,433) Net loss (92,222) (46,677) (42,731) Net loss per share, basic and diluted (0.83) (0.44) (0.42) Net cash provided by operating activities 131,151 96,765 64,232 Purchases of property and equipment (9,359) (3,887) (18,882) Capitalized software development costs (9,789) (2,674) (1,395) Key Operating and Financial Metrics To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use and monitor the following operating and financial metrics, which include non-GAAP financial measures, to understand and evaluate our core operating and financial performance.
Our cash flows from operating activities were $149.9 million, $131.2 million and $96.8 million in 2023, 2022 and 2021, respectively. 49 Table of Contents Financial Highlights Below are our key financial results: Year Ended December 31, (in thousands, except per share data) 2023 2022 2021 Revenue $ 798,710 $ 683,191 $ 541,130 Loss from operations (52,160) (67,815) (41,768) Net loss (78,284) (92,222) (46,677) Net loss per share, basic and diluted (0.68) (0.83) (0.44) Net cash provided by operating activities 149,855 131,151 96,765 Purchases of property and equipment (1,704) (9,359) (3,887) Capitalized software development costs (7,052) (9,789) (2,674) Key Operating and Financial Metrics To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use and monitor the following operating and financial metrics, which include non-GAAP financial measures, to understand and evaluate our core operating and financial performance.
Because of these and other limitations, you should consider calculated current billings along with revenue and our other GAAP financial results. 46 Table of Contents The following table presents a reconciliation of revenue, the most directly comparable financial measure calculated in accordance with GAAP, to calculated current billings: Year Ended December 31, (in thousands) 2022 2021 2020 Revenue $ 683,191 $ 541,130 $ 440,221 Deferred revenue (current), end of period 502,115 407,498 328,819 Deferred revenue (current), beginning of period (1) (408,443) (331,462) (274,348) Calculated current billings $ 776,863 $ 617,166 $ 494,692 _______________ (1) Deferred revenue (current), beginning of period for 2022 and 2021 includes $0.9 million and $2.6 million, respectively, related to acquired deferred revenue.
Because of these and other limitations, you should consider calculated current billings along with revenue and our other GAAP financial results. 50 Table of Contents The following table presents a reconciliation of revenue, the most directly comparable financial measure calculated in accordance with GAAP, to calculated current billings: Year Ended December 31, (in thousands) 2023 2022 2021 Revenue $ 798,710 $ 683,191 $ 541,130 Deferred revenue (current), end of period 580,779 502,115 407,498 Deferred revenue (current), beginning of period (1) (506,192) (408,443) (331,462) Calculated current billings $ 873,297 $ 776,863 $ 617,166 _______________ (1) Deferred revenue (current), beginning of period for 2023, 2022 and 2021 includes $4.1 million, $0.9 million and $2.6 million, respectively, related to acquired deferred revenue.
We believe that these non-GAAP measures provide important information because they facilitate comparisons of our core operating results over multiple periods. 49 Table of Contents The following table presents a reconciliation of net loss and net loss per share, the most comparable financial measures calculated in accordance with GAAP, to non-GAAP net income and non-GAAP earnings per share: Year Ended December 31, (in thousands, except for per share amounts) 2022 2021 2020 Net loss $ (92,222) $ (46,677) $ (42,731) Stock-based compensation 120,633 79,405 59,573 Tax impact of stock-based compensation (1) 2,103 617 1,299 Acquisition-related expenses (2) 2,642 6,901 339 Costs related to intra-entity asset transfers (3) 838 — — Amortization of acquired intangible assets (4) 11,372 6,447 2,314 Tax impact of acquisitions (5) (3,703) (10,560) — Tax impact of intra-entity asset transfers (6) 2,652 2,808 — Non-GAAP net income $ 44,315 $ 38,941 $ 20,794 Net loss per share, diluted $ (0.83) $ (0.44) $ (0.42) Stock-based compensation 1.08 0.75 0.59 Tax impact of stock-based compensation (1) 0.02 0.01 0.01 Acquisition-related expenses (2) 0.02 0.06 — Costs related to intra-entity asset transfers (3) 0.01 — — Amortization of acquired intangible assets (4) 0.10 0.06 0.02 Tax impact of acquisitions (5) (0.03) (0.10) — Tax impact of intra-entity asset transfers (6) 0.03 0.03 — Adjustment to diluted earnings per share (7) (0.02) (0.03) (0.01) Non-GAAP earnings per share, diluted $ 0.38 $ 0.34 $ 0.19 Weighted-average shares used to compute GAAP net loss per share, diluted 111,321 106,387 101,009 Weighted-average shares used to compute non-GAAP earnings per share, diluted 117,534 114,825 109,962 ________________ (1) The tax impact of stock-based compensation is based on the tax treatment for the applicable tax jurisdictions.
We believe that these non-GAAP measures provide important information because they facilitate comparisons of our core operating results over multiple periods. 53 Table of Contents The following table presents a reconciliation of net loss and net loss per share, the most comparable financial measures calculated in accordance with GAAP, to non-GAAP net income and non-GAAP earnings per share: Year Ended December 31, (in thousands, except for per share amounts) 2023 2022 2021 Net loss $ (78,284) $ (92,222) $ (46,677) Stock-based compensation 145,327 120,633 79,405 Tax impact of stock-based compensation (1) 2,017 2,103 617 Acquisition-related expenses (2) 9,472 2,642 6,901 Restructuring (2) 4,499 — — Costs related to intra-entity asset transfer (3) — 838 — Amortization of acquired intangible assets (4) 13,859 11,372 6,447 Tax impact of acquisitions (5) 265 (3,703) (10,560) Tax impact of intra-entity asset transfers (6) — 2,652 2,808 Non-GAAP net income $ 97,155 $ 44,315 $ 38,941 Net loss per share, diluted $ (0.68) $ (0.83) $ (0.44) Stock-based compensation 1.25 1.08 0.75 Tax impact of stock-based compensation (1) 0.02 0.02 0.01 Acquisition-related expenses (2) 0.08 0.02 0.06 Restructuring (2) 0.04 — — Costs related to intra-entity asset transfer (3) — 0.01 — Amortization of acquired intangible assets (4) 0.11 0.10 0.06 Tax impact of acquisitions (5) — (0.03) (0.10) Tax impact of intra-entity asset transfers (6) — 0.03 0.03 Adjustment to diluted earnings per share (7) (0.02) (0.02) (0.03) Non-GAAP earnings per share, diluted $ 0.80 $ 0.38 $ 0.34 Weighted-average shares used to compute GAAP net loss per share, diluted 115,408 111,321 106,387 Weighted-average shares used to compute non-GAAP earnings per share, diluted 120,714 117,534 114,825 ________________ (1) The tax impact of stock-based compensation is based on the tax treatment for the applicable tax jurisdictions.
We paid $66.8 million and $258.5 million to acquire businesses in 2022 and 2021, respectively. We may in the future enter into arrangements to acquire or invest in other complementary businesses, services and technologies, including intellectual property rights. We expect to continue incurring operating losses in the near term.
We may in the future enter into arrangements to acquire or invest in other complementary businesses, services and technologies, including intellectual property rights. We expect to continue incurring operating losses in the near term.
The following table presents a reconciliation of loss from operations, the most directly comparable financial measure calculated in accordance with GAAP, to non-GAAP income from operations, and operating margin, the most directly comparable financial measure calculated in accordance with GAAP, to non-GAAP operating margin: Year Ended December 31, (dollars in thousands) 2022 2021 2020 Loss from operations $ (67,815) $ (41,768) $ (36,433) Stock-based compensation 120,633 79,405 59,573 Acquisition-related expenses 2,642 6,901 339 Costs related to intra-entity asset transfers (1) 838 — — Amortization of acquired intangible assets 11,372 6,447 2,314 Non-GAAP income from operations $ 67,670 $ 50,985 $ 25,793 Operating margin (10) % (8) % (8) % Non-GAAP operating margin 10 % 9 % 6 % ________________ (1) The costs related to the intra-entity asset transfers resulted from our internal restructuring of Cymptom.
The following table presents a reconciliation of loss from operations, the most directly comparable financial measure calculated in accordance with GAAP, to non-GAAP income from operations, and operating margin, the most directly comparable financial measure calculated in accordance with GAAP, to non-GAAP operating margin: Year Ended December 31, (dollars in thousands) 2023 2022 2021 Loss from operations $ (52,160) $ (67,815) $ (41,768) Stock-based compensation 145,327 120,633 79,405 Acquisition-related expenses 9,472 2,642 6,901 Restructuring 4,499 — — Costs related to intra-entity asset transfer (1) — 838 — Amortization of acquired intangible assets 13,859 11,372 6,447 Non-GAAP income from operations $ 120,997 $ 67,670 $ 50,985 Operating margin (7) % (10) % (8) % Non-GAAP operating margin 15 % 10 % 9 % ________________ (1) The costs related to the intra-entity asset transfer resulted from our internal restructuring of Cymptom.
The following tables summarize key components of our customer base: Year Ended December 31, 2022 2021 2020 Number of new enterprise platform customers added in period (1)(2) 2,078 1,882 1,455 _______________ (1) We define an enterprise platform customer as a customer that has licensed Tenable One, Tenable.io, Tenable.cs, Tenable.ad, Tenable.ot or Tenable.sc for an annual amount of $5,000 or greater.
The following tables summarize key components of our customer base: Year Ended December 31, 2023 2022 2021 Number of new enterprise platform customers added in period (1)(2) 1,788 2,078 1,882 _______________ (1) We define an enterprise platform customer as a customer that has licensed Tenable One, Tenable Venerability Management, Tenable Cloud Security, Tenable Identity Exposure, Tenable OT Security or Tenable Security Center for an annual amount of $5,000 or greater.
Other expense, net consists primarily of foreign currency remeasurement and transaction gains and losses. Provision (Benefit) for Income Taxes Provision (benefit) for income taxes consists of income taxes in all foreign jurisdictions in which we conduct business and the related withholding taxes on sales with customers.
Other expense, net consists primarily of foreign currency remeasurement and transaction gains and losses and impairment losses related to our non-marketable simple agreements for future equity ("SAFE") investments. Provision (Benefit) for Income Taxes Provision (benefit) for income taxes consists of income taxes in all foreign jurisdictions in which we conduct business and the related withholding taxes on sales with customers.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, (in thousands) 2022 2021 2020 Net cash provided by operating activities $ 131,151 $ 96,765 $ 64,232 Net cash (used in) provided by investing activities (128,039) (391,590) 4,079 Net cash provided by financing activities 23,318 397,646 36,403 Effect of exchange rate changes on cash and cash equivalents and restricted cash (3,835) (3,013) (916) Net increase in cash and cash equivalents and restricted cash $ 22,595 $ 99,808 $ 103,798 60 Table of Contents Operating Activities Our largest source of cash provided by operating activities is cash collections from sales of our products and services, as we typically invoice our customers in advance.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, (in thousands) 2023 2022 2021 Net cash provided by operating activities $ 149,855 $ 131,151 $ 96,765 Net cash used in investing activities (212,615) (128,039) (391,590) Net cash provided by financing activities 1,251 23,318 397,646 Effect of exchange rate changes on cash and cash equivalents and restricted cash (2,225) (3,835) (3,013) Net (decrease) increase in cash and cash equivalents and restricted cash $ (63,734) $ 22,595 $ 99,808 Operating Activities Our largest source of cash provided by operating activities is cash collections from sales of our products and services, as we typically invoice our customers in advance.
In recognizing revenue, we apply the following steps: • Identify the contract with a customer • Identify the performance obligations in the contract • Determine the transaction price • Allocate the transaction price to the performance obligations in the contract • Recognize revenue when or as performance obligations are satisfied In situations where we enter into a contractual arrangement that includes non-standard terms and conditions, such as acceptance provisions and options to purchase additional products and services, as well as contract modifications, we apply judgment in identifying and assessing the impact on revenue recognition.
In recognizing revenue, we apply the following steps: • Identify the contract with a customer • Identify the performance obligations in the contract • Determine the transaction price • Allocate the transaction price to the performance obligations in the contract • Recognize revenue when or as performance obligations are satisfied In situations where we enter into a contractual arrangement that includes non-standard terms and conditions, such as acceptance provisions and options to purchase additional products and services, as well as contract modifications, we apply judgment in identifying and assessing the impact on revenue recognition. 66 Table of Contents We generate revenue from subscription arrangements for our software and cloud-based solutions, perpetual licenses, maintenance associated with perpetual licenses and professional services and other revenue.
Refer to Note 7 to our consolidated financial statements in this Annual Report on Form 10-K for our required operating lease payments and Note 9 for our required payments to Amazon Web Services, Inc. for cloud services.
Contractual Obligations We have certain contractual obligations for future payments. See Note 7 to our Consolidated Financial Statements in this Annual Report on Form 10-K for our required operating lease payments and Note 9 for our required payments to Microsoft and Amazon Web Services for cloud services.
Our recurring revenue, which includes revenue from subscription arrangements for software (both revenue recognized ratably over the subscription term and upon delivery) and cloud-based solutions and maintenance associated with perpetual licenses, represented 95% of revenue in 2022 and 2021 and 94% of revenue in 2020.
Our recurring revenue, which includes revenue from subscription arrangements for software (both revenue recognized ratably over the subscription term and upon delivery) and cloud-based solutions and maintenance associated with perpetual licenses, represented 95% of revenue in 2023, 2022 and 2021. Our net loss in 2023, 2022 and 2021 was $78.3 million, $92.2 million and $46.7 million, respectively.
Tenable One builds on the speed and breadth of vulnerability coverage from Tenable Research and adds aggregated exposure view analytics, guidance on mitigating attack pathways and a centralized asset inventory. Tenable One incorporates Tenable.io, Tenable.io Web Application Scanning, Tenable Lumin Exposure View, Tenable.cs, Tenable.ad and Tenable.asm.
Tenable One builds on the speed and breadth of vulnerability coverage from Tenable Research and adds aggregated exposure view analytics, guidance on mitigating attack pathways and a centralized asset inventory. Tenable One incorporates Tenable Vulnerability Management, Tenable Web App Scanning, Tenable Lumin, Tenable Cloud Security, Tenable Identity Exposure, Tenable Attack Surface Management, Tenable Security Center and Tenable OT Security.
All of these products are also offered as standalone solutions, alongside Tenable.sc, Tenable.ot and Nessus. Our platform offerings are primarily sold on a subscription basis with a one-year term. Our subscription terms are generally not longer than three years. These offerings are typically prepaid in advance.
All of these products are also offered as standalone solutions, alongside Nessus. Our platform offerings are primarily sold on a subscription basis with a one-year term. Our subscription terms are generally not longer than three years. These offerings are typically prepaid in advance. To a lesser extent, we recognize revenue ratably from perpetual licenses and from the related ongoing maintenance.
Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates.
Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Our actual results could differ from these estimates. The critical accounting estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below.
Term Loan and Revolving Credit Facility In July 2021, we entered into a credit agreement, or the Credit Agreement, which is comprised of a $375.0 million Term Loan and a $50.0 million Revolving Credit Facility, with a $15.0 million letter of credit sublimit.
Term Loan and Revolving Credit Facility In July 2021, we entered into a credit agreement, or the Credit Agreement, which is comprised of a $375.0 million Term Loan and a $50.0 million Revolving Credit Facility, with a $15.0 million letter of credit sublimit. On June 1, 2023, we began using SOFR for the base interest rate instead of LIBOR.
Sales through our channel partner network of distributors and resellers are generally discounted as compared to the price that we would sell to an end user. Revenue for sales through our channel network, which is fixed, is recorded net of any distributor or reseller margin.
Sales through our channel partner network of distributors and resellers are generally discounted as compared to the price that we would sell to an end user.
To a lesser extent, we recognize revenue ratably from perpetual licenses and from the related ongoing maintenance. We sell and market our products and services through our field sales force that works closely with our channel partners, which includes a network of distributors and resellers, in developing sales opportunities.
We sell and market our products and services through our field sales force that works closely with our channel partners, which includes a network of distributors and resellers, in developing sales opportunities.
Deferred Commissions Sales commissions, including related incremental fringe benefit costs, are considered to be incremental costs of obtaining a contract, and therefore are deferred over an estimated period of benefit, which ranges between three and four years for subscription arrangements and five years for perpetual license arrangements.
Revenue for sales through our channel network, which is fixed, is recorded net of any distributor or reseller margin. 67 Table of Contents Deferred Commissions Sales commissions, including related incremental fringe benefit costs, are considered to be incremental costs of obtaining a contract, and therefore are deferred over an estimated period of benefit, which ranges between three and four years for subscription arrangements and five years for perpetual license arrangements.
This is a measure of the amount by which a financial variable, such as a share price, has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. In 2021, we began using the volatility of our common stock to calculate expected volatility.
We use the actual purchase periods as the expected term in the 2018 ESPP. • Volatility. This is a measure of the amount by which a financial variable, such as a share price, has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period.
The amounts above are net of $0.7 million in savings due to the impact of foreign exchange rates. 55 Table of Contents Interest Income, Interest Expense and Other Expense, Net Year Ended December 31, Change (dollars in thousands) 2022 2021 ($) (%) Interest income $ 6,284 $ 606 $ 5,678 937 % Interest expense (19,001) (7,502) (11,499) 153 % Other expense, net (4,757) (1,965) (2,792) 142 % The $5.7 million increase in interest income was due to a higher interest rate on an increased amount of cash and cash equivalents and short-term investments.
Interest Income, Interest Expense and Other Expense, Net Year Ended December 31, Change (dollars in thousands) 2022 2021 ($) (%) Interest income $ 6,284 $ 606 $ 5,678 937 % Interest expense (19,001) (7,502) (11,499) 153 % Other expense, net (4,757) (1,965) (2,792) 142 % The $5.7 million increase in interest income was due to lower returns on our short-term investments in 2021.
Sales and Marketing Sales and marketing expense consists of personnel costs, sales commissions, marketing programs, travel and entertainment, expenses for conferences, meetings and events and allocated overhead costs.
Operating expenses also include depreciation and amortization as well as allocated overhead costs, including IT and facilities costs. Sales and Marketing Sales and marketing expense consists of personnel costs, sales commissions, marketing programs, travel and entertainment, expenses for conferences, meetings and events and allocated overhead costs.
Operating Expenses Our operating expenses consist of sales and marketing, research and development and general and administrative expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, payroll taxes, stock-based compensation and any severance. Operating expenses also include depreciation and amortization as well as allocated overhead costs, including IT and facilities costs.
Operating Expenses Our operating expenses consist of sales and marketing, research and development, general and administrative expenses and restructuring expenses. Personnel costs are the most significant component of operating expenses and consist of salaries, benefits, bonuses, payroll taxes, stock-based compensation and ordinary course severance.
The Term Loan is being amortized at 1% per annum in equal quarterly installments until the final payment of $350.6 million on the July 7, 2028 maturity date. We may be subject to mandatory Term Loan prepayments related to the excess cash provisions in the Credit Agreement beginning in 2023.
The Term Loan is being amortized at 1% per annum in equal quarterly installments until the final payment of $350.6 million on the July 7, 2028 maturity date.
If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected.
If we are unable to raise additional capital when desired, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, operating results and financial condition would be adversely affected. 64 Table of Contents Stock Repurchase Plan In November 2023, our Board of Directors authorized the repurchase of up to $100 million of our common stock.
Research and Development Year Ended December 31, Change (dollars in thousands) 2021 2020 ($) (%) Research and development $ 116,432 $ 101,687 $ 14,745 15 % The increase in research and development expense of $14.7 million was primarily due to: • a $13.5 million increase in personnel costs, largely associated with an increase in headcount, including a $5.8 million increase in stock-based compensation; • a $2.1 million increase in third-party cloud infrastructure costs; and • a $0.6 million increase in software subscriptions; partially offset by • a $1.0 million decrease in travel and meeting costs; • a $0.5 million decrease in allocated overhead; and • a $0.5 million decrease in depreciation.
Research and Development Year Ended December 31, Change (dollars in thousands) 2023 2022 ($) (%) Research and development $ 153,163 $ 143,560 $ 9,603 7 % The increase in research and development expense of $9.6 million was primarily due to: • a $9.6 million increase in personnel costs, largely associated with an increase in headcount, including a $5.7 million increase in stock-based compensation and a $1.4 million decrease in capitalized software development costs; • a $4.8 million increase in third-party cloud infrastructure costs; • a $1.0 million increase in allocated overhead expenses; • a $0.5 million increase in travel and meeting costs; and 59 Table of Contents • a $0.4 million increase in depreciation expense; partially offset by • a $4.3 million decrease in costs for independent contractors; and • a $2.3 million increase in tax credits.
The prepayments related to excess cash flow provisions apply if our first lien net leverage ratio (as defined in the Credit Agreement) exceeds 3.5, and at December 31, 2022, our first lien net leverage ratio was below that threshold.
We may be subject to mandatory Term Loan prepayments related to the excess cash provisions in the Credit Agreement if our first lien net leverage ratio (as defined in the Credit Agreement) exceeds 3.5, and at December 31, 2023, our first lien net leverage ratio was 1.28.
Treasury rate, having a term that most closely resembles the expected life of the stock option. • Dividend Yield . We have not and do not expect to pay dividends on our common stock. Valuations Following our IPO, we use the market price of our common stock at the date of grant as the fair value.
We have not and do not expect to pay dividends on our common stock. Valuations We use the market price of our common stock at the date of grant as the fair value.
We generate revenue from subscription arrangements for our software and cloud-based solutions, perpetual licenses, maintenance associated with perpetual licenses and professional services and other revenue. Subscription Revenue Our subscription arrangements generally have annual or multi-year contractual terms and allow customers to use our software or cloud solutions.
Subscription Revenue Our subscription arrangements generally have annual or multi-year contractual terms and allow customers to use our software or cloud solutions.
Operating Expenses Sales and Marketing Year Ended December 31, Change (dollars in thousands) 2021 2020 ($) (%) Sales and marketing $ 270,158 $ 224,277 $ 45,881 20 % The increase in sales and marketing expense of $45.9 million was primarily due to: • a $23.3 million increase in personnel costs, related to an increase in headcount, including a $9.6 million increase in stock-based compensation; • a $10.5 million increase in expenses for demand generation programs, including advertising, sponsorships, and brand awareness efforts; • a $10.0 million increase in sales commissions; and 57 Table of Contents • a $3.8 million increase in selling expenses, including software subscriptions and training programs; partially offset by • a $1.9 million decrease in travel and meeting costs.
Operating Expenses Sales and Marketing Year Ended December 31, Change (dollars in thousands) 2023 2022 ($) (%) Sales and marketing $ 393,450 $ 349,430 $ 44,020 13 % The increase in sales and marketing expense of $44.0 million was primarily due to: • a $22.9 million increase in personnel costs, related to an increase in headcount, including an $11.9 million increase in stock-based compensation; • a $9.8 million increase in expenses for demand generation programs, including advertising, sponsorships, and brand awareness efforts; • a $9.3 million increase in selling expenses, including travel and meeting costs and software subscription costs; • a $1.6 million increase in allocated overhead expenses; and • a $0.3 million increase in depreciation expense.
However, we expect our general and administrative expense to decrease as a percentage of our revenue 52 Table of Contents over the long term, although our general and administrative expense may fluctuate from period to period due to the timing and extent of these expenses.
We expect our general and administrative expense to continue to increase in absolute dollars and decrease as a percentage of our revenue over the long term, although our general and administrative expense may fluctuate from period to period due to the timing and extent of these expenses. 56 Table of Contents Restructuring Restructuring expenses consist of non-ordinary course severance, employee related benefits and other charges to reorganize business operations.
The critical accounting estimates, assumptions and judgments that we believe have the most significant impact on our consolidated financial statements are described below. 61 Table of Contents Revenue Recognition We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.
Revenue Recognition We recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which we expect to be entitled to in exchange for those goods or services.
Results of Operations The following tables set forth our consolidated results of operations for the periods presented: Year Ended December 31, (in thousands) 2022 2021 2020 Revenue $ 683,191 $ 541,130 $ 440,221 Cost of revenue (1) 154,789 106,396 77,554 Gross profit 528,402 434,734 362,667 Operating expenses: Sales and marketing (1) 349,430 270,158 224,277 Research and development (1) 143,560 116,432 101,687 General and administrative (1) 103,227 89,912 73,136 Total operating expenses 596,217 476,502 399,100 Loss from operations (67,815) (41,768) (36,433) Interest income 6,284 606 1,740 Interest expense (19,001) (7,502) (496) Other expense, net (4,757) (1,965) (1,885) Loss before income taxes (85,289) (50,629) (37,074) Provision (benefit) for income taxes 6,933 (3,952) 5,657 Net loss $ (92,222) $ (46,677) $ (42,731) _______________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, (in thousands) 2022 2021 2020 Cost of revenue $ 8,369 $ 4,446 $ 3,158 Sales and marketing 49,383 29,410 19,842 Research and development 31,499 20,593 14,794 General and administrative 31,382 24,956 21,779 Total stock-based compensation expense $ 120,633 $ 79,405 $ 59,573 53 Table of Contents Comparison of 2022 and 2021 Revenue The following table presents the increase in revenue: Year Ended December 31, Change (dollars in thousands) 2022 2021 ($) (%) Subscription revenue $ 612,510 $ 476,023 $ 136,487 29 % Perpetual license and maintenance revenue 50,699 50,333 366 1 % Professional services and other revenue 19,982 14,774 5,208 35 % Revenue $ 683,191 $ 541,130 $ 142,061 26 % The increase in revenue of $142.1 million included $132.8 million from existing customers as of January 1, 2022 and $9.3 million from new customers.
We expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized based on our history of losses. 57 Table of Contents Results of Operations The following tables set forth our consolidated results of operations for the periods presented: Year Ended December 31, (in thousands) 2023 2022 2021 Revenue $ 798,710 $ 683,191 $ 541,130 Cost of revenue (1) 183,577 154,789 106,396 Gross profit 615,133 528,402 434,734 Operating expenses: Sales and marketing (1) 393,450 349,430 270,158 Research and development (1) 153,163 143,560 116,432 General and administrative (1) 116,181 103,227 89,912 Restructuring 4,499 — — Total operating expenses 667,293 596,217 476,502 Loss from operations (52,160) (67,815) (41,768) Interest income 24,700 6,284 606 Interest expense (31,339) (19,001) (7,502) Other expense, net (8,602) (4,757) (1,965) Loss before income taxes (67,401) (85,289) (50,629) Provision (benefit) for income taxes 10,883 6,933 (3,952) Net loss $ (78,284) $ (92,222) $ (46,677) _______________ (1) Includes stock-based compensation expense as follows: Year Ended December 31, (in thousands) 2023 2022 2021 Cost of revenue $ 11,247 $ 8,369 $ 4,446 Sales and marketing 61,322 49,383 29,410 Research and development 37,225 31,499 20,593 General and administrative 35,533 31,382 24,956 Total stock-based compensation expense $ 145,327 $ 120,633 $ 79,405 Comparison of 2023 and 2022 Revenue Year Ended December 31, Change (dollars in thousands) 2023 2022 ($) (%) Subscription revenue $ 725,013 $ 612,510 $ 112,503 18 % Perpetual license and maintenance revenue 48,729 50,699 (1,970) (4) % Professional services and other revenue 24,968 19,982 4,986 25 % Revenue $ 798,710 $ 683,191 $ 115,519 17 % The increase in revenue of $115.5 million included $125.9 million from existing customers as of January 1, 2023 net of a decrease from new customers of $10.4 million as compared to the prior year.
Cost of Revenue, Gross Profit and Gross Margin Year Ended December 31, Change (dollars in thousands) 2021 2020 ($) (%) Cost of revenue $ 106,396 $ 77,554 $ 28,842 37 % Gross profit 434,734 362,667 72,067 20 % Gross margin 80 % 82 % The increase in cost of revenue of $28.8 million was primarily due to: • a $17.8 million increase in third-party cloud infrastructure costs; • a $4.1 million increase in the amortization of acquired intangible assets; • a $4.0 million increase in personnel costs, primarily due to support for cloud-based products and an increase in headcount, including a $1.3 million increase in stock-based compensation; • a $1.2 million increase in professional fees; and • a $1.1 million increase in hardware costs; partially offset by • a $0.6 million decrease in allocated overhead expenses.
International revenue increased $59.9 million, or 20%. 58 Table of Contents Cost of Revenue, Gross Profit and Gross Margin Year Ended December 31, Change (dollars in thousands) 2023 2022 ($) (%) Cost of revenue $ 183,577 $ 154,789 $ 28,788 19 % Gross profit 615,133 528,402 86,731 16 % Gross margin 77 % 77 % The increase in cost of revenue of $28.8 million was primarily due to: • a $12.2 million increase in personnel costs, primarily due to support for cloud-based products and an increase in headcount, including a $2.9 million increase in stock-based compensation; • a $10.3 million increase in third-party cloud infrastructure costs; • a $2.5 million increase in the amortization of acquired intangible assets; • a $1.8 million increase in depreciation and amortization; • a $0.7 million increase in allocated overhead expenses; • a $0.5 million increase in subscription costs; and • a $0.3 million increase in professional fees.
Non-GAAP Income from Operations and Non-GAAP Operating Margin We use non-GAAP income from operations along with non-GAAP operating margin as key indicators of our financial performance.
The following table presents our dollar-based net expansion rate: December 31, (in thousands) 2023 2022 2021 Dollar-based net expansion rate 111 % 117 % 117 % 52 Table of Contents Non-GAAP Income from Operations and Non-GAAP Operating Margin We use non-GAAP income from operations along with non-GAAP operating margin as key indicators of our financial performance.
In 2020, the provision for income taxes included: • $4.0 million of income taxes in foreign jurisdictions in which we conduct business; and • $1.7 million of discrete expenses primarily related to withholding taxes on sales to customers.
In 2022, the provision for income taxes included: • $4.8 million of income taxes in foreign jurisdictions in which we conduct business; • $3.9 million of discrete expenses primarily related to withholding taxes on sales to customers; and • $2.7 million of current expense from the restructuring of our research and development operations in Israel; partially offset by • a $2.5 million benefit from releasing a valuation allowance related to the Bit Discovery acquisition; • $1.2 million of deferred tax benefits related to the Alsid acquisition; and • $0.8 million of discrete benefits.
At December 31, 2022, we had deferred revenue of $664.6 million, of which $502.1 million was recorded as a current liability and is expected to be recognized as revenue in the next 12 months, provided all other revenue recognition criteria are met. 59 Table of Contents Our principal uses of cash in recent periods have been funding our operations, expansion of our sales and marketing and research and development activities, investments in infrastructure, including the build-out of our new headquarters, and acquiring complementary businesses and technology.
At December 31, 2023, we had deferred revenue of $750.5 million, of which $580.8 million was recorded as a current liability and is expected to be recognized as revenue in the next 12 months, provided all other revenue recognition criteria are met.
The Term Loan bears variable interest at a rate of 2.75% per annum over LIBOR, subject to a 0.50% floor. Prior to January 31, 2022, the interest rate on the Term Loan was 3.25%.
The Term Loan bears interest at a rate of 2.75% per annum over SOFR, subject to a 0.50% floor, plus a credit spread adjustment depending on the interest period. From January to December 2023, interest rates on our Term Loan have been between 7.16% and 8.21%.
General and Administrative Year Ended December 31, Change (dollars in thousands) 2021 2020 ($) (%) General and administrative $ 89,912 $ 73,136 $ 16,776 23 % The increase in general and administrative expense of $16.8 million was primarily due to: • a $7.5 million increase in personnel costs, largely associated with an increase in headcount, including a $3.2 million increase in stock-based compensation; • a $6.3 million increase in acquisition-related expenses; • a $2.0 million increase in professional fees; and • a $1.0 million increase in depreciation and amortization. 58 Table of Contents Interest Income, Interest Expense and Other Expense, Net Year Ended December 31, Change (dollars in thousands) 2021 2020 ($) (%) Interest income $ 606 $ 1,740 $ (1,134) (65) % Interest expense (7,502) (496) (7,006) 1,413 % Other expense, net (1,965) (1,885) (80) 4 % The $1.1 million decrease in interest income was due to lower returns on our short-term investments in 2021.
General and Administrative Year Ended December 31, Change (dollars in thousands) 2023 2022 ($) (%) General and administrative $ 116,181 $ 103,227 $ 12,954 13 % The increase in general and administrative expense of $13.0 million was primarily due to: • a $5.6 million increase in personnel costs, largely associated with an increase in headcount, including a $4.2 million increase in stock-based compensation; • a $3.5 million increase in acquisition-related expenses; • a $2.1 million increase in professional fees; • a $1.1 million increase in indirect taxes such as VAT, GST and other; • a $0.9 million increase in bank charges; and • a $0.5 million increase in travel and meeting costs; partially offset by • a $0.8 million decrease in costs related to intra-entity asset transfers.
We believe that these non-GAAP financial measures provide useful information about our core operating results over multiple periods.
Acquisition-related expenses include transaction and integration expenses, as well as costs related to the intercompany transfer of acquired intellectual property. Restructuring expenses include non-ordinary course severance, employee related benefits and other charges to reorganize business operations. We believe that these non-GAAP financial measures provide useful information about our core operating results over multiple periods.

… 35 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

5 edited+0 added−3 removed7 unchanged
Biggest changeHowever, if our costs, specifically employee-related and third-party cloud infrastructure costs, were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs, and our inability or failure to do so could harm our business, results of operations, or financial condition. 66 Table of Contents
Biggest changeInflation Risk While we do not believe that inflation has had a material effect on our business, results of operations, or financial condition through December 31, 2023, our costs, specifically employee-related and third-party cloud infrastructure costs, may become subject to significant inflationary pressures, and our inability or failure to fully offset such higher costs could harm our business, results of operations, or financial condition. 70 Table of Contents
We also had $266.6 million of short-term investments, which consisted of commercial paper, asset backed securities, certificates of deposit, U.S. treasury and agency securities and corporate and supranational bonds. Our investments are carried at their fair market values with cumulative unrealized gains or losses recorded as a component of accumulated other comprehensive (loss) income within stockholders' equity.
We also had $236.8 million of short-term investments, which consisted of commercial paper, asset backed securities, certificates of deposit, U.S. treasury and agency securities and corporate and supranational bonds. Our investments are carried at their fair market values with cumulative unrealized gains or losses recorded as a component of accumulated other comprehensive income (loss) within stockholders' equity.
In 2022, the U.S. dollar strengthened compared to other currencies, which likely negatively impacted our international sales growth and lowered certain international operating expenses.
In 2023, the U.S. dollar strengthened compared to other currencies, which likely negatively impacted our international sales growth and lowered certain international operating expenses.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risks in the ordinary course of our business, including interest rate, foreign currency exchange and inflation risks. 65 Table of Contents Interest Rate Risk At December 31, 2022, we had $300.9 million of cash and cash equivalents, which consisted of cash deposits and money market funds.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk We are exposed to market risks in the ordinary course of our business, including interest rate, foreign currency exchange and inflation risks. Interest Rate Risk At December 31, 2023, we had $237.1 million of cash and cash equivalents, which consisted of cash deposits and money market funds.
Effective January 31, 2023 through April 27, 2023, the Term Loan has a variable interest rate of 7.58%. A one percentage point increase in the rate would increase 2023 interest expense by $2.5 million.
From January to December 2023, interest rates on our Term Loan have been between 7.16% and 8.21%. A one percentage point increase in the rate would increase 2024 interest expense by $2.7 million.
Removed
Prior to January 31, 2022, the interest rate on the Term Loan was 3.25% (2.75% plus 0.50% LIBOR floor). From January 2022 through July 2022, July 2022 through October 2022, and October 2022 through January 2023, interest rates on our Term Loan were 3.27%, 5.56% and 7.16%, respectively.
Removed
Because the United Kingdom Financial Conduct Authority, which regulates LIBOR, announced the desire to phase out the use of LIBOR by the middle of 2023, our borrowings in the second half of 2023 may be subject to the Secured Overnight Financing Rate, or SOFR, under the terms our Term Loan and Revolving Credit Facility.
Removed
Inflation Risk We do not believe that inflation has had a material effect on our business, results of operations, or financial condition through December 31, 2022.

Other TENB 10-K year-over-year comparisons