Rapid7, Inc. (Nasdaq: RPD), a leader in extended risk and
threat detection, today announced its financial results for the
third quarter of 2023.
“Rapid7 ended the third quarter with $777
million in ARR, driven by strong customer traction and momentum
around our consolidated offerings for risk and threat management,
which contributed over 40% of new business during the quarter,”
said Corey Thomas, Chairman and CEO of Rapid7.
“The work we are doing to align our efforts
around the extended SOC and scaling our ability to offer integrated
expertise enables us to drive better security outcomes for our
customers which, along with our streamlined cost structure,
positions us for more profitable growth. As a result, we are
reiterating our 2023 free cash flow target, and continue to expect
that we will be able to double free cash flow in 2024.”
Third Quarter
2023 Financial Results and Other
Metrics
|
Three Months Ended September 30, |
|
|
2023 |
|
|
2022 |
|
% Change |
|
(dollars in thousands) |
Annualized recurring revenue |
$ |
776,760 |
|
$ |
683,816 |
|
14 |
% |
Number of customers |
|
11,412 |
|
|
10,791 |
|
6 |
% |
ARR per customer |
$ |
68.1 |
|
$ |
63.4 |
|
7 |
% |
|
Three Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
% Change |
|
(in thousands, except per share data) |
Products revenue |
$ |
189,876 |
|
|
$ |
166,496 |
|
|
14 |
% |
Professional services
revenue |
|
8,967 |
|
|
|
9,269 |
|
|
(3 |
%) |
Total revenue |
$ |
198,843 |
|
|
$ |
175,765 |
|
|
13 |
% |
|
|
|
|
|
|
North America revenue |
$ |
155,190 |
|
|
$ |
138,242 |
|
|
12 |
% |
Rest of world revenue |
|
43,653 |
|
|
|
37,523 |
|
|
16 |
% |
Total revenue |
$ |
198,843 |
|
|
$ |
175,765 |
|
|
13 |
% |
|
|
|
|
|
|
GAAP gross profit |
$ |
141,013 |
|
|
$ |
121,915 |
|
|
|
GAAP gross margin |
|
71 |
% |
|
|
69 |
% |
|
|
Non-GAAP gross profit |
$ |
148,315 |
|
|
$ |
129,089 |
|
|
|
Non-GAAP gross margin |
|
75 |
% |
|
|
73 |
% |
|
|
|
|
|
|
|
|
GAAP loss from operations |
$ |
(16,041 |
) |
|
$ |
(23,236 |
) |
|
|
GAAP operating margin |
(8)% |
|
(13)% |
|
|
Non-GAAP income from
operations |
$ |
36,773 |
|
|
$ |
13,044 |
|
|
|
Non-GAAP operating margin |
|
18 |
% |
|
|
7 |
% |
|
|
|
|
|
|
|
|
GAAP net loss |
$ |
(76,611 |
) |
|
$ |
(28,727 |
) |
|
|
GAAP net loss per share, basic
and diluted |
$ |
(1.25 |
) |
|
$ |
(0.49 |
) |
|
|
Non-GAAP net income |
$ |
33,984 |
|
|
$ |
8,599 |
|
|
|
Non-GAAP net income per
share: |
|
|
|
|
|
Basic |
$ |
0.56 |
|
|
$ |
0.15 |
|
|
|
Diluted |
$ |
0.50 |
|
|
$ |
0.14 |
|
|
|
|
|
|
|
|
|
Adjusted EBITDA |
$ |
42,925 |
|
|
$ |
17,930 |
|
|
|
|
|
|
|
|
|
Net cash provided by operating
activities |
$ |
3,665 |
|
|
$ |
20,110 |
|
|
|
Free cash flow |
$ |
(582 |
) |
|
$ |
9,657 |
|
|
|
|
|
|
|
|
|
|
|
|
|
For additional details on the reconciliation of
non-GAAP measures and certain other business metrics to their
nearest comparable GAAP measures, please refer to the accompanying
financial data tables included in this press release.
Recent Business Highlights
- In October,
Rapid7 announced that its Managed Detection and Response (“MDR”)
service has expanded to include multi-layered endpoint protection,
adding next-generation antivirus (“NGAV”) to Velociraptor’s digital
forensics and incident response (DFIR) capabilities to proactively
prevent breaches.
- In October,
Rapid7 announced the opening of its Prague office, which will serve
as the hub for technical talent and innovation and the future home
of a new Security Operations Center (“SOC”) which will supplement
Rapid7's existing SOC facilities, maximize quality and readiness,
and enhance the company’s ability to deliver global 24x7 MDR
services to its customers.
- In September,
Rapid7 issued $300.0 million aggregate principal amount of 1.25%
convertible senior notes due 2029 in a private placement, and used
proceeds from the offering to repurchase $184.0 million aggregate
principal amount of its outstanding 2.25% convertible senior notes
due 2025.
- In September,
Rapid7 and the University of Southern Florida (“USF”) announced a
collaborative cyber training initiative to use the company’s
proprietary threat data to train cyber operators for maximum
readiness, supported by $1.5 million in funding from the Office of
Naval Research (“ONR”) and the National Science Foundation
(“NSF”).
Fourth Quarter and Full-Year
2023 Guidance
Rapid7 anticipates annualized recurring revenue,
revenue, non-GAAP income from operations, non-GAAP net income per
share and free cash flow to be in the following ranges:
|
Fourth Quarter 2023 |
|
Full-Year 2023 |
|
(in millions, except per share data) |
Annualized recurring revenue |
|
|
|
|
$800 |
to |
$805 |
|
Year-over-year growth |
|
|
|
|
12% |
to |
13% |
|
Revenue |
$200 |
to |
$202 |
|
$773 |
to |
$775 |
|
Year-over-year growth |
8% |
to |
10% |
|
13% |
|
Non-GAAP income from
operations |
$33 |
to |
$35 |
|
$94 |
to |
$96 |
|
Non-GAAP net income per
share |
$0.47 |
to |
$0.49 |
|
$1.26 |
to |
$1.29 |
|
Weighted average shares
outstanding |
73.8 |
|
72.1 |
|
Free cash flow |
|
|
|
|
Approximately $80 |
|
|
|
|
|
|
The guidance provided above is forward-looking
in nature. Actual results may differ materially. See the cautionary
note regarding “Forward-Looking Statements” below. Guidance for the
fourth quarter and full-year 2023 does not include any potential
impact of foreign exchange gains or losses. The guidance provided
above is based on a number of assumptions, estimates and
expectations as of the date of this press release and, while
presented with numerical specificity, this guidance is inherently
subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond Rapid7's
control and are based upon specific assumptions with respect to
future business decisions or economic conditions, some of which may
change. Rapid7 undertakes no obligation to update guidance after
this date.
Non-GAAP guidance excludes estimates for
stock-based compensation expense, amortization of acquired
intangible assets, amortization of debt issuance costs, and certain
other items such as acquisition-related expenses, impairment of
long-lived assets, restructuring expense, induced conversion
expense, change in the fair value of derivative assets and
litigation-related expenses. Rapid7 has provided a reconciliation
of historical non-GAAP financial measures to the most comparable
GAAP measures in the financial statement tables included in this
press release. A reconciliation of non-GAAP guidance measures to
the most comparable GAAP measures is not available on a
forward-looking basis without unreasonable efforts due to the high
variability, complexity and low visibility with respect to the
charges excluded from these non-GAAP measures.
Conference Call and Webcast
Information
Rapid7 will host a conference call today,
November 1, 2023, to discuss its results at 4:30 p.m. Eastern
Time. The call will be accessible by telephone at 888-330-2384
(domestic) or +1 240-789-2701 (international) with the event code
8484206. The call will also be available live via webcast on
Rapid7's website at https://investors.rapid7.com. A webcast replay
of the conference call will be available at
https://investors.rapid7.com.
About Rapid7
Rapid7 (Nasdaq: RPD) is on a mission to create a
safer digital world by making cybersecurity simpler and more
accessible. We empower security professionals to manage a modern
attack surface through our best-in-class technology, leading-edge
research, and broad, strategic expertise. Rapid7’s comprehensive
security solutions help more than 11,000 global customers unite
cloud risk management and threat detection to reduce attack
surfaces and eliminate threats with speed and precision. For more
information, visit our website, check out our blog, or follow us
on LinkedIn or Twitter.
Non-GAAP Financial Measures and Other
Metrics
To supplement our consolidated financial
statements, which are prepared and presented in accordance with
generally accepted accounting principles in the United States
(“GAAP”), we provide investors with certain non-GAAP financial
measures and other metrics, which we believe are helpful to our
investors. We use these non-GAAP financial measures and other
metrics for financial and operational decision-making purposes and
as a means to evaluate period-to-period comparisons. We also use
certain non-GAAP financial measures as performance measures under
our executive bonus plan. We believe that these non-GAAP financial
measures and other metrics provide useful information about our
operating results, enhance the overall understanding of past
financial performance and future prospects and allow for greater
transparency with respect to metrics used by our management in its
financial and operational decision-making.
While our non-GAAP financial measures are an
important tool for financial and operational decision-making and
for evaluating our own operating results over different periods of
time, you should review the reconciliation of our non-GAAP
financial measures to the comparable GAAP financial measures
included below, and not rely on any single financial measure to
evaluate our business.
Non-GAAP Financial Measures
We disclose the following non-GAAP financial
measures: non-GAAP gross profit, non-GAAP income (loss) from
operations, non-GAAP net income (loss), non-GAAP net income (loss)
per share, adjusted EBITDA and free cash flow. We also disclose
non-GAAP gross margin and non-GAAP operating margin derived from
these financial measures.
We define non-GAAP gross profit, non-GAAP income
(loss) from operations, non-GAAP net income (loss) and non-GAAP net
income (loss) per share as the respective GAAP balances excluding
the effect of stock-based compensation expense, amortization of
acquired intangible assets, amortization of debt issuance costs and
certain other items such as acquisition-related expenses,
impairment of long-lived assets, restructuring expense, induced
conversion expense, change in the fair value of derivative assets
and litigation-related expenses. Non-GAAP net income (loss) per
basic and diluted share is calculated as non-GAAP net income (loss)
divided by the weighted average shares used to compute net income
(loss) per share, with the number of weighted average shares
decreased, when applicable, to reflect the anti-dilutive impact of
the capped call transactions entered into in connection with our
convertible senior notes.
We believe these non-GAAP financial measures are
useful to investors in assessing our operating performance due to
the following factors:
Stock-based compensation expense. We exclude
stock-based compensation expense because of varying available
valuation methodologies, subjective assumptions and the variety of
equity instruments that can impact our non-cash expense. We believe
that providing non-GAAP financial measures that exclude stock-based
compensation expense allows for more meaningful comparisons between
our operating results from period to period.
Amortization of acquired intangible assets. We
believe that excluding the impact of amortization of acquired
intangible assets allows for more meaningful comparisons between
operating results from period to period as the intangible assets
are valued at the time of acquisition and are amortized over
several years after the acquisition.
Amortization of debt issuance costs. The expense
for the amortization of debt issuance costs related to our
convertible senior notes and revolving credit facility is a
non-cash item, and we believe the exclusion of this interest
expense provides a more useful comparison of our operational
performance in different periods.
Induced conversion expense. In conjunction with
the third quarter of 2023 partial repurchase of our 2.25%
convertible senior notes due 2025, we incurred a non-cash induced
conversion expense of $53.9 million. We exclude induced conversion
expense because this amount is not indicative of the performance
of, or trends in our business, and neither is comparable to the
prior period nor predictive of future results.
Litigation-related expenses. We exclude
non-ordinary course litigation expense because we do not consider
legal costs and settlement fees incurred in litigation and
litigation-related matters of non-ordinary course lawsuits and
other disputes to be indicative of our core operating performance.
We do not adjust for ordinary course legal expenses, including
legal costs and settlement fees resulting from maintaining and
enforcing our intellectual property portfolio and license
agreements.
Acquisition-related expenses. We exclude
acquisition-related expenses as costs that are unrelated to the
current operations and are neither comparable to the prior period
nor predictive of future results.
Change in fair value of derivative assets. The
expense for the change in fair value of derivative assets related
to our capped calls settlement is a non-cash item and we believe
the exclusion of this other income (expense) provides a more useful
comparison of our operational performance in different periods.
Impairment of long-lived assets. Impairment of
long-lived assets consists of impairment charges allocated to the
carrying amount of certain operating right-of-use assets and the
associated leasehold improvements when the carrying amounts exceed
their respective fair values and we believe the exclusion of the
impairment charges provides a more useful comparison of our
operational performance in different periods.
Restructuring expense. We exclude non-ordinary
course restructuring expenses related to our restructuring plan
because we do not believe these charges are indicative of our core
operating performance and we believe the exclusion of the
restructuring expenses provides a more useful comparison of our
performance in different periods.
Anti-dilutive impact of capped call transaction.
Our capped calls transactions are intended to offset potential
dilution from the conversion features in our convertible senior
notes. Although we cannot reflect the anti-dilutive impact of the
capped call transactions under GAAP, we do reflect the
anti-dilutive impact of the capped call transactions in non-GAAP
net income (loss) per diluted share, when applicable, to provide
investors with useful information in evaluating our financial
performance on a per share basis.
Adjusted EBITDA. Adjusted EBITDA is a non-GAAP
measure that we define as net loss before (1) interest income, (2)
interest expense, (3) other income (expense), net, (4) provision
for income taxes, (5) depreciation expense, (6) amortization of
intangible assets, (7) stock-based compensation expense, (8)
acquisition-related expenses, (9) litigation-related expenses, (10)
impairment of long-lived assets and (11) restructuring expense. We
believe that the use of adjusted EBITDA is useful to investors and
other users of our financial statements in evaluating our operating
performance because it provides them with an additional tool to
compare business performance across companies and across
periods.
Free Cash Flow. Free cash flow is a non-GAAP
measure that we define as cash provided by operating activities
less purchases of property and equipment and capitalization of
internal-use software costs. We consider free cash flow to be a
liquidity measure that provides useful information to management
and investors about the amount of cash generated by the business
after necessary capital expenditures.
Our non-GAAP financial measures may not provide
information that is directly comparable to that provided by other
companies in our industry, as other companies in our industry may
calculate non-GAAP financial results differently, particularly
related to non-recurring, unusual items. In addition, there are
limitations in using non-GAAP financial measures because the
non-GAAP financial measures are not prepared in accordance with
GAAP, may be different from non-GAAP financial measures used by
other companies and exclude expenses that may have a material
impact upon our reported financial results. Further, stock-based
compensation expense has been and will continue to be for the
foreseeable future a significant recurring expense in our business
and an important part of the compensation provided to our
employees.
Other Metrics
Annualized Recurring Revenue (“ARR”). ARR is
defined as the annual value of all recurring revenue related
contracts in place at the end of the period. ARR should be viewed
independently of revenue and deferred revenue as ARR is an
operating metric and is not intended to be combined with or replace
these items. ARR is not a forecast of future revenue and can be
impacted by contract start and end dates and renewal rates, and
does not include revenue reported as perpetual license or
professional services revenue in our consolidated statement of
operations.
Number of Customers. We define a customer as any
entity that has an active Rapid7 recurring revenue contract as of
the specified measurement date, excluding InsightOps and Logentries
only customers with a contract value less than $2,400 per year.
ARR per Customer. We define ARR per customer as
ARR divided by the number of customers at the end of the
period.
Cautionary Language Concerning
Forward-Looking Statements
This press release includes forward-looking
statements within the meaning of the Private Securities Litigation
Reform Act of 1995. These forward-looking statements include, but
are not limited to, the statements regarding our financial guidance
for the third quarter and full-year 2023, the assumptions
underlying such guidance, our free cash flow projections for 2023
and 2024 and our ability to drive profitable growth. Our use of the
words “anticipate,” “believe,” “estimate,” “expect,” “intend,”
“may,” “will” and similar expressions are intended to identify
forward-looking statements. The events described in our
forward-looking statements are subject to a number of risks and
uncertainties, assumptions and other factors that could cause
actual results and the timing of certain events to differ
materially from future results expressed or implied by the
forward-looking statements. Risks that could cause or contribute to
such differences include, but are not limited to, growing
macroeconomic uncertainty, unstable market and economic conditions,
fluctuations in our quarterly results, effectiveness of our
restructuring plan, failure to meet our publicly announced guidance
or other expectations about our business, our ability to sustain
our revenue growth rate, the ability of our products and
professional services to correctly detect vulnerabilities, renewal
of our customer's subscriptions, competition in the markets in
which we operate, market growth, our ability to innovate and manage
our growth, our sales cycles, our ability to integrate acquired
companies, and our ability to operate in compliance with applicable
laws as well as other risks and uncertainties that could affect our
business and results described in our filings with the Securities
and Exchange Commission (the “SEC”), including our most recent
Quarterly Report on Form 10-Q filed with the SEC on August 9, 2023,
particularly in the section entitled "Item 1.A Risk Factors," and
in the subsequent reports that we file with the SEC. 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 expressed in any forward-looking statements
we may make. Except as required by law, we undertake no obligation
to update any forward-looking statements to reflect events or
circumstances after the date of such statements. You should,
therefore, not rely on these forward-looking statements as
representing our views as of any date subsequent to the date of
this press release.
Investor contact:
Elizabeth ChwalkDirector, Investor
Relationsinvestors@rapid7.com(617) 865-4277
Press contact:
Kelly CrummeyCorporate Communicationspress@rapid7.com(617)
921-8089
RAPID7, INC. |
Consolidated Balance Sheets (Unaudited) |
(in thousands) |
|
|
|
September 30, 2023 |
|
December 31, 2022 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
182,727 |
|
|
$ |
207,287 |
|
Short-term investments |
|
|
139,434 |
|
|
|
84,162 |
|
Accounts receivable, net |
|
|
137,690 |
|
|
|
152,045 |
|
Deferred contract acquisition and fulfillment costs, current
portion |
|
|
40,909 |
|
|
|
34,906 |
|
Prepaid expenses and other current assets |
|
|
35,087 |
|
|
|
31,907 |
|
Total current assets |
|
|
535,847 |
|
|
|
510,307 |
|
Long-term investments |
|
|
50,603 |
|
|
|
9,756 |
|
Property and equipment, net |
|
|
42,449 |
|
|
|
57,891 |
|
Operating lease right-of-use assets |
|
|
53,275 |
|
|
|
79,342 |
|
Deferred contract acquisition and fulfillment costs, non-current
portion |
|
|
71,654 |
|
|
|
68,169 |
|
Goodwill |
|
|
536,305 |
|
|
|
515,631 |
|
Intangible assets, net |
|
|
99,993 |
|
|
|
101,269 |
|
Other assets |
|
|
9,174 |
|
|
|
16,626 |
|
Total assets |
|
$ |
1,399,300 |
|
|
$ |
1,358,991 |
|
Liabilities and
Stockholders’ Deficit |
|
|
|
|
Current liabilities: |
|
|
|
|
Accounts payable |
|
$ |
8,951 |
|
|
$ |
10,255 |
|
Accrued expenses |
|
|
63,388 |
|
|
|
80,306 |
|
Operating lease liabilities, current portion |
|
|
12,472 |
|
|
|
12,444 |
|
Deferred revenue, current portion |
|
|
421,898 |
|
|
|
426,599 |
|
Other current liabilities |
|
|
888 |
|
|
|
1,663 |
|
Total current liabilities |
|
|
507,597 |
|
|
|
531,267 |
|
Convertible senior notes, non-current portion, net |
|
|
928,892 |
|
|
|
815,948 |
|
Operating lease liabilities, non-current portion |
|
|
81,065 |
|
|
|
85,946 |
|
Deferred revenue, non-current portion |
|
|
29,344 |
|
|
|
31,040 |
|
Other long-term liabilities |
|
|
14,047 |
|
|
|
14,864 |
|
Total liabilities |
|
|
1,560,945 |
|
|
|
1,479,065 |
|
Stockholders’ deficit: |
|
|
|
|
Common stock |
|
|
614 |
|
|
|
597 |
|
Treasury stock |
|
|
(4,765 |
) |
|
|
(4,764 |
) |
Additional paid-in-capital |
|
|
873,381 |
|
|
|
746,249 |
|
Accumulated other comprehensive loss |
|
|
(822 |
) |
|
|
(1,411 |
) |
Accumulated deficit |
|
|
(1,030,053 |
) |
|
|
(860,745 |
) |
Total stockholders’ deficit |
|
|
(161,645 |
) |
|
|
(120,074 |
) |
Total liabilities and stockholders’ deficit |
|
$ |
1,399,300 |
|
|
$ |
1,358,991 |
|
RAPID7, INC. |
Consolidated Statements of Operations
(Unaudited) |
(in thousands, except share and per share data) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Revenue: |
|
|
|
|
|
|
|
Products |
$ |
189,876 |
|
|
$ |
166,496 |
|
|
$ |
545,349 |
|
|
$ |
474,643 |
|
Professional services |
|
8,967 |
|
|
|
9,269 |
|
|
|
27,090 |
|
|
|
25,961 |
|
Total revenue |
|
198,843 |
|
|
|
175,765 |
|
|
|
572,439 |
|
|
|
500,604 |
|
Cost of revenue: |
|
|
|
|
|
|
|
Products |
|
51,261 |
|
|
|
45,957 |
|
|
|
150,597 |
|
|
|
135,296 |
|
Professional services |
|
6,569 |
|
|
|
7,893 |
|
|
|
21,396 |
|
|
|
24,118 |
|
Total cost of revenue |
|
57,830 |
|
|
|
53,850 |
|
|
|
171,993 |
|
|
|
159,414 |
|
Total gross profit |
|
141,013 |
|
|
|
121,915 |
|
|
|
400,446 |
|
|
|
341,190 |
|
Operating expenses: |
|
|
|
|
|
|
|
Research and development |
|
39,940 |
|
|
|
48,622 |
|
|
|
137,048 |
|
|
|
147,341 |
|
Sales and marketing |
|
75,699 |
|
|
|
75,968 |
|
|
|
239,322 |
|
|
|
229,148 |
|
General and administrative |
|
17,866 |
|
|
|
20,561 |
|
|
|
64,961 |
|
|
|
62,967 |
|
Impairment of long-lived assets |
|
3,553 |
|
|
|
— |
|
|
|
30,784 |
|
|
|
— |
|
Restructuring |
|
19,996 |
|
|
|
— |
|
|
|
19,996 |
|
|
|
— |
|
Total operating expenses |
|
157,054 |
|
|
|
145,151 |
|
|
|
492,111 |
|
|
|
439,456 |
|
Loss from operations |
|
(16,041 |
) |
|
|
(23,236 |
) |
|
|
(91,665 |
) |
|
|
(98,266 |
) |
Other income (expense),
net: |
|
|
|
|
|
|
|
Interest income |
|
2,545 |
|
|
|
498 |
|
|
|
6,000 |
|
|
|
853 |
|
Interest expense |
|
(56,515 |
) |
|
|
(2,749 |
) |
|
|
(62,005 |
) |
|
|
(8,200 |
) |
Other income (expense), net |
|
(4,518 |
) |
|
|
(2,205 |
) |
|
|
(18,093 |
) |
|
|
(5,211 |
) |
Loss before income taxes |
|
(74,529 |
) |
|
|
(27,692 |
) |
|
|
(165,763 |
) |
|
|
(110,824 |
) |
Provision for income taxes |
|
2,082 |
|
|
|
1,035 |
|
|
|
3,545 |
|
|
|
2,508 |
|
Net loss |
$ |
(76,611 |
) |
|
$ |
(28,727 |
) |
|
$ |
(169,308 |
) |
|
$ |
(113,332 |
) |
Net loss per share, basic and
diluted |
$ |
(1.25 |
) |
|
$ |
(0.49 |
) |
|
$ |
(2.80 |
) |
|
$ |
(1.95 |
) |
Weighted-average common shares
outstanding, basic and diluted |
|
61,065,157 |
|
|
|
58,730,651 |
|
|
|
60,506,082 |
|
|
|
58,229,872 |
|
RAPID7, INC. |
Consolidated Statements of Cash Flows
(Unaudited) |
(in thousands) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Cash flows from
operating activities: |
|
|
|
|
|
|
|
Net loss |
$ |
(76,611 |
) |
|
$ |
(28,727 |
) |
|
$ |
(169,308 |
) |
|
$ |
(113,332 |
) |
Adjustments to reconcile net
loss to cash provided by operating activities: |
|
|
|
|
|
|
|
Depreciation and amortization |
|
11,649 |
|
|
|
10,195 |
|
|
|
34,528 |
|
|
|
30,587 |
|
Amortization of debt issuance costs |
|
1,041 |
|
|
|
1,046 |
|
|
|
3,061 |
|
|
|
3,036 |
|
Stock-based compensation expense |
|
23,768 |
|
|
|
30,971 |
|
|
|
84,836 |
|
|
|
92,304 |
|
Impairment of long-lived assets |
|
3,553 |
|
|
|
— |
|
|
|
30,784 |
|
|
|
— |
|
Change in fair value of derivative assets |
|
2,851 |
|
|
|
— |
|
|
|
15,511 |
|
|
|
— |
|
Induced conversion expense |
|
53,889 |
|
|
|
— |
|
|
|
53,889 |
|
|
|
— |
|
Other |
|
1,203 |
|
|
|
1,547 |
|
|
|
5,626 |
|
|
|
3,828 |
|
Change in operating assets and
liabilities: |
|
|
|
|
|
|
|
Accounts receivable |
|
(2,682 |
) |
|
|
3,278 |
|
|
|
12,428 |
|
|
|
21,425 |
|
Deferred contract acquisition and fulfillment costs |
|
(3,525 |
) |
|
|
(2,919 |
) |
|
|
(9,488 |
) |
|
|
(7,999 |
) |
Prepaid expenses and other assets |
|
4,033 |
|
|
|
5,224 |
|
|
|
5,433 |
|
|
|
(5,303 |
) |
Accounts payable |
|
27 |
|
|
|
4,947 |
|
|
|
(1,255 |
) |
|
|
8,504 |
|
Accrued expenses |
|
(6,000 |
) |
|
|
252 |
|
|
|
(17,968 |
) |
|
|
(12,241 |
) |
Deferred revenue |
|
(8,150 |
) |
|
|
(4,886 |
) |
|
|
(6,367 |
) |
|
|
18,297 |
|
Other liabilities |
|
(1,381 |
) |
|
|
(818 |
) |
|
|
(898 |
) |
|
|
(1,144 |
) |
Net cash provided by operating activities |
|
3,665 |
|
|
|
20,110 |
|
|
|
40,812 |
|
|
|
37,962 |
|
Cash flows from
investing activities: |
|
|
|
|
|
|
|
Business acquisition, net of cash acquired |
|
— |
|
|
|
— |
|
|
|
(34,841 |
) |
|
|
— |
|
Purchases of property and equipment |
|
(295 |
) |
|
|
(5,863 |
) |
|
|
(3,999 |
) |
|
|
(13,087 |
) |
Capitalization of internal-use software costs |
|
(3,952 |
) |
|
|
(4,590 |
) |
|
|
(13,033 |
) |
|
|
(12,648 |
) |
Purchases of investments |
|
(113,756 |
) |
|
|
(35,489 |
) |
|
|
(194,013 |
) |
|
|
(94,486 |
) |
Sales/maturities of investments |
|
35,000 |
|
|
|
26,050 |
|
|
|
100,700 |
|
|
|
86,379 |
|
Other investments |
|
— |
|
|
|
(500 |
) |
|
|
— |
|
|
|
(1,000 |
) |
Net cash used in investing activities |
|
(83,003 |
) |
|
|
(20,392 |
) |
|
|
(145,186 |
) |
|
|
(34,842 |
) |
Cash flows from
financing activities: |
|
|
|
|
|
|
|
Proceeds from issuance of convertible senior notes, net of issuance
costs paid of $7,200 |
|
292,800 |
|
|
|
— |
|
|
|
292,800 |
|
|
|
— |
|
Purchase of capped calls related to convertible senior notes |
|
(36,570 |
) |
|
|
— |
|
|
|
(36,570 |
) |
|
|
— |
|
Payment of debt issuance costs |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(71 |
) |
Payments for repurchase of convertible senior notes |
|
(199,998 |
) |
|
|
— |
|
|
|
(199,998 |
) |
|
|
(12 |
) |
Payments related to business acquisitions |
|
— |
|
|
|
— |
|
|
|
(2,250 |
) |
|
|
(300 |
) |
Proceeds from capped call settlement |
|
17,518 |
|
|
|
— |
|
|
|
17,518 |
|
|
|
— |
|
Taxes paid related to net share settlement of equity awards |
|
(1,421 |
) |
|
|
(1,637 |
) |
|
|
(4,012 |
) |
|
|
(6,743 |
) |
Proceeds from employee stock purchase plan |
|
5,149 |
|
|
|
6,233 |
|
|
|
11,323 |
|
|
|
11,943 |
|
Proceeds from stock option exercises |
|
302 |
|
|
|
416 |
|
|
|
2,984 |
|
|
|
1,621 |
|
Net cash provided by financing activities |
|
77,780 |
|
|
|
5,012 |
|
|
|
81,795 |
|
|
|
6,438 |
|
Effects of exchange rates on cash, cash equivalents and restricted
cash |
|
(1,673 |
) |
|
|
(2,036 |
) |
|
|
(2,010 |
) |
|
|
(5,707 |
) |
Net (decrease) increase in cash, cash equivalents and restricted
cash |
|
(3,231 |
) |
|
|
2,694 |
|
|
|
(24,589 |
) |
|
|
3,851 |
|
Cash, cash equivalents and
restricted cash, beginning of period |
|
186,446 |
|
|
|
166,174 |
|
|
|
207,804 |
|
|
|
165,017 |
|
Cash, cash equivalents and
restricted cash, end of period |
$ |
183,215 |
|
|
$ |
168,868 |
|
|
$ |
183,215 |
|
|
$ |
168,868 |
|
RAPID7, INC. |
GAAP to Non-GAAP Reconciliation (Unaudited) |
(in thousands, except share and per share data) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
GAAP gross
profit |
$ |
141,013 |
|
|
$ |
121,915 |
|
|
$ |
400,446 |
|
|
$ |
341,190 |
|
Add: Stock-based compensation expense1 |
|
2,527 |
|
|
|
2,745 |
|
|
|
8,348 |
|
|
|
7,610 |
|
Add: Amortization of acquired intangible assets2 |
|
4,775 |
|
|
|
4,429 |
|
|
|
13,993 |
|
|
|
14,117 |
|
Non-GAAP gross
profit |
$ |
148,315 |
|
|
$ |
129,089 |
|
|
$ |
422,787 |
|
|
$ |
362,917 |
|
Non-GAAP gross margin |
|
74.6 |
% |
|
|
73.4 |
% |
|
|
73.9 |
% |
|
|
72.5 |
% |
|
|
|
|
|
|
|
|
GAAP gross profit - Products |
$ |
138,615 |
|
|
$ |
120,539 |
|
|
$ |
394,752 |
|
|
$ |
339,347 |
|
Add: Stock-based compensation expense |
|
1,940 |
|
|
|
2,006 |
|
|
|
6,332 |
|
|
|
5,513 |
|
Add: Amortization of acquired intangible assets |
|
4,775 |
|
|
|
4,429 |
|
|
|
13,993 |
|
|
|
14,117 |
|
Non-GAAP gross profit - Products |
$ |
145,330 |
|
|
$ |
126,974 |
|
|
$ |
415,077 |
|
|
$ |
358,977 |
|
Non-GAAP gross margin - Products |
|
76.5 |
% |
|
|
76.3 |
% |
|
|
76.1 |
% |
|
|
75.6 |
% |
|
|
|
|
|
|
|
|
GAAP gross profit - Professional services |
$ |
2,398 |
|
|
$ |
1,376 |
|
|
$ |
5,694 |
|
|
$ |
1,843 |
|
Add: Stock-based compensation expense |
|
587 |
|
|
|
739 |
|
|
|
2,016 |
|
|
|
2,097 |
|
Non-GAAP gross profit - Professional services |
$ |
2,985 |
|
|
$ |
2,115 |
|
|
$ |
7,710 |
|
|
$ |
3,940 |
|
Non-GAAP gross margin - Professional services |
|
33.3 |
% |
|
|
22.8 |
% |
|
|
28.5 |
% |
|
|
15.2 |
% |
|
|
|
|
|
|
|
|
GAAP loss from
operations |
$ |
(16,041 |
) |
|
$ |
(23,236 |
) |
|
$ |
(91,665 |
) |
|
$ |
(98,266 |
) |
Add: Stock-based compensation expense1 |
|
23,768 |
|
|
|
30,971 |
|
|
|
84,836 |
|
|
|
92,304 |
|
Add: Amortization of acquired intangible assets2 |
|
5,497 |
|
|
|
5,309 |
|
|
|
16,409 |
|
|
|
16,755 |
|
Add: Acquisition-related expenses3 |
|
— |
|
|
|
— |
|
|
|
363 |
|
|
|
— |
|
Add: Litigation-related expenses4 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
115 |
|
Add: Impairment of long-lived assets |
|
3,553 |
|
|
|
— |
|
|
|
30,784 |
|
|
|
— |
|
Add: Restructuring expense |
|
19,996 |
|
|
|
— |
|
|
|
19,996 |
|
|
|
— |
|
Non-GAAP income from
operations |
$ |
36,773 |
|
|
$ |
13,044 |
|
|
$ |
60,723 |
|
|
$ |
10,908 |
|
|
|
|
|
|
|
|
|
GAAP net
loss |
$ |
(76,611 |
) |
|
$ |
(28,727 |
) |
|
$ |
(169,308 |
) |
|
$ |
(113,332 |
) |
Add: Stock-based compensation expense1 |
|
23,768 |
|
|
|
30,971 |
|
|
|
84,836 |
|
|
|
92,304 |
|
Add: Amortization of acquired intangible assets2 |
|
5,497 |
|
|
|
5,309 |
|
|
|
16,409 |
|
|
|
16,755 |
|
Add: Acquisition-related expenses3 |
|
— |
|
|
|
— |
|
|
|
363 |
|
|
|
— |
|
Add: Litigation-related expenses4 |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
115 |
|
Add: Amortization of debt issuance costs |
|
1,041 |
|
|
|
1,046 |
|
|
|
3,061 |
|
|
|
3,036 |
|
Add: Induced conversion expense |
|
53,889 |
|
|
|
— |
|
|
|
53,889 |
|
|
|
— |
|
Add: Change in fair value of derivative assets |
|
2,851 |
|
|
|
— |
|
|
|
15,511 |
|
|
|
— |
|
Add: Impairment of long-lived assets |
|
3,553 |
|
|
|
— |
|
|
|
30,784 |
|
|
|
— |
|
Add: Restructuring expense |
|
19,996 |
|
|
|
— |
|
|
|
19,996 |
|
|
|
— |
|
Non-GAAP net income
(loss) |
$ |
33,984 |
|
|
$ |
8,599 |
|
|
$ |
55,541 |
|
|
$ |
(1,122 |
) |
Add: Interest expense of convertible senior notes5 |
|
604 |
|
|
|
375 |
|
|
|
1,354 |
|
|
|
— |
|
Numerator for non-GAAP
earnings per share calculation |
$ |
34,588 |
|
|
$ |
8,974 |
|
|
$ |
56,895 |
|
|
$ |
(1,122 |
) |
|
|
|
|
|
|
|
|
Weighted average
shares used in GAAP earnings per share calculation, basic and
diluted |
|
61,065,157 |
|
|
|
58,730,651 |
|
|
|
60,506,082 |
|
|
|
58,229,872 |
|
Dilutive effect of convertible
senior notes5 |
|
6,960,346 |
|
|
|
5,803,831 |
|
|
|
6,960,346 |
|
|
|
— |
|
Dilutive effect of employee
equity incentive plans6 |
|
873,718 |
|
|
|
1,063,389 |
|
|
|
1,919,771 |
|
|
|
— |
|
Weighted average shares used
in non-GAAP earnings per share calculation, diluted |
|
68,899,221 |
|
|
|
65,597,871 |
|
|
|
69,386,199 |
|
|
|
58,229,872 |
|
|
|
|
|
|
|
|
|
Non-GAAP net income
(loss) per share: |
|
|
|
|
|
|
|
Basic |
$ |
0.56 |
|
|
$ |
0.15 |
|
|
$ |
0.92 |
|
|
$ |
(0.02 |
) |
Diluted |
$ |
0.50 |
|
|
$ |
0.14 |
|
|
$ |
0.82 |
|
|
$ |
(0.02 |
) |
|
|
|
|
|
|
|
|
1Includes stock-based
compensation expense as follows: |
|
|
|
|
|
|
|
Cost of revenue |
$ |
2,527 |
|
|
$ |
2,745 |
|
|
$ |
8,348 |
|
|
$ |
7,610 |
|
Research and development |
|
8,436 |
|
|
|
13,400 |
|
|
|
30,575 |
|
|
|
40,349 |
|
Sales and marketing |
|
7,106 |
|
|
|
8,047 |
|
|
|
23,087 |
|
|
|
23,251 |
|
General and administrative |
|
5,699 |
|
|
|
6,779 |
|
|
|
22,826 |
|
|
|
21,094 |
|
|
|
|
|
|
|
|
|
2Includes amortization of
acquired intangible assets as follows: |
|
|
|
|
|
|
|
Cost of revenue |
$ |
4,775 |
|
|
$ |
4,429 |
|
|
$ |
13,993 |
|
|
$ |
14,117 |
|
Sales and marketing |
|
652 |
|
|
|
685 |
|
|
|
1,956 |
|
|
|
2,053 |
|
General and administrative |
|
70 |
|
|
|
195 |
|
|
|
460 |
|
|
|
585 |
|
|
|
|
|
|
|
|
|
3Includes acquisition-related
expenses as follows: |
|
|
|
|
|
|
|
General and administrative |
$ |
— |
|
|
$ |
— |
|
|
|
363 |
|
|
$ |
— |
|
|
|
|
|
|
|
|
|
4Includes litigation-related
expenses as follows: |
|
|
|
|
|
|
|
General and administrative |
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
115 |
|
|
|
|
|
|
|
|
|
5We use the
if-converted method to compute diluted earnings per share with
respect to our convertible senior notes. There was no add-back of
interest expense or additional dilutive shares related to the
convertible senior notes where the effect was anti-dilutive. On an
if-converted basis, for the three and nine months ended September
30, 2023, the 2027 and the 2029 Notes were dilutive and the 2025
Notes were anti-dilutive. |
|
|
|
|
|
|
|
|
6We use the
treasury method to compute the dilutive effect of employee equity
incentive plan awards. |
|
|
|
|
|
|
|
|
RAPID7, INC. |
Reconciliation of Net Loss to Adjusted EBITDA
(Unaudited) |
(in thousands) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
GAAP net loss |
$ |
(76,611 |
) |
|
$ |
(28,727 |
) |
|
$ |
(169,308 |
) |
|
$ |
(113,332 |
) |
Interest income |
|
(2,545 |
) |
|
|
(498 |
) |
|
|
(6,000 |
) |
|
|
(853 |
) |
Interest expense |
|
56,515 |
|
|
|
2,749 |
|
|
|
62,005 |
|
|
|
8,200 |
|
Other (income) expense, net |
|
4,518 |
|
|
|
2,205 |
|
|
|
18,093 |
|
|
|
5,211 |
|
Provision for income taxes |
|
2,082 |
|
|
|
1,035 |
|
|
|
3,545 |
|
|
|
2,508 |
|
Depreciation expense |
|
3,343 |
|
|
|
3,479 |
|
|
|
10,929 |
|
|
|
10,008 |
|
Amortization of intangible assets |
|
8,306 |
|
|
|
6,716 |
|
|
|
23,599 |
|
|
|
20,579 |
|
Stock-based compensation expense |
|
23,768 |
|
|
|
30,971 |
|
|
|
84,836 |
|
|
|
92,304 |
|
Acquisition-related expenses |
|
— |
|
|
|
— |
|
|
|
363 |
|
|
|
— |
|
Litigation-related expenses |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
115 |
|
Impairment of long-lived assets |
|
3,553 |
|
|
|
— |
|
|
|
30,784 |
|
|
|
— |
|
Restructuring expense |
|
19,996 |
|
|
|
— |
|
|
|
19,996 |
|
|
|
— |
|
Adjusted EBITDA |
$ |
42,925 |
|
|
$ |
17,930 |
|
|
$ |
78,842 |
|
|
$ |
24,740 |
|
RAPID7, INC. |
Reconciliation of Net Cash Provided by Operating Activities
to Free Cash Flow (Unaudited) |
(in thousands) |
|
|
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
|
|
2023 |
|
|
|
2022 |
|
|
|
2023 |
|
|
|
2022 |
|
Net cash provided by operating
activities |
$ |
3,665 |
|
|
$ |
20,110 |
|
|
$ |
40,812 |
|
|
$ |
37,962 |
|
Less: Purchases of property and equipment |
|
(295 |
) |
|
|
(5,863 |
) |
|
|
(3,999 |
) |
|
|
(13,087 |
) |
Less: Capitalized internal-use software costs |
|
(3,952 |
) |
|
|
(4,590 |
) |
|
|
(13,033 |
) |
|
|
(12,648 |
) |
Free cash flow |
$ |
(582 |
) |
|
$ |
9,657 |
|
|
$ |
23,780 |
|
|
$ |
12,227 |
|
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