Good morning, everyone. My name is Brian Essex. I'm JPMorgan's Securities Software Analyst. Today we're pleased to have Steve Vintz and Mark Thurmond, co-CEOs. Steve is, I guess, the outgoing CFO, soon here.
Yes.
Still CFO, but.
Conducting research.
Conducting research. Thank you both for joining us. I really appreciate it.
Thank you.
Maybe, Steve, maybe a great place to start is a quick recap of the quarter, thoughts on results, and your takeaways on both the results as well as the approach you had to guidance.
Yeah. For those of you who are not familiar with Tenable, we are the cyber exposure company. We help companies understand and reduce their risk. Our roots are in vulnerability management. Over the years, we've applied that core exposure use case into other asset types, such as cloud and OT and ASM identity. More recently, we've integrated a lot of those data sets into our exposure management platform. Now we're combining our first-party assessment data with third-party data. We can talk a little more about that. In terms of the quarter itself, the print was really strong. We're delighted with the results. Revenue was $239 million, 11% growth, a notable beat in expectations relative to our guide. C.C.V. came in also ahead of expectations as well. Operating margin was strong at 20%. We delivered over $80 million of unleveraged free cash flow.
Perhaps more importantly, we saw strong demand dynamics. We added over 300 new enterprise platform customers. We delivered a record number of seven-figure deals, one of our best quarters for seven-figure deals.
Great. Any thoughts that you can share on guidance and what you see in the macro environment as you kind of assess how to guide for the four periods? How much conservatism, maybe relative to prior periods that you had when you considered that?
Sure. We talked about really the strength in seven-figure deals. If you look within the quarter, and I'll talk about the guide momentarily, we had a strong start to the quarter. More importantly, we had an exceptional finish. A lot of the seven-figure deals were closed and transacted in the last month, specifically the last two weeks. We had a really strong finish. Also, we talked about on the earnings call, which was a couple of weeks ago, that April was off to a good start. Top of the funnel remained strong. When I say that, that means we exceeded our own internal expectations for demand gen. As we look at kind of top of the funnel, we see strength there. Obviously, we're getting good momentum with the platform itself, which comes with larger ASPs and good momentum in cloud.
As we looked out the rest of the year, we're seeing certainly potential for longer sales cycles. Why I say that is because 15% of our sales comes from U.S. public sector. That includes federal across a wide range of agencies, civilian, defense, intel, as well as state, which are often backed up by the Fed. There's been certainly a lot of disruptions from a DOD perspective in terms of personnel, more so at the civilian agencies than the defense. The outlook that we gave for the year, we tried to take a bit of a cautious approach. We had a downward revision to the guidance to the tune at the midpoint of roughly a billion in sales in terms of the guide, was like $17 million, if you will, from the midpoint.
We widened the range slightly to reflect a potential wider range of outcomes. So we're taking a little bit of a cautious approach, certainly on the guide. More specifically related to the public sector, again, we had actually had a good public sector quarter. But we do realize in terms of the personnel and the buyers and some of those things, there's the potential for a longer sales cycle. So top of the funnel remained strong. And we've also kind of applied that approach a little bit into enterprise as we look at things like telecom and retail and manufacturing that are also maybe potentially directly impacted by the tariffs. But this market, things change quickly. It seems like every week there's a new data point. Overall, we feel really good about our business and the expectations that we've set for the year.
Yeah. I'll just kind of double-click on that a little bit. It was a very good assessment. When we looked at our federal and public sector business, we really were talking to a lot of the folks that are running these different programs, running these different agencies from an exposure management perspective. The feedback was, as Steve said, positive. We saw very, very strong growth in regard to pipeline. Q3, Q4, we feel very, very strong. The challenge is at a tactical level when you have all of this change. You can talk about some of the DOD change, but also some of the leadership changes, right? Agencies and intel, certain leaders being exited very quickly, different changes in the CISA organization. A lot of these leaders set the tone and tenor and prioritization for where the spend goes.
Without those leaders, in our conversations with our customers that have been Tenable customers for a very long time, they were just saying, "Listen, there's a little bit of grayness here. There's a little bit of lack of clarity when these projects are going to get funded, how big these projects are going to be." We took somewhat of a conservative outlook, but we think it's the right outlook. To Steve's point, every week things get a little bit clearer, right? As some of these leaders start to get announced, going through the confirmation process, as some of the procurement and contract people, folks actually doing the contracts, kind of get people, what we call, kind of in the seat, that's giving us a little more clarity. Optimistic, very much so in regards to the top of funnel.
The one thing I'll add, I know it was a little bit long-winded, but it's really important. One of the biggest trends we are seeing in the federal government space that our buyers are telling us is that efficiency and consolidation is going to be a huge initiative with this administration. They are definitely looking for platforms. They're looking to consolidate different technologies. We now have our FedRAMP certification for Tenable One, for T1, and for cloud security, which we did not have previously. We now have a very good talk track and discussion with these customers around consolidation, looking at saving money, being able to consolidate different asset types onto our platform. We are optimistic. We just, every week, want to get a little more clarity on what's happening in that space.
No, that's a great kind of segue into a couple of points ahead of what I wanted to hit on. I'll jump into it. How do you think about Tenable's ability to consolidate share and establish a platform? Maybe as another kind of thread into what you were just talking about, what are those conversations with the federal government like when they're looking for that?
Absolutely. It is somewhat similar to the public sector and private companies also. We meet with tons of CISOs, right? Our sales force, and we actually just came out of the RSA conference, right, a couple of weeks ago. We had hundreds of different sales calls with CISOs. Hands down, besides AI, the number one conversation was consolidation. When you are able to have a platform, and I think folks are pretty familiar with the success we have seen in Tenable One, we get anywhere from 30%-40% of all new business comes from Tenable One. We are very effective at selling and positioning Tenable One. The conversation is about getting visibility on the entire attack surface on that threat landscape. With Tenable, we have this strength, right?
Our position with VM, traditional VM, being the gold standard for vulnerability management, largest market share, largest install base. We have a power of strength to then say, "Let's look at other asset types." If you have cloud security, if you have operational technology, if you have attack surface management, if you have web application scanning, now, literally launched today, this morning, our third-party ingest with the Vulcan acquisition to do third-party ingest and be able to do automated remediation and workflow, that's what our customers are asking for. Because literally, tactically, what they can do is go through the list of different vendors they have in those asset types and those segments and be able to say, "Let's test this out.
If we can have it on one platform that's trusted and it's coming from a core area of strength, which is vulnerability management, having world-class VM is everything to be successful in exposure management," then they're able to go save cost, get these new subscriptions or renew subscriptions for those different vendors and consolidate. We can have a great T.C.O. discussion. The most beautiful thing is, yes, financially, they like it. It gives you this entire view of your attack surface. It's allowing you to look at risk, judge risk, prioritize your risk at a very different level. It is a similar conversation that we're now having with the federal government. The big difference, though, is we now have FedRAMP, which we did not have for Tenable One or cloud security before.
That is, we think, going to be somewhat of a game changer for us in the federal government and state and local.
How does that line up with some of the maybe network security providers that have some features and functionality that might overlap with you, whether it's O.T. or cloud security? How do they slot you into a position of consolidator versus one of those other vendors that might have quite a big large footprint within some of those agencies?
Security has historically always been best of breed. According to recent surveys, the average company has about 80 different security solutions in their supply chain. Some companies even have much, much more. Certainly, it is a fragmented market. It has always been best of breed. To some extent, it will continue to do so. As we talked about before, our roots are in vulnerability management. We do that better than anyone. The outgrowth of that has always been exposure management, something we have talked about for a while as a category that we have created. Gartner and some of the others are now coming out with, Gartner in particular, an M.Q. a little later this year, calling it a multi-billion dollar opportunity, a top spending priority. Exposure management certainly is here to stay.
Our view of the world is we can come in and assess different assets, take that core vulnerability use case on the network, and then apply that to different asset types, whether it is O.T., whether it is cloud, whether it is A.S.M., or other web app. We can do that and compete best of breed there. At the same time, no company can possibly assess everything across the attack surface. We have now, more recently, and I think we are launching a more expanded version of our exposure management platform that is going to take first-party assessment data, the things that we do really well. We are able to assess things better than anyone, different asset types. Now we are going to ingest data from third-party providers. If there is a V.M. incumbent and someone wants to use Qualys, they can use us for cloud. We can ingest data from Qualys.
We can ingest data from CrowdStrike. We can ingest data from the AppSec players. We can ingest data from the endpoint players. We combine that with our own first-party assessment data. The data that we're getting, that we're ingesting, includes a lot of the metadata, the network information. It's all the findings. It's the person responsible for the remediation. We believe the problem we're solving, because there's a lot of talk about platforms and cyber, but how we think about it is that we're operationalizing preventative security. We want to help customers understand and reduce their risk. The way to do that is combine first-party data with third-party data. It creates a very broad set of exposure data.
We have one of the broadest sets of data fabrics in the market, given our 40,000-plus customers, given the three million cumulative downloads of Nessus, given all the other insights that we're collecting firsthand as well as third-party data. The big opportunity is to aggregate all that information and deliver insights with regard to risk, connect vulnerabilities with threats and identities, and map out a likely path of exploit. AI certainly is going to be a force multiplier and already has been starting to become a force multiplier on the insights that we can deliver.
Great. Super helpful. Maybe one more poke at Fed. We're in continuing resolution. Any insight from customers that you're talking to whether or not budget resolution approval would provide some sort of tailwind there? How might you see that in your business, if so?
Yeah. No, I think so. I think when you look at the skinny budget that was kind of announced, you look at the DOD, you look at Department of Treasury, and you look at Department of Homeland Security, they're all saying they're going to get budget increases. We view that as a very positive sign. A few agencies like CISA are going to go down. That is a little bit of a risk. When you look at what the mandate is, and Steve and I had some pretty senior-level meetings at RSA conference with government officials, CISA really is going to start grounding themselves back to what their original mission was, which is all about network protection and critical infrastructure. There could be some good tailwinds there.
We view the budgets and what the DOD is and what the Department of Treasury is going to do and what, obviously, Department of Homeland Security is going to do is going to be increasing budgets. Now, when that happens, that's a positive. They will still be under pressure to do more with less in regard to humans, right? They're going to definitely have headcount reductions. Again, it's kind of this continuing theme of going back to where consolidation can play, right? If you don't have any kind of organization will have anywhere from six to eight specialized security teams managing their security posture. If we can go in and consolidate these different asset types to a platform, you don't need six to eight teams. You can have one to potentially two teams. We view that as a net positive.
Got it. Super helpful. I appreciate it. Maybe I want to touch on, so congratulations to both of you being named co-CEOs. Can you offer a little bit of insight behind how that decision played out? What kind of considerations the board made and how it materialized to come up with that kind of a structure?
Sure. First, Mark's been here for five years. I've been here for 10. We know a lot about the business in terms of product, go-to-market. I've had a very heavy hand in creating, shaping, refining, and evolving the strategy and expanding our market opportunities over the years. I say that because, obviously, we had a CEO who recently passed away earlier in the year. Prior to that, he announced a temporary leave of absence late last year. He was also working under a modified schedule the early part of last year. The co-CEO structure reflects how we've been running the company for the better part of a year, reflects our ability to continue to drive leverage in the business, expand our market opportunities. We recently announced the acquisition of Vulcan.
We're investing over 20% in R&D and focused on innovation while expanding the margins and then using the cash flow that we're generating to take shares out of the market. It is really, and the board obviously ran a search, considered a number, and interviewed a number of external candidates. In the end, the board believed that kind of the strategy and the course that we've been on to date and the opportunity that's right in front of us in order to execute on that opportunity, they had high conviction and confidence in our ability to do so, as well as confidence in the broader team.
Yeah. No, no question about it, right? It is something where, as Steve highlighted, we have got a long history of working together. We get along extremely well. We have got kind of a motto that we talk about with our team, which is, "Check your ego at the door," right? We are very transparent, and we communicate quite frequently. I think the beautiful part that you get from this, which sometimes people on the outside do not see, is you actually do get an efficiency gain, right? We can divide and conquer. We have got subject matter expertise in certain areas and disciplines and it allows us to go deep and then come together and communicate and make joint decisions together. I think the team at Tenable was obviously very, very excited, very, very positive momentum in regard to what we are doing in the business.
The relationship is extremely strong. We always go back to that theme of over-communication and check your ego at the doors. It has worked out very well.
The one final thing I'll add is we're delighted. We recently announced a new Chief Product Officer. We are making the right decisions to continue to evolve this business and certainly execute on the opportunity that's right in front of us. Again, we've talked about this opportunity with exposure management for years since the I.P.O.. We believe, in many respects, the market's turning to us. You hear a lot of companies talking about exposure management. We think we're best positioned for some of the reasons we talked about, given the broad set of exposure data that we have.
To be able to announce a guy like Eric Doerr, who's our new Chief Product Officer, who came from Google, who's operated at scale prior, that has spent 15 years at Microsoft, a lot of domain expertise, worked with companies that are multi-threaded with focus on platform, we're super excited about that. One of the big litmus tests for us is our ability to continue to attract and retain really talented people. Certainly, Eric recognizes and appreciates the confidence and the opportunity he sees at the company, but certainly the opportunity to work closely with us.
Great. Speaking of new roles, you're in the process of a CFO search. What kind of criteria do you have for a CFO? What's important to you? How is that search progressing?
Sure. The company has a really strong CFO. Let me just say that for 10 years. Of course, I've been with the company for 10 years as its CFO. Over the years, I've spent a lot of time in product and, of course, in other areas. We did announce that we're running a search for a CFO. We've retained a firm. We're sourcing candidates. Just for me personally, my point of view is certainly you want someone who can check a lot of the boxes, right? Accounting, FP&A, certainly ask the right questions on tax. More importantly, you want someone I believe the company deserves and needs, someone who's operationally minded, strategically minded, has a strong operational background. Our big investment is really in product and go-to-market.
You have to have someone who's got experience scaling go-to-market teams, working with go-to-market leaders, certainly understanding the ability to invest in product and get the right returns. Someone who can take value props, synthesize, and tell it in a way that elicits excitement and interest because we have a great story and a big market opportunity. Certainly, someone who's operated at scale. I think we're going to, like we did with the CPO role, get somebody who is truly great and the right person for the role who will contribute immensely to the company.
Great. I want to touch real quick on Tenable Platform. If we take a look at the landscape, all of the what we'll call traditional vulnerability management vendors are under a bit of pressure in core VM business. You're seeing, as you noted, 30-40% of new business from Tenable One. You pointed to Vulcan. And Arimatic is really, it sounds like it's a very timely and prescient acquisition for you. How do you see the platform playing out over the next few years? And what role will that core V.M. part of the business play in your ability to maybe hit better levels of growth going forward?
Yeah. Certainly, the momentum we have with the platform is very significant. This is something we launched two years ago. It's already, as we said, 30%-40% of our total sales. It includes V.M. plus web app plus O.T. plus cloud plus our identity offering. It's the integration of all those data sets. For customers, it has the catalyst to move from, to take a VM customer and move to the platform that's V.M. plus. Increasingly, we see a lot of customers moving from one of our VM solutions into the exposure management platform when they do so with this desire to assess and secure other asset types. It's also a means to drive better prioritization and mobilization.
If you look at if you unpack the exposure management market, what you really have is first starts with kind of some broader scoping objectives. We have partners with the GSIs, right, such as the Deloittes and the Tatas and a bunch of others. First and foremost, from a technology perspective, it's discovering a lot of your assets and devices that are on your network and your public cloud environments, discovering servers, desktops, and laptops, and assessing those, discovering vulnerable code in a publicly facing EC2 instance, looking at the configuration of these public cloud environments. We also do image scans and a bunch of other stuff in cloud, including scanning the code repos themselves. We also look at web applications. We have a dynamic scanner there. It is this desire to secure more of the attack surface against security as a fragmented market.
A lot of the things that we're assessing and discovering are natural extensions of the core VM value prop. The really big opportunity for us is the integration of all that, combining that with third-party data and to be able to deliver greater insights from a risk management perspective. Where do we see the platform going? The big focus, I would say, would be AI. That's first and foremost. This is what exposure management's all about. It's a tremendous opportunity. If you look at AI, it's really twofold for us. Number one, we have a product called AI Aware. We, over 3,000-plus customers, are using AI Aware, using Tenable to discover shadow AI applications, one that they've downloaded, any of the AI assistants, whether it's Gemini or ChatGPT or Anthropic or Claude, whatever the case may be.
Shadow AI applications, browser plug-ins, and truly developed AI applications. We look at AI as a part of the attack surface. What is in our crosshairs and things that we are focused on from a product perspective is the ability to not only discover those AI applications but be able to monitor those. What are the prompts that employees are using in those AI assistants? Is it code? Is it personal identifiable information? Searching, categorizing, tagging a lot of those prompts, and also preventing jailbreaks and prompt injections is going to be really important. There is certainly securing the AI that you use. The other part of that is securing the AI that you build, which we think is a logical extension for us. Whether it is via Gentic, the code used to build agents, or the LLMs themselves, we think we are well-positioned for that.
Certainly, AI as an attack vector is an important area for us. AI as a means to deliver real insights about risk and training our exposure data, it's going to be the real competitive moat in the future. That is where we see the platform evolving from reactive security, where we're discovering threats and reacting to those, to ones that are anticipating threats and responding to those. That is kind of the big and tying things to actual fixes. Everything from discovery to prioritization to the remediation ops and driving higher levels of remediation. That is kind of the focus areas for us: AI, remediation ops, and going deeper and wider in some of the things that we're doing.
Got it. Maybe in the core VM business, any observations you can share with regard to other vendors that are kind of like elbowing their way into what they're calling V.M., right?
Yeah.
Specifically around, is some of the pressure in that business or some of the overall decline between the three core V.M. players due to larger platform vendors offering V.M.. feature functionality so that enterprises can maybe throttle some of the usage from one vendor to the other or use some for more critical instances and save some adjacent scanning for another time?
A couple of things in regard to the competitive kind of landscape and what we're seeing. A little bit on the question you just asked, Steve. When you look at kind of the two main competitors we go against, it's very different strategies, right? When you look at what we've done in regard to exposure management and the investments we've made with internal development and acquisitions, we've made that journey to exposure management. When you look at the competitors, one of our competitors really went into kind of an M.D.R. business, then went into a managed SIM business, and didn't really focus on VM and is kind of doing multiple different things in multiple different areas. It is in exposure management. We have another one that kind of just doubled down in regard to risk-based V.M. and hasn't expanded into all of these different asset types.
When you look at that competitive landscape, what you see with exposure management, the teams and some of the larger enterprise that literally are changing the names of the V.M. program office or the VM teams, they're now called exposure management teams. The V.M. team and the V.M. leads are driving this move to exposure management. That's where we've been able to differentiate ourselves. That's why we've been able to take market share and be able to do what we've done in regard to the traditional competitors. The other folks, say, at the endpoint that are trying to get in and they've got product lines that are called exposure management, they've got a much more difficult task because they don't have that install base of core V.M. users, right?
They try to go in and maybe get a tier two or tier three asset from our install base or a Qualys or a Rapid7. It is going to be really hard because they do not have that world class. Think of Nessus. Think of Security Center. Think of I/O, all the traditional V.M. categories and product lines that we have dominated. That is our install base that is now upgrading. We are seeing that 30% and 40% move to Tenable One. From a competitive landscape, we feel really, really strong. When you look at some of the declines, one of the biggest areas is not so much we feel very strong in our competitive position.
It's really cloud security is one of the main reasons that you've seen some of these challenges because a lot of the on-premise asset type and workload migrated, moved to the cloud over the last five years. We will give credit. The market is changing a little bit with the Wiz and Google acquisition. We'll give some credit, right? Wiz did a really nice job, right? Wiz kind of went in there, captured that CNAPP space, and had incredible growth rates. That's where you saw some of that traditional VM move to. It wasn't going from one competitor to another. It was really going from on-prem to CNAPP into the cloud space. What's happening in that space now, which obviously everyone's read about and everyone sees, is this Google Wiz acquisition, which we think is a net positive for Tenable. It's definitely opening doors.
It's allowing customers that have been with Wiz and paying an extremely high price for Wiz. And Wiz is really good technology, but it's a very costly technology. We now are seeing customers saying, "Hey, we're not really sure we like this idea of our CNAPP solution being owned by one of the hyperscalers. Let's open the door." We view that that's going to give us a great opportunity to go after that CNAPP space as it's integrated, fully integrated, natively integrated into Tenable One, which is a huge differentiation because now we're the only hybrid player doing that, right? Wiz, Google, when they combine, aren't going to be able to do what we can do from a hybrid perspective.
Yeah. Maybe we can pull on that Wiz comment a little bit too. What are you seeing in the marketplace? Obviously, you acquired Arimatic, particularly with regard to the number of RFPs that you're being involved in, win rates when you are involved. How does that trickle down into the tailwinds for your cloud security business?
Stephen and I, we talked a lot about this, especially kind of coming out of the RSA conference because that's where it really hit home because we had so many customer meetings and partner meetings. This was obviously, besides consolidation, one of the really big topics that came up. We have seen extremely strong pipeline growth in our CNAPP solution as part of Tenable One. We are having customers, obviously, for the first time because the acquisition got announced, saying, "We are going to open the door," right? We love Wiz. We love the product line. We are going to open the door because we might be a big AWS shop. We might be a big Azure shop. We might be a big OCI customer.
We do not want one of the biggest spend areas, which is now CNAPP and cloud security, being owned by potentially one of the hyperscaler competitors, right? Do they deprecate the feature set for AWS and Azure? Do they prioritize all of the Google features and capabilities, right, in regard to GCP before they do these other hyperscalers? All of those concerns are what customers are telling us. There is also this massive spend, right? When you look at Wiz, it is spending close to $1 billion plus on AWS, right? When they get owned by GCPs, is Google really going to want that? Is the Wiz Salesforce going to really want to be able to work with the AWS Salesforce and share opportunities and joint sales calls? We view that there is an opportunity, a net positive. Long-winded, but we are seeing pipeline build.
We are seeing customers open the door for the first time that they might not have wanted to have a conversation because they're very comfortable with Wiz. We view that as very much a net positive for Tenable and for Tenable One going forward.
Are our conversion rates from the pipeline, are those relatively consistent as well?
Yeah. I mean, we've seen consistent rates in the last three quarters. Our close ratios and our conversion rates are extremely consistent.
Have you kind of back of the envelope, stick figure math, I mean, how big is cloud security now?
For our business, it's one of the fastest growing areas of our business. It grew 100% last year, and we will continue to see outsized growth. We haven't disclosed it, but I think what we have talked about is our business in the context of approximately 75% of our sales are kind of like VM assets. We're selling the platform, what assets our customers are licensing. Consequently, 25% of our business, which is roughly $250 million on a billion of sales, that's growing 30% plus, is in exposure solutions. That would include cloud. That would include O.T. and some of these other products that we've been selling. Our expectation going forward, if you look at that growth algo, is that we will continue to see good growth there in exposure solutions with cloud security leading the way. Obviously, we expect to see good durable growth in V.M..
VM is an important market. It's not going away anytime soon. We've seen a number of V.M. expansion use cases over the past couple of quarters. We actually talked about that on the earnings call. Some of our larger deals were VM customers moving to the platform, a lot of our larger deals. Certainly, confidence in our ability to sell the platform, confidence in our ability to compete in cloud. We certainly think the acquisition is a potential catalyst for that.
Yeah. Pricing uplift with Tenable One, is it still in the same ballpark it was before, or are you seeing more of a kind of moderation there?
We're actually seeing a little bit of an inflection. The A.S.P., we used to talk about this kind of 70% uplift. Now we've talked about more broadly this 50-100% uplift because that's kind of like the typical range for us. The reason why is because we have an asset-based pricing model. When customers move to the platform, let's just say they're a standalone V.M. customer, they're usually licensing more assets because they're assessing other asset types, right? At the same time, they're also paying a higher price per asset because of the insights that we're able to deliver with regard to prioritization, the scoring, the trending, and the ability to drive the mobilization, the remediation ops piece. About 20-30% of that uplift comes from a higher price per asset because of the insights that we deliver.
Obviously, to build up to that 50-100% uplift, the complement of that is going to be the incremental assets that customers are licensing from us.
Great. We do have a couple of minutes left. I just want to ask if there are any questions from the audience. Okay. I'll hit you with this one. You've done a really good job over the past, I don't know, I think since you went public, beating your guidance range for profitability. I mean, that just ratchets up every single quarter. Cash flow, very similar. Investors would like to see you grow a little bit faster. How do you think about just the standard question of balancing growth and profitability? What kind of levers are you expecting to pull to grow a little bit faster, and how might we expect that to fall with regard to your history of exceeding expectations and expanding margins over time?
Yeah. It's a good question. Every year and even every quarter, it's been here for a long time. Since we've been public, as you mentioned, we've certainly over-delivered on the bottom line. The cash flow is compelling. People do roughly $300 million in cash flow, plus or minus, on level-free cash flow. This year, we did over $80 million in Q1. We've done a good job balancing growth for profitability. The growth rate has moderated over the last couple of years from 25% or so in 2022 to obviously kind of like high single digits this year. There are a lot of reasons. I think growth rates for a lot of tech companies and even cyber companies in particular have done that. Our focus is our mandate is to accelerate growth. We're focused on that. While growth has moderated, we've walked the margins up.
We've also generated a fair amount of cash flow. We're taking shares out of the market. That's a good use of cash and taking shares above and beyond even the share creep that you see that's happening. If I look at the business, we have also one of the reasons why the margins have expanded is because of greater efficiency and go-to-market. We've gone into a lot of countries over the years. It's a major investment. When I first started, we were selling in four countries. Now we have feet on the street in 40. We sell in 160. We're very much a global business. We have sizable distribution. Productivity levels we're very pleased with. We think we can continue to go higher if we put more products in the hands of our sellers. We're also growing R&D spend, roughly 25%. We're investing in innovation.
We're bringing new products to market organically. Inorganically, we just recently announced the acquisition of Vulcan, and that accelerates time in the market for us. We're very much product-driven. If you look at the business and say, "We're focused on accelerating growth. We're confident in our ability to do that." Obviously, short term, we have a little noise around public sector. Most public companies have half the exposure that we have in public sector. Public sector has been and will be in the midterm and even long term a tailwind for us. We're as well positioned in public sector as anyone. Let us not forget kind of the roots and the history of this business. One of the reasons why we're one of the leaders in V.M. is because we've won some sizable contracts in V.M. with D.O.D. on the civilian side over the years.
Success in public sector translates to success in the commercial and the enterprise market. We see a similar opportunity with cloud and with the platform that are now recently FedRAMP authorized. We feel like we're doing the right things to be able to drive growth higher. We're confident in our ability to do that, and we're focused on that. Short term, we're setting the expectations more cautiously given some of the macro dynamics.
Great. With that, I think we're out of time. So Steve, Mark, thank you very much.
Thank you very much.
Appreciate it.
Thanks.