After Rumored Private Filing, Tenable Is Going Public

Today Tenable filed to go public. The cybersecurity company raised just under $310 million as a private company. Tenable last raised $250 million in 2015.

The company’s IPO filing shows growing revenues and moderate losses. The company also claims a strong retention rate, which we’ll peek at.

Here are the core notes from the company’s S-1:

• Revenue: Tenable had revenue of $124.4 million in 2016 and $187.7 million in 2017, which works out to 51 percent year-over-year growth. In the first quarter of 2018, Tenable reported revenue of $59.1 million, up from $40.5 million in the first quarter of 2017. In percent terms, the firm grew 46 percent.
• Margins: In 2016, the company’s gross margin was 88.6 percent. In 2017, it was 86.4 percent. In the first quarter of 2018, the company’s gross margin came to 85.2 percent. In short, there has been consistent, minor deceleration.
• Losses: The company’s GAAP net losses grew from $40.0 million in 2016 to $41.8 million in 2017. The firm’s GAAP net loss also grew from $9.0 million in Q1’17 to $16.1 million in Q1’18. However, the firm’s adjusted loss fell from $34.5 million in 2016 to $32.7 million in 2017. On an adjusted basis, the firm still lost more in Q1’18 than Q1’17. However, given the company’s growth rate, it doesn’t seem too likely that the firm’s deficits will prove too scary. Especially compared to other, recent IPOs.
• Cash Burn: On a cash basis, Tenable operates reasonably efficiently. The firm’s negative free cash flow came to just $8.6 million in 2016 and $9.0 million in 2017. Again, compared to its revenue growth, those numbers aren’t aggressive. The firm’s free cash flow fell from $727,000 in Q1’17 to a $1.1 million deficit in Q1’18.
• Cash Position: Tenable has a small $26.4 million in cash and equivalents on hand as of the end of Q1’18. However, that number (as noted before) was just $27.2 million at the end of 2017 and was only $34.5 million at the end of 2016. In short, the company doesn’t have a lot of cash on hand because it hasn’t been setting cash on fire; some companies that go public have larger, more impressive cash positions, but also far worse cash consumption.
• SaaS Notes: We’ll need to unpack it a bit more in time, but Tenable’s stated dollar-based net expansion rate seems strong. The firm notes a 125 percent rate in 2016 (good), a 121 percent pace in 2017 (still good), and a 124 percent rate for the first quarter of 2018 (back to good-er). It is not clear per the S-1 (page 60) if the company takes into account badge (or customer) churn. If that doesn’t make sense, we’re essentially not sure if the firm is being generous to itself when calculating positive dollar churn or not. More when we have more time!

On the whole, Tenable seems to be in pretty good shape. Revenue growth on a percent basis seems strong, it doesn’t lose much money on a GAAP basis, and it burns little cash.

Its S-1 notes a $100 million raise, which is a placeholder. If the firm did raise a few hundred million it would have essentially infinite runway at its current burn.

Prior investors include In-Q-Tel, Accel, and Insight Venture Partners. Probably a good day for them, depending on the final valuation of course.

Illustration: Li-Anne Dias