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02/09/22 - 04:05 pm
Rapid7 Announces Fourth Quarter and Full-Year 2021 Financial Results
  • Annualized recurring revenue (ARR) of $599.0 million, an increase of 38% year-over-year
  • Full-year revenue of $535.4 million, up 30% year-over-year; Products revenue of $500.8 million, up 31% year-over-year
  • Total customer growth of 18% year-over-year
  • Total ARR per customer growth of 17% year-over-year

BOSTON, Feb. 09, 2022 (GLOBE NEWSWIRE) -- Rapid7, Inc. (NASDAQ: RPD), a leading provider of security analytics and automation, today announced financial results for the fourth quarter and full-year 2021.

"We ended 2021 on a high note, delivering strong fourth quarter results across our security transformation and vulnerability management solutions. We grew ARR by 38% during the year while eclipsing 10,000 customers globally, highlighting our team's strong execution and the growing need for customers to manage increasingly complex security environments," said Corey Thomas, Chairman and CEO of Rapid7.

"As we look ahead to 2022, we remain focused on enabling better security outcomes for our customers, while driving durable growth and scaling profitability."

Fourth Quarter 2021 Financial Results and Other Metrics

  As of December 31,
           
  2021
  2020
  % Change
           
  (dollars in thousands)
Annualized recurring revenue $ 599,020     $ 432,946     38 %
Number of customers (1)   10,283       8,718     18 %
ARR per customer (1) $ 58.3     $ 49.7     17 %
(1) Number of customers and ARR per customer are based on our new customer count methodology provided at our virtual investor day on March 10, 2021. Prior period amounts have been revised to conform with these modified definitions, which are also provided in the Non-GAAP Financial Measures and Other Metrics section below.
 


  Three Months Ended December 31,   Year Ended December 31,
                       
  2021   2020   % Change   2021   2020   % Change
                       
  (in thousands, except per share data)
Products revenue $ 141,262     $ 104,384     35 %   $ 500,843     $ 382,922     31 %
Professional services revenue   10,376       8,775     18 %     34,561       28,564     21 %
Total revenue $ 151,638     $ 113,159     34 %   $ 535,404     $ 411,486     30 %
                       
North America revenue $ 120,886     $ 93,765     29 %   $ 433,111     $ 342,638     26 %
Rest of world revenue   30,752       19,394     59 %     102,293       68,848     49 %
Total revenue $ 151,638     $ 113,159     34 %   $ 535,404     $ 411,486     30 %
                       
GAAP gross profit $ 101,758     $ 79,465         $ 366,456     $ 289,969      
GAAP gross margin   67 %     70 %         68 %     70 %    
Non-GAAP gross profit $ 108,181     $ 83,002         $ 388,320     $ 302,967      
Non-GAAP gross margin   71 %     73 %         73 %     74 %    
                       
GAAP loss from operations $ (40,708 )   $ (20,631 )       $ (120,065 )   $ (74,099 )    
GAAP operating margin (26.8 )%   (18.2 )%       (22.4 )%   (18.0 )%    
Non-GAAP (loss) income from operations $ (6,110 )   $ (744 )       $ 7,599     $ 2,032      
Non-GAAP operating margin (4.0 )%   (0.7 )%         1.4 %     0.5 %    
                       
GAAP net loss $ (44,625 )   $ (28,918 )       $ (146,334 )   $ (98,849 )    
GAAP net loss per share, basic and diluted $ (0.79 )   $ (0.56 )       $ (2.65 )   $ (1.94 )    
Non-GAAP net loss $ (8,931 )   $ (3,726 )       $ (2,983 )   $ (5,200 )    
Non-GAAP net loss per share, basic and diluted $ (0.16 )   $ (0.07 )       $ (0.05 )   $ (0.10 )    
                       
Adjusted EBITDA $ (1,903 )   $ 2,958         $ 23,795     $ 15,525      
                       
Free cash flow $ (2,179 )   $ (7,818 )       $ 35,053     $ (15,045 )    
                                       

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 January 2022, Rapid7 announced its inclusion in the Bloomberg Gender-Equality Index, which aims to track the performance of public companies committed to transparency in gender-data reporting.
  • In January 2022, Tim Adams joined Rapid7 as Chief Financial Officer, reporting to Rapid7's Chairman and Chief Executive Officer, Corey Thomas.
  • Rapid7 ended 2021 with over 10,000 global customers that rely on Rapid7's technology, services, and research to improve security outcomes and securely advance their organizations.
  • In November 2021, Rapid7 fully redeemed the remaining $45.4 million in aggregate principal amount of its outstanding convertible senior notes due 2023.

First Quarter and Full-Year 2022 Guidance

Rapid7 anticipates annualized recurring revenue, revenue, non-GAAP (loss) income from operations, non-GAAP net (loss) income per share and free cash flow to be in the following ranges:

           
  First Quarter 2022   Full-Year 2022
  (in millions, except per share data)
Annualized recurring revenue         $740 to $750
Year-over-year growth         24% to 25%
Revenue $153 to $155   $682 to $690
Year-over-year growth 30% to 32%   27% to 29%
Non-GAAP (loss) income from operations $(7) to $(5)   $17 to $24
Non-GAAP net (loss) income per share $(0.18) to $(0.15)   $0.05 to $0.16
Weighted average shares outstanding 58.3   60.9
Free cash flow         $40 to $45
               

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 first quarter and full-year 2022 does not include any potential impact of foreign exchange gains or losses. The weighted average shares outstanding for the first quarter 2022 represent basic shares outstanding given our projected non-GAAP net loss and diluted shares outstanding for the full-year 2022 given our projected range of non-GAAP net income. 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. Rapid7 has provided a reconciliation of each non-GAAP guidance measure to the most comparable GAAP measures in the financial statement tables included in this press release. The reconciliation does not reflect any items that are unknown at this time, such as litigation-related expenses, which we are not able to predict without unreasonable effort due to their inherent uncertainty.

Conference Call and Webcast Information

Rapid7 will host a conference call today, February 9, 2022, to discuss its results at 4:30 p.m. Eastern Time. The call will be accessible by telephone at 877-357-4230 (domestic) or 629-228-0721 (international). The call will also be available live via webcast on the Company’s website at http://investors.rapid7.com. A telephone replay of the conference call will be available at 855-859-2056 or 404-537-3406 (access code 7585978) until February 16, 2022. A webcast replay will be available at http://investors.rapid7.com.

About Rapid7

Rapid7 (Nasdaq: RPD) is advancing security with visibility, analytics, and automation delivered through our Insight cloud. Our solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks. Over 10,000 customers rely on Rapid7 technology, services, and research to improve security outcomes and securely advance their organizations. For more information, visit our website, check out our blog, or follow us on 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, or 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 discount and issuance costs and certain other items such as acquisition-related expenses, litigation-related expenses and induced conversion expense. 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 discount and issuance costs. The expense for the amortization of debt discount and 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 first quarter of 2021 partial repurchase of our 1.25% convertible senior notes due 2023, we incurred an induced conversion expense of $2.7 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 certain litigation-related expenses consisting of professional fees and related costs incurred by us related to significant litigation outside the ordinary course of business. We believe it is useful to exclude such expenses because we do not consider such amounts to be part of our ongoing operations.

Acquisition-related expenses. We exclude acquisition-related expenses as costs that are unrelated to the current operations and neither are comparable to the prior period nor predictive of future results. Our acquisition-related expenses for the year ended December 31, 2021 includes $9.0 million of tax expense related to the sale of acquired intellectual property through an intercompany transaction related to the Alcide acquisition.

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 (non-GAAP). 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, and (8) certain other items. 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 net cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs.

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 first quarter and full-year 2022, the assumptions underlying such guidance and the timing of global economic recovery, market opportunities, future growth and operating leverage, and the anticipated impact of COVID-19 on our guidance, business, financial condition, and results of operations. 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, risks arising from the ongoing COVID-19 pandemic, fluctuations in our quarterly results, failure to meet our publicly announced guidance or other expectations about our business, our rapid growth and ability to sustain our revenue growth rate, the ability of our products and professional services to correctly detect vulnerabilities, our customers renewal of their subscriptions with us, 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, our ability to operate in compliance with applicable laws as well as other risks and uncertainties set forth in the “Risk Factors” section of our most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) on November 4, 2021 and in the subsequent reports that we file with the Securities and Exchange Commission. 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:
Sunil Shah
Vice President, Investor Relations
investors@rapid7.com
(617) 865-4277

Press contact:
Caitlin O'Connor
Senior Public Relations Manager
press@rapid7.com
(857) 990-4240   

 
RAPID7, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands)
         
    December 31, 2021   December 31, 2020
Assets        
Current assets:        
Cash and cash equivalents   $ 164,582     $ 173,617  
Short-term investments     58,850       138,839  
Accounts receivable, net     146,094       111,599  
Deferred contract acquisition and fulfillment costs, current portion     29,974       21,536  
Prepaid expenses and other current assets     33,236       27,844  
Total current assets     432,736       473,435  
Long-term investments     34,068       10,124  
Property and equipment, net     50,225       53,114  
Operating lease right-of-use assets     83,751       67,178  
Deferred contract acquisition and fulfillment costs, non-current portion     57,191       43,103  
Goodwill     515,258       213,601  
Intangible assets, net     111,591       44,296  
Other assets     11,191       8,271  
Total assets   $ 1,296,011     $ 913,122  
Liabilities and Stockholders’ Equity (Deficit)        
Current liabilities:        
Accounts payable   $ 3,521     $ 3,860  
Accrued expenses     82,620       61,677  
Operating lease liabilities, current portion     9,630       9,612  
Deferred revenue, current portion     372,067       278,585  
Other current liabilities     842        
Total current liabilities     468,680       353,734  
Convertible senior notes, net     812,063       378,586  
Operating lease liabilities, non-current portion     90,865       75,737  
Deferred revenue, non-current portion     33,056       31,365  
Other long-term liabilities     17,342       2,164  
Total liabilities     1,422,006       841,586  
Stockholders’ equity (deficit):        
Common stock     577       522  
Treasury stock     (4,764 )     (4,764 )
Additional paid-in-capital     615,032       692,603  
Accumulated other comprehensive (loss) income     (812 )     454  
Accumulated deficit     (736,028 )     (617,279 )
Total stockholders’ equity (deficit)     (125,995 )     71,536  
Total liabilities and stockholders’ equity (deficit)   $ 1,296,011     $ 913,122  
                 


 
RAPID7, INC.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
         
    Three Months Ended December 31,   Year Ended December 31,
    2021   2020   2021   2020
Revenue:                
Products   $ 141,262     $ 104,384     $ 500,843     $ 382,922  
Professional services     10,376       8,775       34,561       28,564  
Total revenue     151,638       113,159       535,404       411,486  
Cost of revenue:                
Products     41,457       27,295       140,773       96,864  
Professional services     8,423       6,399       28,175       24,653  
Total cost of revenue     49,880       33,694       168,948       121,517  
Total gross profit     101,758       79,465       366,456       289,969  
Operating expenses:                
Research and development     48,514       29,737       160,779       108,568  
Sales and marketing     73,189       54,429       247,453       195,981  
General and administrative     20,763       15,930       78,289       59,519  
Total operating expenses     142,466       100,096       486,521       364,068  
Loss from operations     (40,708 )     (20,631 )     (120,065 )     (74,099 )
Other income (expense), net:                
Interest income     63       111       365       1,454  
Interest expense     (2,877 )     (7,429 )     (14,292 )     (24,137 )
Other income (expense), net     (703 )     12       (1,921 )     (81 )
Loss before income taxes     (44,225 )     (27,937 )     (135,913 )     (96,863 )
Provision for income taxes     400       981       10,421       1,986  
Net loss   $ (44,625 )   $ (28,918 )   $ (146,334 )   $ (98,849 )
Net loss per share, basic and diluted   $ (0.79 )   $ (0.56 )   $ (2.65 )   $ (1.94 )
Weighted-average common shares outstanding, basic and diluted     56,752,295       52,017,473       55,270,998       51,036,824  
                                 


 
RAPID7, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
         
    Three Months Ended December 31,   Year Ended December 31,
    2021   2020   2021   2020
Cash flows from operating activities:                
Net loss   $ (44,625 )   $ (28,918 )   $ (146,334 )   $ (98,849 )
Adjustments to reconcile net loss to net cash provided by operating activities:                
Depreciation and amortization     9,988       6,284       33,501       22,631  
Amortization of debt discount and issuance costs     1,096       5,305       3,982       17,518  
Stock-based compensation expense     28,707       16,967       102,579       63,888  
Deferred income taxes     (3,458 )     737       466       737  
Induced conversion expense                 2,740        
Other     265       447       1,920       2,428  
Changes in operating assets and liabilities:                
Accounts receivable     (48,997 )     (37,608 )     (25,475 )     (24,380 )
Deferred contract acquisition and fulfillment costs     (12,754 )     (8,101 )     (22,526 )     (13,379 )
Prepaid expenses and other assets     (6,446 )     (10,308 )     (3,355 )     (8,956 )
Accounts payable     (4,156 )     (4,316 )     (2,077 )     (2,394 )
Accrued expenses     23,759       11,719       19,205       8,640  
Deferred revenue     61,173       47,884       85,562       37,428  
Other liabilities     136       490       3,729       (425 )
Net cash provided by operating activities     4,688       582       53,917       4,887  
Cash flows from investing activities:                
Business acquisitions, net of cash acquired                 (358,420 )     (125,826 )
Purchases of property and equipment     (4,175 )     (6,677 )     (9,010 )     (13,802 )
Capitalization of internal-use software costs     (2,692 )     (1,723 )     (9,854 )     (6,130 )
Purchases of investments     (33,784 )     (68,343 )     (93,092 )     (177,053 )
Sales/maturities of investments     23,160       10,925       147,998       166,524  
Other investments                 (3,000 )      
Net cash used in investing activities     (17,491 )     (65,818 )     (325,378 )     (156,287 )
Cash flows from financing activities:                
Proceeds from issuance of convertible senior notes, net of issuance costs paid                 585,024       222,799  
Purchase of capped calls related to convertible senior notes                 (76,020 )     (27,255 )
Payments of debt issuance costs     (300 )     (29 )     (300 )     (440 )
Payments for redemption, repurchase and conversion of convertible senior notes     (45,351 )           (230,000 )      
Payments related to business acquisitions                 (12,118 )     (150 )
Taxes paid related to net share settlement of equity awards     (4,672 )     (2,937 )     (16,044 )     (8,921 )
Proceeds from employee stock purchase plan                 9,276       7,082  
Proceeds from stock option exercises     1,036       1,591       4,315       7,810  
Net cash (used in) provided by financing activities     (49,287 )     (1,375 )     264,133       200,925  
Effect of exchange rate changes on cash, cash equivalents and restricted cash     (423 )     519       (1,272 )     679  
Net (decrease) increase in cash, cash equivalents and restricted cash     (62,513 )     (66,092 )     (8,600 )     50,204  
Cash, cash equivalents and restricted cash, beginning of period     227,530       239,709       173,617       123,413  
Cash, cash equivalents and restricted cash, end of period   $ 165,017     $ 173,617     $ 165,017     $ 173,617  
                                 


 
RAPID7, INC.
GAAP to Non-GAAP Reconciliation (Unaudited)
(in thousands, except share and per share data)
         
    Three Months Ended December 31,   Year Ended December 31,
    2021   2020   2021   2020
Total gross profit (GAAP)   $ 101,758     $ 79,465     $ 366,456     $ 289,969  
Add: Stock-based compensation expense1     1,521       1,104       6,491       4,298  
Add: Amortization of acquired intangible assets2     4,902       2,433       15,373       8,700  
Total gross profit (non-GAAP)   $ 108,181     $ 83,002     $ 388,320     $ 302,967  
Gross margin (non-GAAP)     71.3 %     73.3 %     72.5 %     73.6 %
Gross profit (GAAP) - Products   $ 99,805     $ 77,089     $ 360,070     $ 286,058  
Add: Stock-based compensation expense     1,066       727       4,357       2,740  
Add: Amortization of acquired intangible assets     4,902       2,433       15,373       8,700  
Total gross profit (non-GAAP) - Products   $ 105,773     $ 80,249     $ 379,800     $ 297,498  
Gross margin (non-GAAP) - Products     74.9 %     76.9 %     75.8 %     77.7 %
Gross profit (GAAP) - Professional services   $ 1,953     $ 2,376     $ 6,386     $ 3,911  
Add: Stock-based compensation expense     455       377       2,134       1,558  
Total gross profit (non-GAAP) - Professional services   $ 2,408     $ 2,753     $ 8,520     $ 5,469  
Gross margin (non-GAAP) - Professional services     23.2 %     31.4 %     24.7 %     19.1 %
GAAP Loss from operations   $ (40,708 )   $ (20,631 )   $ (120,065 )   $ (74,099 )
Add: Stock-based compensation expense1     28,707       16,967       102,579       63,888  
Add: Amortization of acquired intangible assets2     5,781       2,582       17,305       9,138  
Add: Acquisition-related expenses3           205       7,211       1,343  
Add: Litigation-related expenses4     110       133       569       1,762  
Non-GAAP (loss) income from operations   $ (6,110 )   $ (744 )   $ 7,599     $ 2,032  
GAAP Net loss   $ (44,625 )   $ (28,918 )   $ (146,334 )   $ (98,849 )
Add: Stock-based compensation expense1     28,707       16,967       102,579       63,888  
Add: Amortization of acquired intangible assets2     5,781       2,582       17,305       9,138  
Add: Acquisition-related expenses3           205       16,176       1,343  
Add: Litigation-related expenses4     110       133       569       1,762  
Add: Induced conversion expense                 2,740        
Add: Amortization of debt discount and issuance costs     1,096       5,305       3,982       17,518  
Non-GAAP Net loss   $ (8,931 )   $ (3,726 )   $ (2,983 )   $ (5,200 )
                 
Reconciliation of net loss per share, basic and diluted:                
GAAP net loss per share, basic and diluted   $ (0.79 )   $ (0.56 )   $ (2.65 )   $ (1.94 )
Non-GAAP adjustment to net loss per share   $ 0.63     $ 0.49     $ 2.60     $ 1.84  
Non-GAAP net loss per share, basic and diluted   $ (0.16 )   $ (0.07 )   $ (0.05 )   $ (0.10 )
                 
Weighted average shares used in per share calculation, basic and diluted     56,752,295       52,017,473       55,270,998       51,036,824  
                 
1 Includes stock-based compensation expense as follows:                
Cost of revenue   $ 1,521     $ 1,104     $ 6,491     $ 4,298  
Research and development     14,838       6,571       46,622       24,423  
Sales and marketing     5,696       4,297       23,828       16,826  
General and administrative     6,652       4,995       25,638       18,341  
2 Includes amortization of acquired intangible assets as follows:                
Cost of revenue   $ 4,902     $ 2,433     $ 15,373     $ 8,700  
Sales and marketing     684       104       1,477       247  
General and administrative     195       45       455       191  
3 Includes acquisition-related expenses as follows:                
Research and development   $     $     $ 40     $  
Sales and marketing                 275        
General and administrative           205       6,896       1,343  
Provision for income taxes                 8,965        
4 Includes litigation-related expenses as follows:                
General and administrative   $ 110     $ 133     $ 569     $ 1,762  
                                 


 
Reconciliation of GAAP Net Loss to Adjusted EBITDA (Unaudited)
(in thousands)
         
    Three Months Ended December 31,   Year Ended December 31,
    2021   2020   2021   2020
Net loss   $ (44,625 )   $ (28,918 )   $ (146,334 )   $ (98,849 )
Interest income     (63 )     (111 )     (365 )     (1,454 )
Interest expense     2,877       7,429       14,292       24,137  
Other (income) expense, net     703       (12 )     1,921       81  
Provision for income taxes     400       981       10,421       1,986  
Depreciation expense     3,140       2,915       12,342       11,036  
Amortization of intangible assets     6,848       3,369       21,159       11,595  
Stock-based compensation expense     28,707       16,967       102,579       63,888  
Acquisition-related expenses           205       7,211       1,343  
Litigation-related expenses     110       133       569       1,762  
Adjusted EBITDA   $ (1,903 )   $ 2,958     $ 23,795     $ 15,525  
                                 


 
RAPID7, INC.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (Unaudited)
(in thousands)
       
  Three Months Ended December 31,   Year Ended December 31,
  2021   2020   2021   2020
Net cash provided by operating activities $ 4,688     $ 582     $ 53,917     $ 4,887  
Less: Purchases of property and equipment   (4,175 )     (6,677 )     (9,010 )     (13,802 )
Less: Capitalized internal-use software costs   (2,692 )     (1,723 )     (9,854 )     (6,130 )
Free cash flow $ (2,179 )   $ (7,818 )   $ 35,053     $ (15,045 )
                               


 
First Quarter and Full-Year 2022 Guidance
GAAP to Non-GAAP Reconciliation
(in millions, except per share data)
               
  First Quarter 2022   Full-Year 2022
Reconciliation of GAAP to non-GAAP (loss) income from operations:              
Anticipated GAAP loss from operations $ (46 ) to $ (44 )   $ (143 ) to $ (136 )
Add: Anticipated stock-based compensation expense   33   to   33       138   to   138  
Add: Anticipated amortization of acquired intangible assets   6   to   6       22   to   22  
Anticipated non-GAAP (loss) income from operations $ (7 ) to $ (5 )   $ 17   to $ 24  
               
Reconciliation of GAAP to non-GAAP net (loss) income:              
Anticipated GAAP net loss $ (51 ) to $ (49 )   $ (161 ) to $ (154 )
Add: Anticipated stock-based compensation expense   33   to   33       138   to   138  
Add: Anticipated amortization of acquired intangible assets   6   to   6       22   to   22  
Add: Anticipated amortization of debt issuance costs   1   to   1       4   to   4  
Anticipated non-GAAP net (loss) income $ (11 ) to $ (9 )   $ 3   to $ 10  
               
Anticipated GAAP net loss per share, basic and diluted $ (0.87 )   $ (0.84 )   $ (2.73 )   $ (2.61 )
Anticipated non-GAAP net (loss) income per share, diluted $ (0.18 )   $ (0.15 )   $ 0.05     $ 0.16  
               
Weighted average shares used in GAAP per share calculation, basic and diluted       58.3           59.0  
               
Weighted average shares used in non-GAAP per share calculation:              
Basic       58.3           59.0  
Diluted       58.3           60.9  

The reconciliation does not reflect any items that are unknown at this time, such as acquisition-related and litigation-related expenses, which we are not able to predict without unreasonable effort due to their inherent uncertainty. As a result, the estimates shown for Anticipated GAAP loss from operations, Anticipated GAAP net loss, and Anticipated GAAP net loss per share are expected to change.

  Full-Year 2022
Reconciliation of net cash provided by operating activities to free cash flow:      
               
               
               
               
Net cash provided by operating activities $ 78   to $ 83  
               
               
               
               
Less: Purchases of property and equipment   (25 ) to   (25 )
               
               
               
               
Less: Capitalized internal-use software costs   (13 ) to   (13 )
               
               
               
               
               
Free cash flow $ 40   to $ 45  
               

 


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Source: Rapid7