Tenable Announces Fourth Quarter and Full Year 2023 Financial Results

  • Added 597 new enterprise platform customers and 156 net new six-figure customers in the fourth quarter(1).
  • Fourth quarter revenue of $213.3 million, up 16% year-over-year; full year revenue of $798.7 million, up 17% year-over-year.
  • Fourth quarter calculated current billings of $271.6 million, up 14% year-over year; full year calculated current billings of $873.3 million, up 12% year-over-year.
  • Full year net cash provided by operating activities of $149.9 million; full year unlevered free cash flow of $175.4 million.

COLUMBIA, Md., Feb. 06, 2024 (GLOBE NEWSWIRE) -- Tenable Holdings, Inc. (“Tenable”) (Nasdaq: TENB), the Exposure Management company, today announced financial results for the quarter and year ended December 31, 2023.

“We delivered a strong Q4, including better-than-expected results on the top and bottom line,” said Amit Yoran, Chairman and CEO of Tenable. “Underpinning our results was strength in Tenable One, driven by strong adoption of cloud and identity, as well as continued traction in OT. We are optimizing the business as we leverage the investments we have made to broaden our offerings and bring greater value to our customers.”

Fourth Quarter 2023 Financial Highlights

  • Revenue was $213.3 million, a 16% increase year-over-year.
  • Calculated current billings was $271.6 million, a 14% increase year-over-year.
  • GAAP loss from operations was $14.3 million, compared to a loss of $14.1 million in the fourth quarter of 2022.
  • Non-GAAP income from operations was $36.1 million, compared to $19.9 million in the fourth quarter of 2022.
  • GAAP net loss was $21.6 million, compared to $21.5 million in the fourth quarter of 2022.
  • GAAP net loss per share was $0.19 in the fourth quarter of 2023 and in the fourth quarter of 2022.
  • Non-GAAP net income was $30.2 million, compared to $14.2 million in the fourth quarter of 2022.
  • Non-GAAP diluted earnings per share was $0.25, compared to $0.12 in the fourth quarter of 2022.
  • Net cash provided by operating activities was $38.5 million, compared to $31.9 million in the fourth quarter of 2022.
  • Unlevered free cash flow was $43.3 million, compared to $32.1 million in the fourth quarter of 2022.
  • Repurchased 0.4 million shares of our common stock for $14.9 million.

Full Year 2023 Financial Highlights

  • Revenue was $798.7 million, a 17% increase year-over-year.
  • Calculated current billings was $873.3 million, a 12% increase year-over-year.
  • GAAP loss from operations was $52.2 million, compared to $67.8 million in 2022.
  • Non-GAAP income from operations was $121.0 million, compared to $67.7 million in 2022.
  • GAAP net loss was $78.3 million, compared to $92.2 million in 2022.
  • GAAP net loss per share was $0.68, compared to $0.83 in 2022.
  • Non-GAAP net income was $97.2 million, compared to $44.3 million in 2022.
  • Non-GAAP diluted earnings per share was $0.80, compared to $0.38 in 2022.
  • Cash and cash equivalents and short-term investments were $474.0 million at December 31, 2023, compared to $567.4 million at December 31, 2022.
  • Net cash provided by operating activities was $149.9 million, compared to $131.2 million in 2022.
  • Unlevered free cash flow was $175.4 million, compared to $128.1 million in 2022.

Fourth Quarter 2023 and Recent Business Highlights

  • Added 597 new enterprise platform customers and 156 net new six-figure customers(1).
  • Achieved "Ready" designation for Tenable Cloud Security (via Ermetic) at the moderate impact level from the Federal Risk and Authorization Management Program (FedRAMP®).
  • Expanded our partnership with Siemens Energy to further secure operational technology (OT) environments in the energy sector. Siemens Energy will integrate Tenable OT Security into their Omnivise T3000 control system as a network intrusion detection system (NIDS), in addition to already leveraging Tenable OT Security for asset discovery and vulnerability management.
  • Named a Leader in IDC's 2023 MarketScape report on Risk-Based VM Platforms.
  • Recognized as a Leader in the Cloud Security category of the inaugural report, The Next Generation of Cybersecurity Applications, executed and launched by Snowflake.

(1) Includes 104 enterprise platform customers and 15 six-figure customers added in connection with our acquisition of Ermetic.

Financial Outlook

For the first quarter of 2024, we currently expect:

  • Revenue in the range of $212.0 to $214.0 million.
  • Non-GAAP income from operations in the range of $27.0 million to $29.0 million.
  • Non-GAAP net income in the range of $20.0 million to $22.0 million, assuming interest income of $5.2 million, interest expense of $8.2 million and a provision for income taxes of $3.9 million.
  • Non-GAAP diluted earnings per share in the range of $0.16 to $0.18.
  • 123.0 million diluted weighted average shares outstanding.

For the year ending December 31, 2024, we currently expect:

  • Calculated current billings in the range of $982.0 million to $992.0 million.
  • Revenue in the range of $895.0 million to $905.0 million.
  • Non-GAAP income from operations in the range of $152.0 million to $160.0 million.
  • Non-GAAP net income in the range of $129.0 million to $137.0 million, assuming interest income of $21.7 million, interest expense of $32.2 million and a provision for income taxes of $10.6 million.
  • Non-GAAP diluted earnings per share in the range of $1.03 to $1.10.
  • 125.0 million diluted weighted average shares outstanding.
  • Unlevered free cash flow in the range of $220.0 million to $230.0 million.

Conference Call Information

Tenable will host a conference call today, February 6, 2024, at 4:30 p.m. Eastern Time to discuss its financial results. The conference call can be accessed at 877-407-9716 (U.S.) and 201-493-6779 (international). A live webcast of the event will be available on the Tenable Investor Relations website at https://investors.tenable.com. An archived replay of the live broadcast will be available on the Investor Relations page of the website following the call.

About Tenable

Tenable® is the Exposure Management company. Approximately 44,000 organizations around the globe rely on Tenable to understand and reduce cyber risk. As the creator of Nessus®, Tenable extended its expertise in vulnerabilities to deliver the world’s first platform to see and secure any digital asset on any computing platform. Tenable customers include approximately 65 percent of the Fortune 500, approximately 50 percent of the Global 2000, and large government agencies. Learn more at tenable.com.

Contact Information

Investor Relations
investors@tenable.com

Media Relations
tenablepr@tenable.com

Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. All statements contained in this press release other than statements of historical fact, including statements regarding our future results of operations and financial position, business strategy and plans and objectives for future operations, are forward-looking statements and represent our views as of the date of this press release. The words “anticipate,” "believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “will” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of assumptions and risks and uncertainties, many of which involve factors or circumstances that are beyond our control that could affect our financial results. These risks and uncertainties are detailed in the sections titled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2022, our Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 and other filings that we make from time to time with the SEC, which are available on the SEC's website at sec.gov. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this press release may not occur and actual results could differ materially and adversely from those anticipated or implied in any forward-looking statements. Except as required by law, we are under no obligation to update these forward-looking statements subsequent to the date of this press release, or to update the reasons if actual results differ materially from those anticipated in the forward-looking statements.

Non-GAAP Financial Measures

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we use certain non-GAAP financial measures, as described below, to understand and evaluate our core operating performance. These non-GAAP financial measures, which may be different than similarly titled measures used by other companies, are presented to enhance the overall understanding of our financial performance and should not be considered a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP.

We believe that these non-GAAP financial measures provide useful information about our financial performance, enhance the overall understanding of our past performance and future prospects and allow for greater transparency with respect to important metrics used by management for financial and operational decision-making. We include these non-GAAP financial measures to present our financial performance using a management view and because we believe that these measures provide an additional comparison of our core financial performance over multiple periods with other companies in our industry.

Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial tables accompanying this press release.

Calculated Current Billings: We define calculated current billings, a non-GAAP financial measure, as total revenue recognized in a period plus the change in current deferred revenue in the corresponding period. We believe that calculated current billings is a key metric to measure our periodic performance. Given that most of our customers pay in advance (including multi-year contracts), but we generally recognize the related revenue ratably over time, we use calculated current billings to measure and monitor our ability to provide our business with the working capital generated by upfront payments from our customers. We believe that calculated current billings, which excludes deferred revenue for periods beyond twelve months in a customer’s contractual term, more closely correlates with annual contract value and that the variability in total billings, depending on the timing of large multi-year contracts and the preference for annual billing versus multi-year upfront billing, may distort growth in one period over another.

Free Cash Flow and Unlevered Free Cash Flow: We define free cash flow, a non-GAAP financial measure, as net cash provided by operating activities less purchases of property and equipment and capitalized software development costs. We believe free cash flow is an important liquidity measure of the cash that is available (if any), after purchases of property and equipment and capitalized software development costs, for investment in our business and to make acquisitions. We believe that free cash flow is useful as a liquidity measure because it measures our ability to generate or use cash. We define unlevered free cash flow as free cash flow plus cash paid for interest and other financing costs. We believe unlevered free cash flow is useful as a liquidity measure as it measures the cash that is available to invest in our business and meet our current debt obligations and future financing needs. However, given our debt obligations, non-cancelable commitments and other contractual obligations, unlevered free cash flow does not represent residual cash flow available for discretionary expenses.

Non-GAAP Income from Operations and Non-GAAP Operating Margin: We define these non-GAAP financial measures as their respective GAAP measures, excluding the effect 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. 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. We believe that the exclusion of these expenses provides for a useful comparison of our operating results to prior periods and to our peer companies, which commonly exclude restructuring expenses.

Non-GAAP Net Income and Non-GAAP Earnings Per Share: We define non-GAAP net income as GAAP net loss, excluding the effect of stock-based compensation, acquisition-related expenses, restructuring expenses and amortization of acquired intangible assets, including the applicable tax impacts. In addition, we exclude 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. We use non-GAAP net income to calculate non-GAAP earnings per share.

Non-GAAP Gross Profit and Non-GAAP Gross Margin: We define non-GAAP gross profit as GAAP gross profit, excluding the effect of stock-based compensation and amortization of acquired intangible assets. Non-GAAP gross margin is defined as non-GAAP gross profit as a percentage of revenue.

Non-GAAP Sales and Marketing Expense, Non-GAAP Research and Development Expense and Non-GAAP General and Administrative Expense: We define these non-GAAP measures as their respective GAAP measures, excluding stock-based compensation, acquisition-related expenses and costs related to intra-entity asset transfers resulting from the internal restructuring of legal entities.


TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
 
 Three Months Ended
December 31,
 Year Ended
December 31,
(in thousands, except per share data) 2023   2022   2023   2022 
Revenue$213,306  $184,631  $798,710  $683,191 
Cost of revenue(1) 48,803   45,240   183,577   154,789 
Gross profit 164,503   139,391   615,133   528,402 
Operating expenses:       
Sales and marketing(1) 103,700   91,311   393,450   349,430 
Research and development(1) 40,083   36,911   153,163   143,560 
General and administrative(1) 30,567   25,258   116,181   103,227 
Restructuring 4,499      4,499    
Total operating expenses 178,849   153,480   667,293   596,217 
Loss from operations (14,346)  (14,089)  (52,160)  (67,815)
Interest income 5,377   3,538   24,700   6,284 
Interest expense (8,131)  (6,755)  (31,339)  (19,001)
Other (expense) income, net (609)  123   (8,602)  (4,757)
Loss before income taxes (17,709)  (17,183)  (67,401)  (85,289)
Provision for income taxes 3,939   4,304   10,883   6,933 
Net loss$(21,648) $(21,487) $(78,284) $(92,222)
        
Net loss per share, basic and diluted$(0.19) $(0.19) $(0.68) $(0.83)
Weighted-average shares used to compute net loss per share, basic and diluted 116,717   112,742   115,408   111,321 

_______________
(1) Includes stock-based compensation as follows:

 Three Months Ended
December 31,
 Year Ended
December 31,
 2023 2022 2023 2022
Cost of revenue$2,705 $2,401 $11,247 $8,369
Sales and marketing 14,700  12,963  61,322  49,383
Research and development 9,354  8,205  37,225  31,499
General and administrative 9,756  7,110  35,533  31,382
Total stock-based compensation$36,515 $30,679 $145,327 $120,633


TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited)
 
 December 31,
(in thousands, except per share data) 2023   2022 
Assets    
Current assets:   
Cash and cash equivalents$237,132  $300,866 
Short-term investments 236,840   266,569 
Accounts receivable (net of allowance for doubtful accounts of $470 and $1,400 at December 31, 2023 and 2022, respectively) 220,060   187,341 
Deferred commissions 49,559   44,270 
Prepaid expenses and other current assets 61,882   58,121 
Total current assets 805,473   857,167 
Property and equipment, net 45,436   46,726 
Deferred commissions (net of current portion) 72,394   67,238 
Operating lease right-of-use assets 34,835   38,495 
Acquired intangible assets, net 107,017   75,376 
Goodwill 518,539   316,520 
Other assets 23,177   38,008 
Total assets$1,606,871  $1,439,530 
    
Liabilities and Stockholders' Equity   
Current liabilities:   
Accounts payable and accrued expenses$16,941  $18,722 
Accrued compensation 66,492   52,620 
Deferred revenue 580,779   502,115 
Operating lease liabilities 5,971   5,821 
Other current liabilities 5,655   4,882 
Total current liabilities 675,838   584,160 
Deferred revenue (net of current portion) 169,718   162,487 
Term loan, net of issuance costs (net of current portion) 359,281   361,970 
Operating lease liabilities (net of current portion) 48,058   52,611 
Other liabilities 7,632   7,436 
Total liabilities 1,260,527   1,168,664 
Stockholders’ equity:   
Common stock (par value: $0.01; 500,000 shares authorized, 117,504 and 113,056 shares issued at December 31, 2023 and 2022, respectively) 1,175   1,131 
Additional paid-in capital 1,185,100   1,017,837 
Treasury stock (at cost: 356 and 0 shares at December 31, 2023 and 2022, respectively) (14,934)   
Accumulated other comprehensive income (loss) 38   (1,351)
Accumulated deficit (825,035)  (746,751)
Total stockholders’ equity 346,344   270,866 
Total liabilities and stockholders' equity$1,606,871  $1,439,530 


TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
 
 Year Ended December 31,
(in thousands) 2023   2022 
Cash flows from operating activities:   
Net loss$(78,284) $(92,222)
Adjustments to reconcile net loss to net cash provided by operating activities:   
Deferred income taxes 265   (2,781)
Depreciation and amortization 27,108   22,194 
Stock-based compensation 145,327   120,633 
Net accretion of discounts and amortization of premiums on short-term investments (8,323)  (1,199)
Impairment of other investments 5,617    
Amortization of debt issuance costs 1,267   1,299 
Other 1,914   5,404 
Changes in operating assets and liabilities:   
Accounts receivable (30,042)  (51,256)
Prepaid expenses and other assets 1,689   (2,929)
Accounts payable, accrued expenses and accrued compensation 7,071   409 
Deferred revenue 81,755   132,622 
Other current and noncurrent liabilities (5,509)  (1,023)
Net cash provided by operating activities 149,855   131,151 
    
Cash flows from investing activities:   
Purchases of property and equipment (1,704)  (9,359)
Capitalized software development costs (7,052)  (9,789)
Purchases of short-term investments (278,209)  (266,693)
Sales and maturities of short-term investments 317,651   234,569 
Purchases of other investments    (10,000)
Business combinations, net of cash acquired (243,301)  (66,767)
Net cash used in investing activities (212,615)  (128,039)
    
Cash flows from financing activities:   
Payments on term loan (3,750)  (3,750)
Proceeds from stock issued in connection with the employee stock purchase plan 16,224   14,791 
Proceeds from the exercise of stock options 3,501   11,721 
Purchase of treasury stock (14,934)   
Other financing activities 210   556 
Net cash provided by financing activities 1,251   23,318 
Effect of exchange rate changes on cash and cash equivalents and restricted cash (2,225)  (3,835)
Net (decrease) increase in cash and cash equivalents and restricted cash (63,734)  22,595 
Cash and cash equivalents and restricted cash at beginning of year 300,866   278,271 
Cash and cash equivalents and restricted cash at end of year$237,132  $300,866 


TENABLE HOLDINGS, INC.
REVENUE COMPONENTS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(unaudited)
 
RevenueThree Months Ended
December 31,
 Year Ended
December 31,
(in thousands)2023 2022 2023 2022
Subscription revenue$193,880 $166,253 $725,013 $612,510
Perpetual license and maintenance revenue 12,194  12,485  48,729  50,699
Professional services and other revenue 7,232  5,893  24,968  19,982
Revenue(1)$213,306 $184,631 $798,710 $683,191

_______________
(1) Recurring revenue, which includes revenue from subscription arrangements for software (both recognized ratably over the subscription term and upon delivery) and cloud-based solutions and maintenance associated with perpetual licenses, represented 95% of revenue in the three months and years ended December 31, 2023 and 2022.

Calculated Current BillingsThree Months Ended
December 31,
 Year Ended
December 31,
(in thousands) 2023   2022   2023   2022 
Revenue$213,306  $184,631  $798,710  $683,191 
Deferred revenue (current), end of period 580,779   502,115   580,779   502,115 
Deferred revenue (current), beginning of period(1) (522,449)  (447,863)  (506,192)  (408,443)
Calculated current billings$271,636  $238,883  $873,297  $776,863 

_______________
(1) Deferred revenue (current), beginning of period for the three months ended December 31, 2023 and year ended December 31, 2023 and 2022 includes $4.1 million, $4.1 million and $0.9 million, respectively, related to acquired deferred revenue.

Remaining Performance ObligationsAt December 31,
(in thousands)2023 2022
Remaining performance obligations, short-term$595,053 $513,325
Remaining performance obligations, long-term 179,955  167,073
Remaining performance obligations$775,008 $680,398


Free Cash Flow and Unlevered Free Cash FlowThree Months Ended
December 31,
 Year Ended
December 31,
(in thousands) 2023   2022   2023   2022 
Net cash provided by operating activities$38,505  $31,918  $149,855  $131,151 
Purchases of property and equipment (405)  (4,227)  (1,704)  (9,359)
Capitalized software development costs (2,345)  (1,011)  (7,052)  (9,789)
Free cash flow(1) 35,755   26,680   141,099   112,003 
Cash paid for interest and other financing costs 7,537   5,428   34,323   16,047 
Unlevered free cash flow(1)$43,292  $32,108  $175,422  $128,050 

________________
(1) Free cash flow and unlevered free cash flow for the periods presented were impacted by:

 Three Months Ended
December 31,
 Year Ended
December 31,
(in thousands) 2023   2022   2023   2022 
Employee stock purchase plan activity$3,584  $5,375  $1,077  $837 
Acquisition-related expenses (8,506)  (260)  (9,336)  (2,655)
Costs related to intra-entity asset transfer          (838)
Tax payment on intra-entity asset transfer          (2,697)
                

Free cash flow and unlevered free cash flow for the year ended December 31, 2022 were benefited by approximately $8 million from prepayments of software subscription costs, insurance and rent made in prior quarters.

Non-GAAP Income from Operations and Non-GAAP Operating MarginThree Months Ended
December 31,
 Year Ended
December 31,
(dollars in thousands) 2023   2022   2023   2022 
Loss from operations$(14,346) $(14,089) $(52,160) $(67,815)
Stock-based compensation 36,515   30,679   145,327   120,633 
Acquisition-related expenses 4,744   266   9,472   2,642 
Restructuring 4,499      4,499    
Costs related to intra-entity asset transfer(1)          838 
Amortization of acquired intangible assets 4,651   3,080   13,859   11,372 
Non-GAAP income from operations$36,063  $19,936  $120,997  $67,670 
Operating margin(7)% (8)% (7)% (10)%
Non-GAAP operating margin 17 %  11 %  15 %  10 %

________________
(1) The costs related to the intra-entity asset transfer resulted from our internal restructuring of Cymptom.

Non-GAAP Net Income and Non-GAAP Earnings Per ShareThree Months Ended
December 31,
 Year Ended
December 31,
(in thousands, except per share data) 2023   2022   2023   2022 
Net loss$(21,648) $(21,487) $(78,284) $(92,222)
Stock-based compensation 36,515   30,679   145,327   120,633 
Tax impact of stock-based compensation(1) 971   531   2,017   2,103 
Acquisition-related expenses(2) 4,744   266   9,472   2,642 
Restructuring(2) 4,499      4,499    
Costs related to intra-entity asset transfer(3)          838 
Amortization of acquired intangible assets(4) 4,651   3,080   13,859   11,372 
Tax impact of acquisitions(5) 426   604   265   (3,703)
Tax impact of intra-entity asset transfer(6)    531      2,652 
Non-GAAP net income$30,158  $14,204  $97,155  $44,315 
        
Net loss per share, diluted$(0.19) $(0.19) $(0.68) $(0.83)
Stock-based compensation 0.31   0.27   1.25   1.08 
Tax impact of stock-based compensation(1) 0.01      0.02   0.02 
Acquisition-related expenses(2) 0.04      0.08   0.02 
Restructuring(2) 0.04      0.04    
Costs related to intra-entity asset transfer(3)          0.01 
Amortization of acquired intangible assets(4) 0.04   0.03   0.11   0.10 
Tax impact of acquisitions(5)    0.01      (0.03)
Tax impact of intra-entity asset transfer(6)    0.01      0.03 
Adjustment to diluted earnings per share(7)    (0.01)  (0.02)  (0.02)
Non-GAAP earnings per share, diluted$0.25  $0.12  $0.80  $0.38 
        
Weighted-average shares used to compute GAAP net loss per share, diluted 116,717   112,742   115,408   111,321 
        
Weighted-average shares used to compute non-GAAP earnings per share, diluted 122,023   117,546   120,714   117,534 

________________
(1) The tax impact of stock-based compensation is based on the tax treatment for the applicable tax jurisdictions.
(2) The tax impact of acquisition-related expenses and restructuring charges are not material.
(3) The costs related to the intra-entity asset transfer 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.
(5) The tax impact of acquisitions for all periods presented includes the deferred tax benefits of the Alsid acquisition. In the three months and year ended December 31, 2023, tax impact from acquisitions includes a reversal of deferred tax expense related to indefinite-lived intangible assets. Additionally, the tax impact of acquisitions for the year ended December 31, 2022 includes 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.
(6) The tax impact of the intra-entity transfer is related to current tax expense based on the applicable Israeli tax rates resulting from our internal restructuring of Cymptom in the year ended December 31, 2022.
(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.

Non-GAAP Gross Profit and Non-GAAP Gross MarginThree Months Ended
December 31,
 Year Ended
December 31,
(dollars in thousands) 2023   2022   2023   2022 
Gross profit$164,503  $139,391  $615,133  $528,402 
Stock-based compensation 2,705   2,401   11,247   8,369 
Amortization of acquired intangible assets 4,651   3,080   13,859   11,372 
Non-GAAP gross profit$171,859  $144,872  $640,239  $548,143 
Gross margin 77%  75%  77%  77%
Non-GAAP gross margin 81%  78%  80%  80%


Non-GAAP Sales and Marketing ExpenseThree Months Ended
December 31,
 Year Ended
December 31,
(dollars in thousands) 2023   2022   2023   2022 
Sales and marketing expense$103,700  $91,311  $393,450  $349,430 
Less: Stock-based compensation 14,700   12,963   61,322   49,383 
Less: Acquisition-related expenses 512      512   15 
Non-GAAP sales and marketing expense$88,488  $78,348  $331,616  $300,032 
Non-GAAP sales and marketing expense % of revenue 41%  42%  42%  44%


Non-GAAP Research and Development ExpenseThree Months Ended
December 31,
 Year Ended
December 31,
(dollars in thousands) 2023   2022   2023   2022 
Research and development expense$40,083  $36,911  $153,163  $143,560 
Less: Stock-based compensation 9,354   8,205   37,225   31,499 
Less: Acquisition-related expenses 2,880      2,880   46 
Non-GAAP research and development expense$27,849  $28,706  $113,058  $112,015 
Non-GAAP research and development expense % of revenue 13%  16%  14%  16%


Non-GAAP General and Administrative ExpenseThree Months Ended
December 31,
 Year Ended
December 31,
(dollars in thousands) 2023   2022   2023   2022 
General and administrative expense$30,567  $25,258  $116,181  $103,227 
Less: Stock-based compensation 9,756   7,110   35,533   31,382 
Less: Acquisition-related expenses 1,352   266   6,080   2,581 
Less: Costs related to intra-entity asset transfer          838 
Non-GAAP general and administrative expense$19,459  $17,882  $74,568  $68,426 
Non-GAAP general and administrative expense % of revenue 9%  10%  9%  10%

The following adjustments to reconcile forecasted non-GAAP income from operations, non-GAAP net income, non-GAAP earnings per share, free cash flow and unlevered free cash flow are subject to a number of uncertainties and assumptions, each of which are inherently difficult to forecast. As a result, actual adjustments and GAAP results may differ materially.

Forecasted Non-GAAP Income from OperationsThree Months Ended
March 31, 2024
 Year Ended
December 31, 2024
(in millions)Low High Low High
Forecasted loss from operations$(27.7) $(23.7) $(41.7) $(31.7)
Forecasted stock-based compensation 40.0   40.0   165.0   165.0 
Forecasted restructuring expense 10.0   8.0   10.0   8.0 
Forecasted amortization of acquired intangible assets 4.7   4.7   18.7   18.7 
Forecasted non-GAAP income from operations$27.0  $29.0  $152.0  $160.0 


Forecasted Non-GAAP Net Income and Non-GAAP Earnings Per ShareThree Months Ended
March 31, 2024
 Year Ended
December 31, 2024
(in millions, except per share data)Low High Low High
Forecasted net loss(1)$(34.6) $(30.6) $(68.9) $(58.9)
Forecasted stock-based compensation 40.0   40.0   165.0   165.0 
Forecasted tax impact of stock-based compensation (0.4)  (0.4)  3.2   3.2 
Forecasted tax impact of acquisitions 0.3   0.3   1.0   1.0 
Forecasted restructuring expense 10.0   8.0   10.0   8.0 
Forecasted amortization of acquired intangible assets 4.7   4.7   18.7   18.7 
Forecasted non-GAAP net income$20.0  $22.0  $129.0  $137.0 
        
Forecasted net loss per share, diluted(1)$(0.29) $(0.26) $(0.58) $(0.49)
Forecasted stock-based compensation 0.34   0.34   1.39   1.39 
Forecasted tax impact of stock-based compensation       0.03   0.03 
Forecasted tax impact of acquisitions       0.01   0.01 
Forecasted restructuring expense 0.09   0.07   0.08   0.07 
Forecasted amortization of acquired intangible assets 0.04   0.04   0.16   0.16 
Adjustment to diluted earnings per share(2) (0.02)  (0.01)  (0.06)  (0.07)
Forecasted non-GAAP earnings per share, diluted$0.16  $0.18  $1.03  $1.10 
        
Forecasted weighted-average shares used to compute GAAP net loss per share, diluted 117.5   117.5   119.0   119.0 
Forecasted weighted-average shares used to compute non-GAAP earnings per share, diluted 123.0   123.0   125.0   125.0 

________________
(1) The forecasted GAAP net loss assumes income tax expense of $3.8 million and $14.8 million in the three months ending March 31, 2024 and year ending December 31, 2024, respectively.
(2) Adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.

Forecasted Free Cash Flow and Unlevered Free Cash FlowYear Ended
December 31, 2024
(in millions)Low High
Forecasted net cash provided by operating activities$201.0  $211.0 
Forecasted purchases of property and equipment (7.7)  (7.7)
Forecasted capitalized software development costs (4.0)  (4.0)
Forecasted free cash flow 189.3   199.3 
Forecasted cash paid for interest and other financing costs 30.7   30.7 
Forecasted unlevered free cash flow$220.0  $230.0 

 


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