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11/04/20 - 04:05 pm
Rapid7 Announces Third Quarter 2020 Financial Results
  • Annualized recurring revenue (ARR) of $398.7 million, an increase of 29% year-over-year
  • Revenue of $105.1 million, 26% year-over-year growth; Products revenue of $98.6 million, 29% year-over-year growth
  • GAAP operating loss of $(17.9) million; Non-GAAP operating income of $2.4 million
  • Raising full year 2020 guidance for ARR and revenue

BOSTON, Nov. 04, 2020 (GLOBE NEWSWIRE) -- Rapid7, Inc. (Nasdaq: RPD), a leading provider of security analytics and automation, today announced its financial results for the third quarter of 2020.

"Rapid7 is pleased to report strong Q3 performance that exceeded growth and profit expectations thanks to solid execution by our team. We ended the quarter with total ARR of $398.7 million dollars, up 29% year-over-year, led by continued strong demand for our security transformation solutions and healthy growth in vulnerability management," said Corey Thomas, Chairman and CEO of Rapid7.

"As organizations lean into the cloud, they are engaging with Rapid7 to modernize and extend their security architectures in the cloud with our Insight Platform."

Third Quarter 2020 Financial Results and Other Metrics

  Three Months Ended September 30,
  2020   2019   % Change
   
  (dollars in thousands)
Annualized recurring revenue $ 398,725     $ 310,184     29 %
Number of customers 9,347     8,625     8 %
ARR per customer $ 42.7     $ 36.0     19 %
Recurring revenue as a percentage of total revenue 91 %   88 %    
Renewal rate 103 %   111 %    
               


  Three Months Ended September 30,
  2020   2019   % Change
   
  (in thousands, except per share data)
Products revenue (1) $ 98,559     $ 76,476     29 %
Professional services revenue 6,516     6,679     (2 )%
Total revenue $ 105,075     $ 83,155     26 %
           
North America revenue $ 87,612     $ 69,883     25 %
Rest of world revenue 17,463     13,272     32 %
Total revenue $ 105,075     $ 83,155      
           
GAAP gross profit $ 74,047     $ 59,525      
GAAP gross margin 70 %   72 %    
Non-GAAP gross profit $ 77,613     $ 61,865      
Non-GAAP gross margin 74 %     74 %      
           
GAAP loss from operations $ (17,916)     $ (11,756)      
GAAP operating margin (17 )%   (14 )%    
Non-GAAP income from operations $ 2,444     $ 542      
Non-GAAP operating margin 2 %   1 %    
           
GAAP net loss $ (25,541)     $ (14,406)      
GAAP net loss per share, basic and diluted $ (0.50)     $ (0.29)      
Non-GAAP net income $ 25     $ 571      
Non-GAAP net income per share, basic $ 0.00     $ 0.01      
Non-GAAP net income per share, diluted $ 0.00     $ 0.01      
           
Adjusted EBITDA $ 5,791     $ 3,446      
           
Cash provided by operating activities $ 11,078     $ 1,839      

(1) Historically, we have presented revenue on our consolidated statement of operations as products, maintenance and support and professional services revenue. For the three months ended September 30, 2020, we have combined products and maintenance and support revenue together as products revenue on our consolidated statement of operations. Prior periods have been adjusted to conform with this presentation.

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 August 2020, Rapid7 was named a Leader in the Forrester Wave: Midsize Managed Service Providers, Q3 2020 report by Forrester Research.
  • In October 2020, Rapid7 released its Cloud Identity and Access Management (IAM) Governance module for DivvyCloud, extending DivvyCloud's capabilities into the emerging Cloud Infrastructure Entitlement Management (CIEM) space.
  • In October 2020, Rapid7 announced the availability of Enhanced Endpoint Telemetry (EET) within InsightIDR, providing robust visibility into endpoint activity to enable broader coverage and frictionless investigations into security incidents.
  • In October 2020, Rapid7 extended its strategic partnership with Snyk to provide a comprehensive end-to-end solution for cloud native application security.  Developers will have the ability to secure the critical components of their cloud native application development underpinned by a combination of Rapid7 and Snyk application security solutions.

Fourth Quarter and Full-Year 2020 Guidance

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

  Fourth Quarter 2020   Full-Year 2020
   
  (dollars in millions)
Annualized recurring revenue         $ 418.0   to $ 422.0  
Year-over-year growth         23 % to 25 %
Revenue $ 107.9   to $ 109.5     $ 406.2   to $ 407.8  
Year-over-year growth 18 % to 20 %   24 % to 25 %
Non-GAAP (loss) income from operations $ (1.8 ) to $ (0.8 )   $ 1.0   to $ 2.0  
Non-GAAP net loss per share $ (0.09 ) to $ (0.07 )   $ (0.12 ) to $ (0.10 )
Weighted average shares outstanding     52.1         51.0  
                   

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 2020 does not include any potential impact of foreign exchange gains or losses. The weighted average shares outstanding for the fourth quarter and full-year 2020 represent basic shares outstanding given our projected non-GAAP net loss. In addition, fluctuations in Rapid7’s quarterly operating results may be particularly pronounced in the current economic environment due to the uncertainty caused by, and the unprecedented nature of, the current COVID-19 pandemic, whose severity, duration and ultimate impact is difficult to predict at this time. The primary set of drivers of Rapid7’s actual financial performance relative to the ranges provided will be a function of the timing and pace of economic recovery in the global economy and whether there are broad regional or systematic closures as a result of a sustained pandemic resurgence. 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 discount and 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 acquisition-related expenses and litigation-related expenses for the fourth quarter of 2020, 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, November 4, 2020, 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 Rapid7's website at https://investors.rapid7.com. A telephone replay of the conference call will be available at 855-859-2056 or 404-537-3406 (access code 1393364) until November 11, 2020. A webcast replay will be available at https://investors.rapid7.com.

About Rapid7

Rapid7 (Nasdaq: RPD) is advancing security with visibility, analytics, and automation delivered through our Insight Platform. 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 9,300 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 and adjusted EBITDA. 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 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 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.

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.

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 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. 

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 (1) an active Rapid7 contract or a contract that expired within 90 days or less of the applicable measurement date; and for Logentries products, those customers with a contract value equal to or greater than $2,400 per year, or (2) purchased Rapid7 professional services within the 12 months preceding the applicable measurement date.

ARR per Customer. We define ARR per customer as ARR divided by the number of customers at the end of the period.

Recurring Revenue. We define recurring revenue as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support.

Renewal Rate. We calculate our renewal rate by dividing the dollar value of renewed customer agreements, including upsells and cross-sells of additional products, but excluding professional services, in a trailing 12-month period by the dollar value of the corresponding customer agreements.

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 fourth quarter and full year 2020, the assumptions underlying such guidance and the timing of global economic recovery 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, including DivvyCloud, 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 August 10, 2020 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 
(857) 990-4074

Press contact:

Caitlin Doherty
press@rapid7.com 
(857) 990-4240




RAPID7, INC.    
Consolidated Balance Sheets (Unaudited)     
(in thousands)    

    September 30, 2020   December 31, 2019
Assets        
Current assets:        
Cash and cash equivalents   $ 239,409       $ 123,413    
Short-term investments   81,209       116,158    
Accounts receivable, net   73,625       87,927    
Deferred contract acquisition and fulfillment costs, current portion   19,269       17,047    
Prepaid expenses and other current assets   20,521       20,051    
Total current assets   434,033       364,596    
Long-term investments   10,813       22,887    
Property and equipment, net   50,305       50,670    
Operating lease right-of-use assets   69,797       60,984    
Deferred contract acquisition and fulfillment costs, non-current portion   37,269       34,213    
Goodwill   213,727       97,866    
Intangible assets, net   45,942       28,561    
Other assets   4,931       5,136    
Total assets   $ 866,817       $ 664,913    
Liabilities and Stockholders’ Equity        
Current liabilities:        
Accounts payable   $ 9,033       $ 6,836    
Accrued expenses   48,035       41,021    
Operating lease liabilities, current portion   9,568       7,179    
Deferred revenue, current portion   231,560       231,518    
Other current liabilities   85       119    
Total current liabilities   298,281       286,673    
Convertible senior notes, net   373,318       185,200    
Operating lease liabilities, non-current portion   77,863       72,294    
Deferred revenue, non-current portion   30,632       36,226    
Other long-term liabilities   1,370       1,352    
Total liabilities   781,464       581,745    
Stockholders’ equity:        
Common stock   518       499    
Treasury stock   (4,764 )     (4,764 )  
Additional paid-in-capital   677,983       605,650    
Accumulated other comprehensive (loss) income   (23 )     213    
Accumulated deficit   (588,361 )     (518,430 )  
Total stockholders’ equity   85,353       83,168    
Total liabilities and stockholders’ equity   $ 866,817       $ 664,913    
                     



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,
  2020   2019   2020   2019
Revenue:              
Products $ 98,559       $ 76,476       $ 278,538       $ 214,900    
Professional services 6,516       6,679       19,789       20,399    
Total revenue 105,075       83,155       298,327       235,299    
Cost of revenue:              
Products 25,196       17,703       69,569       48,709    
Professional services 5,832       5,927       18,254       17,075    
Total cost of revenue 31,028       23,630       87,823       65,784    
Total gross profit 74,047       59,525       210,504       169,515    
Operating expenses:              
Research and development 28,509       20,154       78,831       57,645    
Sales and marketing 48,448       39,904       141,552       113,214    
General and administrative 15,006       11,223       43,589       32,336    
Total operating expenses 91,963       71,281       263,972       203,195    
Loss from operations (17,916 )     (11,756 )     (53,468 )     (33,680 )  
Other income (expense), net:              
Interest income 87       1,448       1,343       4,761    
Interest expense (7,328 )     (3,399 )     (16,707 )     (9,940 )  
Other income (expense), net 143       (492 )     (94 )     (727 )  
Loss before income taxes (25,014 )     (14,199 )     (68,926 )     (39,586 )  
Provision for (benefit from) income taxes 527       207       1,005       (87 )  
Net loss $ (25,541 )     $ (14,406 )     $ (69,931 )     $ (39,499 )  
Net loss per share, basic and diluted $ (0.50 )     $ (0.29 )     $ (1.38 )     $ (0.82 )  
Weighted-average common shares outstanding, basic and diluted 51,293,210       49,020,449       50,707,553       48,437,686    
                               



RAPID7, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
Cash flows from operating activities:              
Net loss $ (25,541 )     $ (14,406 )     $ (69,931 )     $ (39,499 )  
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:              
Depreciation and amortization 5,928       4,598       16,347       11,969    
Amortization of debt discount and issuance costs 5,206       2,679       12,213       7,783    
Stock-based compensation expense 17,128       10,426       46,921       29,490    
Provision for doubtful accounts 752       429       1,760       1,782    
Deferred income taxes                   (761 )  
Foreign currency re-measurement loss 109       379       308       570    
Other non-cash (income) expense 60       (345 )     (87 )     (1,635 )  
Changes in operating assets and liabilities:              
Accounts receivable 2,393       6,311       13,228       10,860    
Deferred contract acquisition and fulfillment costs (2,284 )     (2,231 )     (5,278 )     (5,403 )  
Prepaid expenses and other assets (421 )     (544 )     1,352       (9,878 )  
Accounts payable 1,785       (1,052 )     1,922       1,132    
Accrued expenses 4,358       2,490       (3,079 )     (4,822 )  
Deferred revenue 1,540       (7,058 )     (10,456 )     (12,124 )  
Other liabilities 65       163       (915 )     1,292    
Net cash provided by (used in) operating activities 11,078       1,839       4,305       (9,244 )  
Cash flows from investing activities:              
Business acquisition, net of cash acquired (55 )     14       (125,826 )     (14,607 )  
Purchases of property and equipment (3,170 )     (9,341 )     (7,125 )     (27,053 )  
Capitalization of internal-use software costs (1,459 )     (1,534 )     (4,407 )     (4,686 )  
Purchases of investments (59,451 )     (41,776 )     (108,710 )     (114,208 )  
Sales/maturities of investments 9,000       36,985       155,599       177,287    
Net cash (used in) provided by investing activities (55,135 )     (15,652 )     (90,469 )     16,733    
Cash flows from financing activities:              
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $7,201 (701 )           222,799          
Purchase of capped calls related to convertible senior notes             (27,255 )        
Deferred business acquisition payment (150 )           (150 )        
Payments of debt issuance costs (163 )           (411 )        
Taxes paid related to net share settlement of equity awards (2,534 )     (2,087 )     (5,984 )     (4,926 )  
Proceeds from employee stock purchase plan 3,736       2,887       7,082       5,521    
Proceeds from stock option exercises 2,491       1,866       6,219       7,924    
Net cash provided by financing activities 2,679       2,666       202,300       8,519    
Effect of exchange rate changes on cash, cash equivalents and restricted cash 461       (497 )     160       (648 )  
Net (decrease) increase in cash, cash equivalents and restricted cash (40,917 )     (11,644 )     116,296       15,360    
Cash, cash equivalents and restricted cash, beginning of period 280,626       126,569       123,413       99,565    
Cash, cash equivalents and restricted cash, end of period $ 239,709       $ 114,925       $ 239,709       $ 114,925    
                                       



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,
  2020   2019   2020   2019
GAAP gross profit $ 74,047     $ 59,525     $ 210,504     $ 169,515  
Add: Stock-based compensation expense1 1,132     679     3,194     1,970  
Add: Amortization of acquired intangible assets2 2,434     1,661     6,267     4,681  
Non-GAAP gross profit $ 77,613     $ 61,865     $ 219,965     $ 176,166  
Non-GAAP gross margin 73.9 %   74.4 %   73.7 %   74.9 %
               
GAAP gross profit - Products $ 73,363     $ 58,773     $ 208,969     $ 166,191  
Add: Stock-based compensation expense 730     386     2,013     1,036  
Add: Amortization of acquired intangible assets 2,434     1,661     6,267     4,681  
Non-GAAP gross profit - Products $ 76,527     $ 60,820     $ 217,249     $ 171,908  
Non-GAAP gross margin - Products 77.6 %   79.5 %   78.0 %   80.0 %
               
GAAP gross profit - Professional services $ 684     $ 752     $ 1,535     $ 3,324  
Add: Stock-based compensation expense 402     293     1,181     934  
Non-GAAP gross profit - Professional services $ 1,086     $ 1,045     $ 2,716     $ 4,258  
Non-GAAP gross margin - Professional services 16.7 %   15.6 %   13.7 %   20.9 %
               
GAAP loss from operations $ (17,916 )   $ (11,756 )   $ (53,468 )   $ (33,680 )
Add: Stock-based compensation expense1 17,128     10,426     46,921     29,490  
Add: Amortization of acquired intangible assets2 2,581     1,694     6,556     4,789  
Add: Acquisition-related expenses3         1,138     514  
Add: Litigation-related expenses4 651     178     1,629     506  
Non-GAAP income from operations $ 2,444     $ 542     $ 2,776     $ 1,619  
               
GAAP net loss $ (25,541 )   $ (14,406 )   $ (69,931 )   $ (39,499 )
Add: Stock-based compensation expense1 17,128     10,426     46,921     29,490  
Add: Amortization of acquired intangible assets2 2,581     1,694     6,556     4,789  
Add: Acquisition-related expenses3         1,138     514  
Add: Litigation-related expenses4 651     178     1,629     506  
Add: Amortization of debt discount and issuance costs 5,206     2,679     12,213     7,783  
Add: Release of valuation allowance, acquisition-related             (761 )
Non-GAAP net income (loss) $ 25     $ 571     $ (1,474 )   $ 2,822  
               
Reconciliation of net (loss) income per share, basic              
GAAP net loss per share, basic $ (0.50 )   $ (0.29 )   $ (1.38 )   $ (0.82 )
Non-GAAP adjustments to net loss 0.50     0.30     1.35     0.88  
Non-GAAP net (loss) income per share, basic $     $ 0.01     $ (0.03 )   $ 0.06  
               
Reconciliation of net (loss) income per share, diluted              
GAAP net loss per share, diluted $ (0.50 )   $ (0.29 )   $ (1.38 )   $ (0.82 )
Non-GAAP adjustments to net loss 0.50     0.30     1.35     0.87  
                       


Non-GAAP net income (loss) per share, diluted $ —      $ 0.01      $ (0.03 )   $ 0.05   
               
Weighted average shares used in GAAP per share calculation, basic and diluted 51,293,210     49,020,449     50,707,553     48,437,686  
               
Weighted average shares used in non-GAAP per share calculation:              
Basic 51,293,210     49,020,449     50,707,553     48,437,686  
Diluted 53,894,202     52,404,657     50,707,553     51,879,345  
               
1 Includes stock-based compensation expense as follows:              
Cost of revenue $ 1,132     $ 679     $ 3,194     $ 1,970  
Research and development 6,818     3,996     17,852     11,224  
Sales and marketing 4,506     3,047     12,529     8,453  
General and administrative 4,672     2,704     13,346     7,843  
               
2 Includes amortization of acquired intangible assets as follows:              
Cost of revenue $ 2,434     $ 1,661     $ 6,267     $ 4,681  
Sales and marketing 31     32     143     105  
General and administrative 116     1     146     3  
               
3 Includes acquisition-related expenses as follows:              
General and administrative $     $     $ 1,138     $ 514  
               
4 Includes litigation-related expenses as follows:              
General and administrative $ 651     $ 178     $ 1,629     $ 506  
                               


RAPID7, INC.

Reconciliation of Net Loss to Adjusted EBITDA (Unaudited)
(in thousands)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2020   2019   2020   2019
GAAP net loss $ (25,541 )     $ (14,406 )     $ (69,931 )     $ (39,499 )  
Interest income (87 )     (1,448 )     (1,343 )     (4,761 )  
Interest expense 7,328       3,399       16,707       9,940    
Other (income) expense, net (143 )     492       94       727    
Provision for (benefit from) income taxes 527       207       1,005       (87 )  
Depreciation expense 2,706       2,520       8,121       6,426    
Amortization of intangible assets 3,222       2,078       8,226       5,543    
Stock-based compensation expense 17,128       10,426       46,921       29,490    
Acquisition-related expenses             1,138       514    
Litigation-related expenses 651       178       1,629       506    
Adjusted EBITDA $ 5,791       $ 3,446       $ 12,567       $ 8,799    
                                       


RAPID7, INC.
Fourth Quarter and Full-Year 2020 Guidance
GAAP to Non-GAAP Reconciliation
(in millions, except per share data)

  Fourth Quarter 2020   Full-Year 2020
Reconciliation of GAAP to Non-GAAP (loss) income from operations:              
Anticipated GAAP loss from operations $ (20.9 )   to $ (19.9 )     $ (74.2 )   to $ (73.2 )  
Add: Anticipated stock-based compensation expense 16.5     to 16.5       63.4     to 63.4    
Add: Anticipated amortization of acquired intangible assets 2.6     to 2.6       9.1     to 9.1    
Add: Anticipated acquisition-related expenses     to       1.1     to 1.1    
Add: Anticipated litigation-related expenses     to       1.6     to 1.6    
Anticipated non-GAAP (loss) income from operations $ (1.8 )   to $ (0.8 )     $ 1.0     to $ 2.0    
               
Reconciliation of GAAP to Non-GAAP net loss:              
Anticipated GAAP net loss $ (29.0 )   to $ (28.0 )     $ (98.7 )   to $ (97.7 )  
Add: Anticipated stock-based compensation expense 16.5     to 16.5       63.4     to 63.4    
Add: Anticipated amortization of acquired intangible assets 2.6     to 2.6       9.1     to 9.1    
Add: Anticipated acquisition-related expenses     to       1.1     to 1.1    
Add: Anticipated litigation-related expenses     to       1.6     to 1.6    
Add: Anticipated amortization of debt discount and issuance costs 5.3     to 5.3       17.5     to 17.5    
Anticipated non-GAAP net loss $ (4.6 )   to $ (3.6 )     $ (6.0 )   to $ (5.0 )  
               
Anticipated GAAP net loss per share $ (0.56 )     $ (0.54 )     $ (1.94 )     $ (1.92 )  
Anticipated non-GAAP net loss per share $ (0.09 )     $ (0.07 )     $ (0.12 )     $ (0.10 )  
               
Weighted average shares used in GAAP and non-GAAP per share calculation, basic and diluted     52.1           51.0    

The reconciliation does not reflect any items that are unknown at this time, such as acquisition-related expenses and litigation-related expenses for the fourth quarter of 2020, which we are not able to predict without unreasonable effort due to their inherent uncertainty.


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Source: Rapid7