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11/03/21 - 04:05 pm
Rapid7 Announces Third Quarter 2021 Financial Results
  • Annualized recurring revenue (ARR) of $550.0 million, an increase of 38% year-over-year
  • Revenue of $139.9 million, up 33% year-over-year; Products revenue of $131.1 million, up 33% year-over-year
  • Total customer growth of 17% year-over-year
  • Total ARR per customer growth of 18% year-over-year

BOSTON, Nov. 03, 2021 (GLOBE NEWSWIRE) -- Rapid7, Inc. (Nasdaq: RPD), a leading provider of security analytics and automation, today announced its financial results for the third quarter of 2021.

“Rapid7 delivered milestone results during the third quarter as we ended the period with $550 million in ARR, growth of 38% over the prior year. This performance was driven by accelerating demand for our security transformation solutions and sustained growth in vulnerability management, coupled with our recent acquisition of IntSights,” said Corey Thomas, Chairman and CEO of Rapid7.

“We remain focused on helping customers navigate an increasingly complex security landscape with an expanding set of capabilities on our Insight Platform, and have been pleased with the early customer reception to our recent addition of threat intelligence capabilities. Our third quarter results clearly demonstrate how we are delivering on our customer mission while executing against our dual mandate to drive durable growth while expanding profitability and free cash flow over time.”

Third Quarter 2021 Financial Results and Other Metrics

  Three Months Ended September 30,
  2021   2020   % Change
  (dollars in thousands)
Annualized recurring revenue $ 550,044     $ 398,725     38 %
Number of customers (1) 9,909     8,442     17 %
ARR per customer (1) $ 55.5     $ 47.2     18 %
(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 September 30,
  2021   2020   % Change
  (in thousands, except per share data)
Products revenue $ 131,149       $ 98,559       33 %
Professional services revenue 8,745       6,516       34 %
Total revenue $ 139,894       $ 105,075       33 %
           
North America revenue $ 112,337       $ 87,612       28 %
Rest of world revenue 27,557       17,463       58 %
Total revenue $ 139,894       $ 105,075       33 %
           
GAAP gross profit $ 96,424       $ 74,047        
GAAP gross margin 69   %   70   %    
Non-GAAP gross profit $ 102,838       $ 77,613        
Non-GAAP gross margin 74   %   74   %    
           
GAAP loss from operations $ (34,315 )     $ (17,916 )      
GAAP operating margin (25 ) %   (17 ) %    
Non-GAAP income from operations $ 5,733       $ 2,444        
Non-GAAP operating margin 4   %   2   %    
           
GAAP net loss $ (37,700 )     $ (25,541 )      
GAAP net loss per share, basic and diluted $ (0.67 )     $ (0.50 )      
Non-GAAP net income $ 3,443       $ 25        
Non-GAAP net income per share, basic $ 0.06       $ 0.00        
Non-GAAP net income per share, diluted $ 0.06       $ 0.00        
           
Adjusted EBITDA $ 9,911       $ 5,791        
           
Net cash provided by operating activities $ 19,448       $ 11,078        
Free cash flow $ 14,327       $ 6,449        

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 2021, Rapid7 launched Project Doppler, a free and simple tool that allows organizations of any size to quickly gain insights into their external attack surface. Project Doppler was developed to enable customers to leverage data from Rapid7’s existing security research projects including Project Sonar, which scans the internet to identify exposures, and Project Heisenberg, a globally-distributed honeypot network that monitors for potentially malicious activity.
  • In October 2021, Rapid7 announced plans to expand its US presence with a new office in Tampa, Florida, to support the company's long term growth objectives across engineering, development, support, and other operational business roles.
  • In September 2021, Rapid7 announced that it issued a notice of redemption for the remaining $45.4 million in aggregate principal amount of its outstanding convertible senior notes due 2023.

Fourth Quarter and Full-Year 2021 Guidance

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

Fourth Quarter and Full-Year 2021 Guidance (in millions, except per share data)
               
  Fourth Quarter 2021   Full-Year 2021
Annualized recurring revenue     Approximately $586
Revenue $144.9 to $146.5     $528.7
to $530.3  
Year-over-year growth 28% to 29%     28% to 29%  
Non-GAAP (loss) income from operations $(6.7)     $7.0  
Non-GAAP net loss per share $(0.18)     $(0.07)  
Weighted average shares outstanding, basic 57.0     55.2  
Free cash flow     Approximately $25.0

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 2021 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. 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, November 3, 2021, 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 7158634) until November 10, 2021. 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 9,900 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 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 three and nine months ended September 30, 2021 include $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 fourth quarter and full-year 2021, 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, 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 5, 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)

    September 30, 2021   December 31, 2020
Assets        
Current assets:        
Cash and cash equivalents   $ 227,104       $ 173,617    
Short-term investments   77,145       138,839    
Accounts receivable, net   96,775       111,599    
Deferred contract acquisition and fulfillment costs, current portion   25,863       21,536    
Prepaid expenses and other current assets   27,079       27,844    
Total current assets   453,966       473,435    
Long-term investments   5,364       10,124    
Property and equipment, net   49,034       53,114    
Operating lease right-of-use assets   62,105       67,178    
Deferred contract acquisition and fulfillment costs, non-current portion   48,548       43,103    
Goodwill   515,297       213,601    
Intangible assets, net   115,746       44,296    
Other assets   10,820       8,271    
Total assets   $ 1,260,880       $ 913,122    
Liabilities and Stockholders’ Equity (Deficit)        
Current liabilities:        
Accounts payable   $ 7,514       $ 3,860    
Accrued expenses   57,975       61,677    
Operating lease liabilities, current portion   9,395       9,612    
Deferred revenue, current portion   316,045       278,585    
Convertible senior notes, current portion, net   44,804          
Other current liabilities   809          
Total current liabilities   436,542       353,734    
Convertible senior notes, non-current portion, net   811,068       378,586    
Operating lease liabilities, non-current portion   69,418       75,737    
Deferred revenue, non-current portion   27,905       31,365    
Other long-term liabilities   20,950       2,164    
Total liabilities   1,365,883       841,586    
Stockholders’ equity (deficit):        
Common stock   564       522    
Treasury stock   (4,764 )     (4,764 )  
Additional paid-in-capital   591,529       692,603    
Accumulated other comprehensive (loss) income   (929 )     454    
Accumulated deficit   (691,403 )     (617,279 )  
Total stockholders’ equity (deficit)   (105,003 )     71,536    
Total liabilities and stockholders’ equity (deficit)   $ 1,260,880       $ 913,122    


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,
  2021   2020   2021   2020
Revenue:              
Products $ 131,149       $ 98,559       $ 359,581       $ 278,538    
Professional services 8,745       6,516       24,185       19,789    
Total revenue 139,894       105,075       383,766       298,327    
Cost of revenue:              
Products 36,497       25,196       99,315       69,569    
Professional services 6,973       5,832       19,753       18,254    
Total cost of revenue 43,470       31,028       119,068       87,823    
Total gross profit 96,424       74,047       264,698       210,504    
Operating expenses:              
Research and development 43,880       28,509       112,265       78,831    
Sales and marketing 63,041       48,448       174,264       141,552    
General and administrative 23,818       15,006       57,527       43,589    
Total operating expenses 130,739       91,963       344,056       263,972    
Loss from operations (34,315 )     (17,916 )     (79,358 )     (53,468 )  
Other income (expense), net:              
Interest income 84       87       302       1,343    
Interest expense (2,962 )     (7,328 )     (11,415 )     (16,707 )  
Other income (expense), net (299 )     143       (1,217 )     (94 )  
Loss before income taxes (37,492 )     (25,014 )     (91,688 )     (68,926 )  
Provision for income taxes 208       527       10,021       1,005    
Net loss $ (37,700 )     $ (25,541 )     $ (101,709 )     $ (69,931 )  
Net loss per share, basic and diluted $ (0.67 )     $ (0.50 )     $ (1.86 )     $ (1.38 )  
Weighted-average common shares outstanding, basic and diluted 55,976,671       51,293,210       54,743,538       50,707,553    


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

  Three Months Ended September 30,   Nine Months Ended September 30,
  2021   2020   2021   2020
Cash flows from operating activities:              
Net loss $ (37,700 )     $ (25,541 )     $ (101,709 )     $ (69,931 )  
Adjustments to reconcile net loss to cash provided by operating activities:              
Depreciation and amortization 9,745       5,928       23,513       16,347    
Amortization of debt discount and issuance costs 1,095       5,206       2,886       12,213    
Stock-based compensation expense 29,196       17,128       73,872       46,921    
Deferred income taxes             3,924          
Induced conversion expense             2,740          
Other 209       921       1,655       1,981    
Change in operating assets and liabilities:              
Accounts receivable 10,706       2,393       23,522       13,228    
Deferred contract acquisition and fulfillment costs (4,319 )     (2,284 )     (9,772 )     (5,278 )  
Prepaid expenses and other assets 2,697       (421 )     3,091       1,352    
Accounts payable 3,408       1,785       2,079       1,922    
Accrued expenses 3,038       4,358       (4,554 )     (3,079 )  
Deferred revenue 2,169       1,540       24,389       (10,456 )  
Other liabilities (796 )     65       3,593       (915 )  
Net cash provided by operating activities 19,448       11,078       49,229       4,305    
Cash flows from investing activities:              
Business acquisition, net of cash acquired (306,000 )     (55 )     (358,420 )     (125,826 )  
Purchases of property and equipment (2,164 )     (3,170 )     (4,835 )     (7,125 )  
Capitalization of internal-use software costs (2,957 )     (1,459 )     (7,162 )     (4,407 )  
Purchases of investments       (59,451 )     (59,308 )     (108,710 )  
Sales/maturities of investments 36,900       9,000       124,838       155,599    
Other investments (1,500 )           (3,000 )        
Net cash used in investing activities (275,721 )     (55,135 )     (307,887 )     (90,469 )  
Cash flows from financing activities:              
Proceeds from issuance of convertible senior notes, net of issuance costs paid (416 )     (701 )     585,024       222,799    
Purchase of capped calls related to convertible senior notes             (76,020 )     (27,255 )  
Payments of debt issuance costs       (163 )           (411 )  
Payments for repurchase of convertible senior notes             (184,649 )        
Payments related to business acquisitions (9,687 )     (150 )     (12,118 )     (150 )  
Taxes paid related to net share settlement of equity awards (4,701 )     (2,534 )     (11,372 )     (5,984 )  
Proceeds from employee stock purchase plan 4,809       3,736       9,276       7,082    
Proceeds from stock option exercises 749       2,491       3,279       6,219    
Net cash (used in) provided by financing activities (9,246 )     2,679       313,420       202,300    
Effects of exchange rates on cash, cash equivalents and restricted cash (556 )     461       (849 )     160    
Net (decrease) increase in cash, cash equivalents and restricted cash (266,075 )     (40,917 )     53,913       116,296    
Cash, cash equivalents and restricted cash, beginning of period 493,605       280,626       173,617       123,413    
Cash, cash equivalents and restricted cash, end of period $ 227,530       $ 239,709       $ 227,530       $ 239,709    


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,
  2021   2020   2021   2020
GAAP gross profit $ 96,424       $ 74,047       $ 264,698       $ 210,504    
Add: Stock-based compensation expense1 1,604       1,132       4,970       3,194    
Add: Amortization of acquired intangible assets2 4,810       2,434       10,471       6,267    
Non-GAAP gross profit $ 102,838       $ 77,613       $ 280,139       $ 219,965    
Non-GAAP gross margin 73.5   %   73.9   %   73.0   %   73.7   %
               
GAAP gross profit - Products $ 94,652       $ 73,363       $ 260,266       $ 208,969    
Add: Stock-based compensation expense 1,073       730       3,291       2,013    
Add: Amortization of acquired intangible assets 4,810       2,434       10,471       6,267    
Non-GAAP gross profit - Products $ 100,535       $ 76,527       $ 274,028       $ 217,249    
Non-GAAP gross margin - Products 76.7   %   77.6   %   76.2   %   78.0   %
               
GAAP gross profit - Professional services $ 1,772       $ 684       $ 4,432       $ 1,535    
Add: Stock-based compensation expense 531       402       1,679       1,181    
Non-GAAP gross profit - Professional services $ 2,303       $ 1,086       $ 6,111       $ 2,716    
Non-GAAP gross margin - Professional services 26.3   %   16.7   %   25.3   %   13.7   %
               
GAAP loss from operations $ (34,315 )     $ (17,916 )     $ (79,358 )     $ (53,468 )  
Add: Stock-based compensation expense1 29,196       17,128       73,872       46,921    
Add: Amortization of acquired intangible assets2 5,567       2,581       11,524       6,556    
Add: Acquisition-related expenses3 5,180             7,211       1,138    
Add: Litigation-related expenses4 105       651       459       1,629    
Non-GAAP income from operations $ 5,733       $ 2,444       $ 13,708       $ 2,776    
               
GAAP net loss $ (37,700 )     $ (25,541 )     $ (101,709 )     $ (69,931 )  
Add: Stock-based compensation expense1 29,196       17,128       73,872       46,921    
Add: Amortization of acquired intangible assets2 5,567       2,581       11,524       6,556    
Add: Acquisition-related expenses3 5,180             16,176       1,138    
Add: Litigation-related expenses4 105       651       459       1,629    
Add: Amortization of debt discount and issuance costs 1,095       5,206       2,886       12,213    
Add: Induced conversion expense             2,740          
Non-GAAP net income (loss) $ 3,443       $ 25       $ 5,948       $ (1,474 )  
               
Reconciliation of net income (loss) per share, basic              
GAAP net loss per share, basic $ (0.67 )     $ (0.50 )     $ (1.86 )     $ (1.38 )  
Non-GAAP adjustments to net loss 0.73       0.50       1.97       1.35    
Non-GAAP net income (loss) per share, basic $ 0.06       $ 0.00       $ 0.11       $ (0.03 )  
               
Reconciliation of net income (loss) per share, diluted              
GAAP net loss per share, diluted $ (0.67 )     $ (0.50 )     $ (1.86 )     $ (1.38 )  
Non-GAAP adjustments to net loss 0.73       0.50       1.96       1.35    
Non-GAAP net income (loss) per share, diluted $ 0.06       $ 0.00       $ 0.10       $ (0.03 )  


Weighted average shares used in GAAP per share calculation, basic and diluted 55,976,671     51,293,210     54,743,538     50,707,553  
               
Weighted average shares used in non-GAAP per share calculation:              
Basic 55,976,671     51,293,210     54,743,538     50,707,553  
Diluted 58,376,992     53,894,202     57,181,646     50,707,553  
               
1 Includes stock-based compensation expense as follows:              
Cost of revenue $ 1,604     $ 1,132     $ 4,970     $ 3,194  
Research and development 14,549     6,818     31,784     17,852  
Sales and marketing 6,348     4,506     18,132     12,529  
General and administrative 6,695     4,672     18,986     13,346  
               
2 Includes amortization of acquired intangible assets as follows:              
Cost of revenue $ 4,810     $ 2,434     $ 10,471     $ 6,267  
Sales and marketing 587     31     793     143  
General and administrative 170     116     260     146  
               
3 Includes acquisition-related expenses as follows:              
Research and development $ 40     $     $ 40     $  
Sales and marketing 153         275      
General and administrative 4,987         6,896     1,138  
Provision for income taxes         8,965      
               
4 Includes litigation-related expenses as follows:              
General and administrative $ 105     $ 651     $ 459     $ 1,629  


RAPID7, INC.
Reconciliation of Net Loss to Adjusted EBITDA (Unaudited)
(in thousands)

  Three Months Ended September 30,   Nine Months Ended September 30,
  2021   2020   2021   2020
GAAP net loss $ (37,700 )     $ (25,541 )     $ (101,709 )     $ (69,931 )  
Interest income (84 )     (87 )     (302 )     (1,343 )  
Interest expense 2,962       7,328       11,415       16,707    
Other (income) expense, net 299       (143 )     1,217       94    
Provision for income taxes 208       527       10,021       1,005    
Depreciation expense 3,155       2,706       9,202       8,121    
Amortization of intangible assets 6,590       3,222       14,311       8,226    
Stock-based compensation expense 29,196       17,128       73,872       46,921    
Acquisition-related expenses 5,180             7,211       1,138    
Litigation-related expenses 105       651       459       1,629    
Adjusted EBITDA $ 9,911       $ 5,791       $ 25,697       $ 12,567    


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,
  2021   2020   2021   2020
Net cash provided by operating activities $ 19,448       $ 11,078       $ 49,229       $ 4,305    
Less: Purchases of property and equipment (2,164 )     (3,170 )     (4,835 )     (7,125 )  
Less: Capitalized internal-use software costs (2,957 )     (1,459 )     (7,162 )     (4,407 )  
Free cash flow $ 14,327       $ 6,449       $ 37,232       $ (7,227 )  


Fourth Quarter and Full-Year 2021 Guidance
GAAP to Non-GAAP Reconciliation    
(in millions, except per share data)

  Fourth Quarter   Full-Year
  2021   2021
Reconciliation of GAAP to non-GAAP (loss) income from operations:      
Anticipated GAAP loss from operations $ (42.8 )     $ (122.2 )  
Add: Anticipated stock-based compensation expense 30.3       104.2    
Add: Anticipated amortization of acquired intangible assets 5.8       17.3    
Add: Anticipated acquisition-related expenses       7.2    
Add: Anticipated litigation-related expenses       0.5    
Anticipated non-GAAP (loss) income from operations $ (6.7 )     $ 7.0    
       
Reconciliation of GAAP to non-GAAP net loss:      
Anticipated GAAP net loss $ (47.7 )     $ (149.3 )  
Add: Anticipated stock-based compensation expense 30.3       104.2    
Add: Anticipated amortization of acquired intangible assets 5.8       17.3    
Add: Anticipated acquisition-related expenses       16.2    
Add: Anticipated litigation-related expenses       0.5    
Add: Anticipated amortization of debt issuance costs 1.6       4.5    
Add: Anticipated induced conversion expense       2.7    
Anticipated non-GAAP net loss $ (10.0 )     $ (3.9 )  
       
Anticipated GAAP net loss per share, basic and diluted $ (0.84 )     $ (2.70 )  
Anticipated non-GAAP net loss per share, basic and diluted $ (0.18 )     $ (0.07 )  
       
Weighted average shares used in per share calculation, basic and diluted 57.0       55.2    

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. 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 2021
Reconciliation of net cash provided by operating activities to free cash flow:  
Net cash provided by operating activities $ 43.5    
Purchases of property and equipment (8.0 )  
Capitalized internal-use software costs (10.5 )  
Free cash flow $ 25.0    


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Source: Rapid7