They’re not add-on products for a company that historically has been very VM oriented. And we’re at the point where our core sales team is capable of picking up a lot of that load. Now, we’re still providing them specialists, we’re still providing them focus specialists, SEs and additional support. We saw there’s an opportunity to just drive additional efficiency on the go-to-market side, and so we’re taking advantage of that momentum and improving the market profile.
Jonathan Ho: In terms of the US federal government opportunity, can you talk about what your expectations are for 2024 and maybe what you’re seeing with customers today?
Amit Yoran: We see some variance quarter by quarter. But if you look back at our business over time, it’s been ballpark 15% of our business coming from public sector. We do see tremendous opportunity – continued opportunity, public sector. Historically, that’s really come very focused on the VM side of things. Lately, we’ve been talking a little bit more about success that we’ve seen with OT, identity. We’re just now at the point where we can start bringing some cloud security capability to the federal marketplace. So we see a lot of opportunity for that to expand. A lot of that market is completely untapped from our perspective outside of VM. And so, we’ll see how all that plays out. In the near term, we’re viewing it as more [indiscernible] expected as our commercial business continues to grow. I think we’re just treating the – public sector business will remain ballpark 15%.
Operator: Our next question comes from the line of Matt Saltzman with Morgan Stanley.
Matthew Saltzman: Just first one, really quick on the 2024 CCB guide. Steve, could you shed some light on the assumptions you’re making around the mix of new customer contribution versus existing expansion in the year ahead?
Steve Vintz: I think some of the dynamics that we saw in 2023 are flowing through our guide for the full year 2024. Our net dollar expansion rate for the quarter is up there at 11%. So when customers renew, they spend incrementally more. We’re not expecting any more or any less than the expansion rate that we experienced in 2023. And of course, we continue to add a lot of new customers. This quarter, we added almost 600 new enterprise platform customers. That’s up sequentially from Q4. And for the year, we added a good pace of new customers, the markets in which we compete are greenfield. They’re sizable opportunities to continue to take and win share. So we’re reflecting kind of that pace of expansion with new customers. So, overall, our outlook assumes really more of the same in 2024. We think this is a good initial guide for the year.
Matthew Saltzman: Amit, just a quick one on product for you. One of the key differentiators that you guys talk about a lot on the Tenable One platform is just the attack path analysis that you guys can do and just the overall level of analytics that you bring with the platform. I’m curious, what are you guys doing on that front today that competitors can’t or aren’t doing yet? And I guess, like, in other words, aside from breadth of asset coverage, like, what is the main differentiator of the product from a capability standpoint versus peers?
Amit Yoran: Well, I think there’s, as you put it, it’s breadth of coverage. So, it’s visibility not just into your cloud environments and the attack paths that might happen within cloud, but a recognition among security practitioners and customers that even a pristine cloud environment, if it’s being accessed by a DevOps person coming in from a laptop or a system, which is vulnerable or which is compromised, results in and could result in the compromise of cloud based infrastructure, even though that cloud may be properly configured. And that’s not a hypothetical. That’s something that we’ve seen play itself out over time in even some very high profile breaches. Certainly, it’s incredibly important to have the breadth of visibility.
We bring that to the table today, Tenable One, with our own products, with that breadth of coverage, and over time, through adjusting third party data, data from other security products and platforms and infrastructure which our customers might be using. And the second is in the form of analytics, right? You mentioned two of them in limited exposure scorecards and also with the attack path analytics, and we’re constantly adding new applications, new insights into the platform. So, [indiscernible] a lot of the talk has been around the cyber asset management application that we’ve built on top of Tenable One. As we do that, all of the data in Tenable One and all of the insights from that asset management application are then made available to our Tenable One customers, but also can be leveraged by the customers of other individual products that we’re using.
So, we think it’s a great differentiator, and we think it’s a great accelerant to continued innovation.
Operator: Our next question comes from the line of Brian Essex with J.P. Morgan.
Brian Essex: Maybe for Steve, I was wondering if we could circle back on cost rationalization. And I guess as you went through the thought process, was there any process with regard to benchmarking or evaluation of costs relative to peers that kind of drove that decision? And then maybe the follow up on that, I think, particularly in regard to sales and marketing, I know some have asked me, what are the differences between you and others, and you tend to have maybe a higher touch with sales and marketing efforts and customer success? Is there any shift in the philosophy of, I guess, the focus that you put on sales and marketing to drive close rates in pipeline velocity? I’ll leave it there. Interested in your thoughts around that?
Steve Vintz: Tenable has evolved quite a bit over the years. As Amit out earlier, we have introduced new products over the years, both organically and inorganically, and these newer products have become part of our mainstream selling motion. So some of the changes that Amit spoke of earlier in terms of go-to-market was just really a natural evolution of go-to-market for us. So, we look at our own business and say, okay, what are the opportunities to create a more cohesive go-to-market motion, deliver a clear and consistent message to our customer. So some of this is just a natural consequence of some of the changes that we made to the business, and not a result of any arbitrary goal that we have. So, our guidance today reflects continued expansion in the operating margin.
We’re expecting sales and marketing as a percent of revenue to improve by approximately 400 basis points on a year-over-year. I think there’s a lot of natural leverage in the business. And overall, we feel good about the guide then. Clearly, we’re having success selling some of these newer products. And these are in some of the biggest areas in all of cyber – cloud, OT, identity, and of course, the intersection of all those things that we call Tenable One. So, for us, it’s part of our natural evolution, our ability to drive margins higher and the ability to continue to drive good sustainable growth and the result of our ability to make this a core part of our selling motion.
Operator: Our next question comes from the line of Dan Ives with Wedbush Securities.
Dan Ives: Amit, a question for you. When you’re talking to customers, does it feel like there’s a big shift, if you look back six, nine months ago to today, in terms of just where Tenable is viewed more strategic and just even some of the individual you’re talking to within customers or potential customers? Can you kind of contrast that for us? Just from your perspective.
Amit Yoran: I think there’s been a shift. If I rewind, maybe a little bit more than six to nine months, you go back a couple of years, I think Tenable was very squarely – had our sights on becoming the market leading VM company. And then we went through this transition where it was, we’re a real market leading VM company, we’ve added a couple of additional products to the portfolio. And some of those products were market-leading, other products were technology which we purchased, which was still earlier in its maturation, earlier in terms of customer adoption and stuff like that. To me, the biggest shift is in the last six to nine months, just the maturity of some of the newer product lines where they’re really now able to go toe to toe with market leaders that are highly competitive, are best of breed, and we’re able to win deals.
And when we’re able to win deals in individual knife fights in each one of these product areas and then we have the platform capability that we can talk about, we can help them with vendor consolidation and be much more strategic, then I think it starts becoming a much more exciting conversation. So I think it’s going from this, hey, I really love you guys on VM to now being a much more strategic partner to a lot of our CSOs.
Dan Ives: Is that like, from a partner perspective, even just different inbounds, in terms of more and more partners work with you?
Amit Yoran: It is. And we’ve seen the inbound, the channel in number continue to increase. It’s now basically sitting at – half of our business is now what we’d categorize as a channel in, which is up significantly from where it was in quarters and years past where we just started embarking on this channel journey. So playing more strategic roles with our channel partners and we’ll play a more strategic role with our CSO customers.
Operator: Our next question comes from the line of Brad Reback with Stifel.
Brad Reback: Steve, your comment on 400 basis point improvement in sales and marketing, I’m assuming that’s the exit rate for 2024.
Steve Vintz: Your audio was a bit unclear, but sales and marketing in 2023 for the quarter and for the year is about 41%, a little more, 41 and change, as a percent of revenue. And our guidance assumes for full year 2025 that there’s 400 basis point improvement. And of course, sales and marketing in terms of absolute dollars will increase on a year-over-year basis, but approximately a 400 basis point improvement in sales and marketing spend as a percent of revenue on a year-over-year basis is what we’re assuming in our guidance.
