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Tenable Announces Third Quarter 2020 Financial Results

Tenable Holdings, Inc.
·21 min read
  • Added 335 new enterprise platform customers and 56 net new six-figure customers

  • Revenue of $112.3 million, up 22% year-over-year

  • GAAP loss from operations of $3.5 million; Non-GAAP income from operations of $12.4 million

  • Net cash provided by operating activities of $24.8 million; Free cash flow of $16.7 million

COLUMBIA, Md., Oct. 27, 2020 (GLOBE NEWSWIRE) -- Tenable (Nasdaq: TENB), the Cyber Exposure company, today announced financial results for the quarter ended September 30, 2020.

“We are pleased with our results for the quarter which includes attractive topline growth and expanding operating and free cash flow margins,” said Amit Yoran, Chairman and CEO of Tenable. “Remote work models have accelerated digital transformation and cloud adoption and organizations are increasingly relying on Tenable to secure these dynamic, modern environments. Tenable is helping customers invest in the cloud confidently and securely, empowering them to take a unified, risk-based approach to vulnerability management.”

Third Quarter 2020 Financial Highlights

  • Revenue was $112.3 million, representing a 22% increase year-over-year.

  • Calculated current billings was $133.7 million, representing a 21% increase year-over-year.

  • GAAP loss from operations was $3.5 million, compared to a loss of $18.3 million in the third quarter of 2019.

  • Non-GAAP income from operations was $12.4 million, compared to a loss of $7.7 million in the third quarter of 2019.

  • GAAP net loss was $5.9 million, compared to a loss of $17.6 million in the third quarter of 2019.

  • GAAP net loss per share was $0.06, compared to a loss per share of $0.18 in the third quarter of 2019.

  • Non-GAAP net income was $10.5 million, compared to a loss of $6.7 million in the third quarter of 2019.

  • Non-GAAP diluted earnings per share was $0.09, compared to a loss per share of $0.07 in the third quarter of 2019.

  • Cash and cash equivalents and short-term investments were $269.1 million at September 30, 2020, compared to $212.3 million at December 31, 2019.

  • Net cash provided by operating activities was $24.8 million, compared to $4.7 million of net cash used in operating activities in the third quarter of 2019.

  • Free cash flow was $16.7 million, compared to $(9.6) million in the third quarter of 2019.

Recent Business Highlights

  • Added 335 new enterprise platform customers and 56 net new six-figure customers.

  • Unveiled Frictionless Assessment, a new cloud security capability for Tenable.io® that empowers customers to instantly and continuously evaluate their cloud assets and allows them to quickly detect new vulnerabilities without the need to schedule a scan or deploy an agent.

  • Announced enhancements to Tenable Lumin™, including new capabilities to assess organizations’ remediation maturity, an inventory of endpoint security controls and predictive scoring for more comprehensive insight into an organization’s cyber exposure.

  • Achieved “In Process” designation from the Federal Risk and Authorization Management Program (FedRAMP) for Tenable.io, our cloud-based vulnerability management platform.

  • Announced a new partnership with the Center for Internet Security, Inc. (CIS®) that will bolster cyber hygiene for both public and private sector organizations, making foundational cybersecurity more affordable, accessible and actionable.

Financial Outlook

For the fourth quarter of 2020, we currently expect:

  • Revenue in the range of $113.0 million to $115.0 million.

  • Non-GAAP income from operations in the range of $8.0 million to $9.0 million.

  • Non-GAAP net income in the range of $6.0 million to $7.0 million.

  • Non-GAAP diluted earnings per share in the range of $0.05 to $0.06.

  • 113.0 million diluted weighted average shares outstanding.

For the year ending December 31, 2020, we currently expect:

  • Revenue in the range of $435.1 million to $437.1 million.

  • Non-GAAP income from operations in the range of $18.4 million to $19.4 million.

  • Non-GAAP net income in the range of $12.4 million to $13.4 million.

  • Non-GAAP diluted earnings per share in the range of $0.11 to $0.12.

  • 110.6 million diluted weighted average shares outstanding.

Conference Call Information

Tenable will host a conference call 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. A replay of the webcast will be available until November 10, 2020.

About Tenable

Tenable® is the Cyber Exposure company. Over 30,000 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 more than 50 percent of the Fortune 500, more than 30 percent of the Global 2000, and large government agencies. Learn more at tenable.com.

Contact Information

Investor Relations
Andrea DiMarco
investors@tenable.com

Media Relations
Cayla Baker
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, 2019, our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020 and other filings that we make from time to time with the SEC, which are available on the SEC's website at sec.gov. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. 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 and Other Key Metrics

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 investors’ 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 present these non-GAAP financial measures to assist investors in seeing our financial performance using a management view and because we believe that these measures provide an additional tool for investors to use in comparing 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: We define free cash flow, a non-GAAP financial measure, as net cash provided by (used in) operating activities less purchases of property and equipment. We believe free cash flow is an important liquidity measure of the cash (if any) that is available, after purchases of property and equipment, for investment in our business and to make acquisitions. We believe that free cash flow is useful to investors as a liquidity measure because it measures our ability to generate or use cash.

Non-GAAP Income (Loss) 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 and amortization of acquired intangible assets. Acquisition-related expenses include transaction expenses and costs related to the transfer of acquired intellectual property.

Non-GAAP Net Income (Loss) and Non-GAAP Earnings (Loss) Per Share: We define non-GAAP net income (loss) as GAAP net loss, excluding the effect of stock-based compensation, acquisition-related expenses and amortization of acquired intangible assets, including the applicable tax impact. We use non-GAAP net income (loss) to calculate non-GAAP earnings (loss) 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 and acquisition-related expenses.


TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share data)

2020

2019

2020

2019

Revenue

$

112,282

$

91,852

$

322,139

$

257,537

Cost of revenue(1)

19,394

15,245

57,237

42,389

Gross profit

92,888

76,607

264,902

215,148

Operating expenses:

Sales and marketing(1)

53,045

56,699

168,343

165,403

Research and development(1)

25,128

20,763

77,269

64,396

General and administrative(1)

18,180

17,472

54,992

48,595

Total operating expenses

96,353

94,934

300,604

278,394

Loss from operations

(3,465

)

(18,327

)

(35,702

)

(63,246

)

Interest (expense) income, net

(12

)

1,527

1,177

4,677

Other expense, net

(561

)

(240

)

(1,819

)

(576

)

Loss before income taxes

(4,038

)

(17,040

)

(36,344

)

(59,145

)

Provision for income taxes

1,820

600

4,451

1,563

Net loss

$

(5,858

)

$

(17,640

)

$

(40,795

)

$

(60,708

)

Net loss per share, basic and diluted

$

(0.06

)

$

(0.18

)

$

(0.41

)

$

(0.64

)

Weighted-average shares used to compute net loss per share, basic and diluted

101,736

96,709

100,272

95,433

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

Three Months Ended September 30,

Nine Months Ended September 30,

2020

2019

2020

2019

Cost of revenue

$

826

$

694

$

2,403

$

2,088

Sales and marketing

4,806

3,521

14,677

11,102

Research and development

3,953

2,124

10,794

6,595

General and administrative

5,715

4,160

16,127

11,406

Total stock-based compensation

$

15,300

$

10,499

$

44,001

$

31,191



TENABLE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS

September 30, 2020

December 31, 2019

(in thousands, except per share data)

(unaudited)

Assets

Current assets:

Cash and cash equivalents

$

141,387

$

74,363

Short-term investments

127,720

137,904

Accounts receivable (net of allowance for doubtful accounts of $314 and $764 at September 30, 2020 and December 31, 2019, respectively)

87,502

94,827

Deferred commissions

30,131

28,499

Prepaid expenses and other current assets

34,236

27,369

Total current assets

420,976

362,962

Property and equipment, net

39,960

26,847

Deferred commissions (net of current portion)

41,753

43,766

Operating lease right-of-use assets

41,430

42,847

Acquired intangible assets, net

13,771

15,508

Goodwill

54,138

54,138

Other assets

11,807

12,544

Total assets

$

623,835

$

558,612

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable and accrued expenses

$

6,248

$

10,168

Accrued compensation

28,244

36,634

Deferred revenue

296,360

274,348

Operating lease liabilities

6,312

5,209

Other current liabilities

1,126

1,284

Total current liabilities

338,290

327,643

Deferred revenue (net of current portion)

93,842

88,779

Operating lease liabilities (net of current portion)

55,645

40,663

Other liabilities

4,931

2,622

Total liabilities

492,708

459,707

Stockholders’ equity:

Common stock (par value: $0.01; 500,000 shares authorized; 102,755 and 98,587 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively)

1,028

986

Additional paid-in capital

735,961

662,990

Accumulated other comprehensive income

54

50

Accumulated deficit

(605,916

)

(565,121

)

Total stockholders’ equity

131,127

98,905

Total liabilities and stockholders’ equity

$

623,835

$

558,612



TENABLE HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)

Nine Months Ended September 30,

(in thousands)

2020

2019

Cash flows from operating activities:

Net loss

$

(40,795

)

$

(60,708

)

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Depreciation and amortization

7,980

4,604

Stock-based compensation

44,001

31,191

Other

1,009

(787

)

Changes in operating assets and liabilities:

Accounts receivable

7,774

(13,309

)

Prepaid expenses and other current assets

(6,690

)

820

Deferred commissions

381

(5,089

)

Other assets

17,691

(2,386

)

Accounts payable and accrued expenses

(3,873

)

3,892

Accrued compensation

(8,390

)

(5,350

)

Deferred revenue

27,075

39,472

Other current and noncurrent liabilities

135

(22

)

Net cash provided by (used in) operating activities

46,298

(7,672

)

Cash flows from investing activities:

Purchases of property and equipment

(19,073

)

(10,262

)

Purchases of short-term investments

(157,557

)

(179,703

)

Sales and maturities of short-term investments

168,175

174,485

Net cash used in investing activities

(8,455

)

(15,480

)

Cash flows from financing activities:

Proceeds from loan agreement

2,000

Principal payments under finance lease obligations

(11

)

(12

)

Credit facility issuance costs

(333

)

Proceeds from stock issued in connection with the employee stock purchase plan

13,040

15,129

Proceeds from the exercise of stock options

15,782

15,448

Net cash provided by financing activities

30,478

30,565

Effect of exchange rate changes on cash and cash equivalents and restricted cash

(1,359

)

(1,226

)

Net increase in cash and cash equivalents and restricted cash

66,962

6,187

Cash and cash equivalents and restricted cash at beginning of period

74,665

165,378

Cash and cash equivalents and restricted cash at end of period

$

141,627

$

171,565



TENABLE HOLDINGS, INC.
REVENUE COMPONENTS AND RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
(unaudited)

Revenue

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

2020

2019

2020

2019

Subscription revenue

$

96,792

$

75,503

$

275,192

$

209,610

Perpetual license and maintenance revenue

12,448

13,797

38,046

40,877

Professional services and other revenue

3,042

2,552

8,901

7,050

Revenue(1)

$

112,282

$

91,852

$

322,139

$

257,537

_______________
(1) Recurring revenue, which includes revenue from subscription arrangements for software and cloud-based solutions and maintenance associated with perpetual licenses, represented 94% and 92% in the three months ended September 30, 2020 and 2019, respectively, and represented 93% and 91% of revenue in the nine months ended September 30, 2020 and 2019, respectively.

Calculated Current Billings

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

2020

2019

2020

2019

Revenue

$

112,282

$

91,852

$

322,139

$

257,537

Add: Deferred revenue (current), end of period

296,360

245,985

296,360

245,985

Less: Deferred revenue (current), beginning of period

(274,953

)

(227,227

)

(274,348

)

(213,644

)

Calculated current billings

$

133,689

$

110,610

$

344,151

$

289,878


Free Cash Flow

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

2020

2019

2020

2019

Net cash provided by (used in) operating activities

$

24,807

$

(4,675

)

$

46,298

$

(7,672

)

Purchases of property and equipment

(8,069

)

(4,927

)

(19,073

)

(10,262

)

Free cash flow(1)

$

16,738

$

(9,602

)

$

27,225

$

(17,934

)

________________
(1) Free cash flow included reductions related to employee stock purchase plan activity of $2.3 million and $3.7 million in the three months ended September 30, 2020 and 2019, respectively, and $2.7 million, and $4.7 million in the nine months ended September 30, 2020 and 2019, respectively. The three and nine months ended September 30, 2020 included $5.6 million and $14.2 million, respectively, in proceeds from lease incentives as well as $6.8 million and $16.6 million, respectively, in capital expenditures for our new headquarters. The three and nine months ended September 30, 2019 included $2.4 million in capital expenditures for our new headquarters. The nine months ended September 30, 2020 also included $0.7 million of acquisition-related payments for Indegy.

Non-GAAP Income (Loss) from Operations and Non-GAAP Operating Margin

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2020

2019

2020

2019

Loss from operations

$

(3,465

)

$

(18,327

)

$

(35,702

)

$

(63,246

)

Stock-based compensation

15,300

10,499

44,001

31,191

Acquisition-related expenses

339

Amortization of acquired intangible assets

579

125

1,736

427

Non-GAAP income (loss) from operations

$

12,414

$

(7,703

)

$

10,374

$

(31,628

)

Operating margin

(3

)

%

(20

)

%

(11

)

%

(25

)

%

Non-GAAP operating margin

11

%

(8

)

%

3

%

(12

)

%


Non-GAAP Net Income (Loss) and Non-GAAP Earnings (Loss) Per Share

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands, except per share data)

2020

2019

2020

2019

Net loss

$

(5,858

)

$

(17,640

)

$

(40,795

)

$

(60,708

)

Stock-based compensation

15,300

10,499

44,001

31,191

Tax impact of stock-based compensation(1)

497

273

1,132

(255

)

Acquisition-related expenses

339

Amortization of acquired intangible assets(2)

579

125

1,736

427

Non-GAAP net income (loss)

$

10,518

$

(6,743

)

$

6,413

$

(29,345

)

Net loss per share, diluted

$

(0.06

)

$

(0.18

)

$

(0.41

)

$

(0.64

)

Stock-based compensation

0.15

0.11

0.44

0.33

Tax impact of stock-based compensation(1)

0.01

Acquisition-related expenses

Amortization of acquired intangible assets(2)

0.01

0.02

Adjustment to diluted earnings per share(3)

(0.01

)

Non-GAAP earnings (loss) per share, diluted

$

0.09

$

(0.07

)

$

0.06

$

(0.31

)

Weighted-average shares used to compute GAAP net loss per share, diluted

101,736

96,709

100,272

95,433

Weighted-average shares used to compute non-GAAP earnings (loss) per share, diluted(4)

111,224

96,709

109,046

95,433

________________
(1) The tax impact of stock-based compensation is based on the tax treatment for the applicable tax jurisdictions.
(2) The tax impact of amortization of acquired intangible assets is not material.
(3) Adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.
(4) In periods in which there is a non-GAAP net loss, basic and diluted weighted average shares outstanding are the same, as potentially dilutive shares would be antidilutive.

Non-GAAP Gross Profit and Non-GAAP Gross Margin

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2020

2019

2020

2019

Gross profit

$

92,888

$

76,607

$

264,902

$

215,148

Stock-based compensation

826

694

2,403

2,088

Amortization of acquired intangible assets

579

125

1,736

427

Non-GAAP gross profit

$

94,293

$

77,426

$

269,041

$

217,663

Gross margin

83

%

83

%

82

%

84

%

Non-GAAP gross margin

84

%

84

%

84

%

85

%


Non-GAAP Sales and Marketing Expense

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2020

2019

2020

2019

Sales and marketing expense

$

53,045

$

56,699

$

168,343

$

165,403

Less: Stock-based compensation

4,806

3,521

14,677

11,102

Non-GAAP sales and marketing expense

$

48,239

$

53,178

$

153,666

$

154,301

Non-GAAP sales and marketing expense as % of revenue

43

%

58

%

48

%

60

%


Non-GAAP Research and Development Expense

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2020

2019

2020

2019

Research and development expense

$

25,128

$

20,763

$

77,269

$

64,396

Less: Stock-based compensation

3,953

2,124

10,794

6,595

Non-GAAP research and development expense

$

21,175

$

18,639

$

66,475

$

57,801

Non-GAAP research and development expense as % of revenue

19

%

20

%

21

%

22

%


Non-GAAP General and Administrative Expense

Three Months Ended September 30,

Nine Months Ended September 30,

(dollars in thousands)

2020

2019

2020

2019

General and administrative expense

$

18,180

$

17,472

$

54,992

$

48,595

Less: Stock-based compensation

5,715

4,160

16,127

11,406

Less: Acquisition-related expenses

339

Non-GAAP general and administrative expense

$

12,465

$

13,312

$

38,526

$

37,189

Non-GAAP general and administrative expense as % of revenue

11

%

14

%

12

%

14

%


Forecasted Non-GAAP Income from Operations

Three Months Ending December 31, 2020

Year Ending December 31, 2020

(in millions)

Low

High

Low

High

Forecasted loss from operations

$

(8.0

)

$

(7.0

)

$

(43.3

)

$

(42.3

)

Forecasted stock-based compensation

15.4

15.4

59.4

59.4

Forecasted amortization of acquired intangible assets

0.6

0.6

2.3

2.3

Forecasted non-GAAP income from operations

$

8.0

$

9.0

$

18.4

$

19.4


Forecasted Non-GAAP Net Income and Non-GAAP Earnings Per Share

Three Months Ending December 31, 2020

Year Ending December 31, 2020

(in millions, except per share data)

Low

High

Low

High

Forecasted net loss

$

(10.7

)

$

(9.7

)

$

(51.1

)

$

(50.1

)

Forecasted stock-based compensation

15.4

15.4

59.4

59.4

Tax impact of stock-based compensation

0.7

0.7

1.8

1.8

Forecasted amortization of acquired intangible assets

0.6

0.6

2.3

2.3

Forecasted non-GAAP net income

$

6.0

$

7.0

$

12.4

$

13.4

Forecasted net loss per share, diluted

$

(0.10

)

$

(0.09

)

$

(0.51

)

$

(0.50

)

Forecasted stock-based compensation

0.14

0.14

0.59

0.59

Tax impact of stock-based compensation

0.01

0.01

0.02

0.02

Forecasted amortization of acquired intangible assets

0.01

0.01

0.02

0.02

Adjustment to diluted earnings per share(1)

(0.01

)

(0.01

)

(0.01

)

(0.01

)

Forecasted non-GAAP earnings per share, diluted

$

0.05

$

0.06

$

0.11

$

0.12

Forecasted weighted-average shares used to compute net loss per share, diluted

103.3

103.3

101.0

101.0

Forecasted weighted-average shares used to compute non-GAAP earnings per share, diluted

113.0

113.0

110.6

110.6

________________
(1) Adjustment to reconcile GAAP net loss per share, which excludes potentially dilutive shares, to non-GAAP earnings per share, which includes potentially dilutive shares.