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Rapid7 Announces Second Quarter 2022 Financial Results

08/03/2022
  • Annualized recurring revenue (ARR) of $658 million, an increase of 35% year-over-year
  • Total revenue of $167 million, up 32% year-over-year; Products revenue of $159 million, up 34% year-over-year
  • Total ARR per customer growth of 18% year-over-year
  • Total customer growth of 14% year-over-year

BOSTON, Aug. 03, 2022 (GLOBE NEWSWIRE) -- Rapid7, Inc. (Nasdaq: RPD), a leading provider of security analytics and automation, today announced its financial results for the second quarter of 2022.

“Robust customer demand for our security transformation solutions drove second quarter ending ARR of $658 million, representing growth of 35% year-over-year,” said Corey Thomas, Chairman and CEO of Rapid7.

“As customers prioritize spending around their modern cloud environments, Rapid7 continues to address their most urgent security challenges with our market leading Insight platform. In the current environment, there is a significant opportunity for consolidation across security operations from both a capability and economic standpoint, and our differentiated solutions are positioned to enable customers to accelerate that process while driving profitable, sustainable growth for Rapid7.”

Second Quarter 2022 Financial Results and Other Metrics

  Three Months Ended June 30,
    2022     2021   % Change
  (dollars in thousands)
Annualized recurring revenue $ 658,172   $ 488,860   35 %
Number of customers   10,624     9,315   14 %
ARR per customer $ 62.0   $ 52.5   18 %


  Three Months Ended June 30,
    2022       2021     % Change
  (in thousands, except per share data)
Products revenue $ 159,122     $ 119,147     34 %
Professional services revenue   8,333       7,274     15 %
Total revenue $ 167,455     $ 126,421     32 %
           
North America revenue $ 132,646     $ 103,485     28 %
Rest of world revenue   34,809       22,936     52 %
Total revenue $ 167,455     $ 126,421     32 %
           
GAAP gross profit $ 113,180     $ 87,113      
GAAP gross margin   68 %     69 %    
Non-GAAP gross profit $ 120,799     $ 91,845      
Non-GAAP gross margin   72 %     73 %    
           
GAAP loss from operations $ (34,651 )   $ (21,926 )    
GAAP operating margin (21 )%   (17 )%    
Non-GAAP income from operations $ 3,483     $ 6,070      
Non-GAAP operating margin   2 %     5 %    
           
GAAP net loss $ (39,606 )   $ (34,164 )    
GAAP net loss per share, basic and diluted $ (0.68 )   $ (0.62 )    
Non-GAAP net (loss) income $ (461 )   $ 3,930      
Non-GAAP net (loss) income per share, basic and diluted $ (0.01 )   $ 0.07      
           
Adjusted EBITDA $ 7,983     $ 10,030      
           
Net cash provided by operating activities $ 7,449     $ 9,186      
Free cash flow $ (1,258 )   $ 5,040      

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 June 2022, Boston Business Journal's Best Places to Work ranked Rapid7 #1 for companies with over 500 employees.
  • In June 2022, Rapid7 announced findings from Forrester Consulting quantifying the Total Economic Impact and benefits of the Company’s managed detection and response (MDR) services. Forrester found that Rapid7’s MDR service provided a 549% return on investment over three years for a composite organization.
  • In April 2022, Rapid7 announced the creation of The Rapid7 Cybersecurity Foundation to promote a diverse and inclusive workforce, advance free and open solutions for underserved and vulnerable communities, and conduct research and advocacy that strengthens cybersecurity outcomes and awareness for all.
  • In April 2022, Rapid7 was recognized as a Visionary by Gartner for the second consecutive year in the Magic Quadrant for Application Security Testing.

Third Quarter and Full-Year 2022 Guidance

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

  Third 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 $175 to $177   $686 to $690
Year-over-year growth 25% to 27%   28% to 29%
Non-GAAP income from operations $6 to $8   $20 to $24
Non-GAAP net income per share $0.03 to $0.06   $0.08 to $0.15
Weighted average shares outstanding, diluted   66.2       60.2  
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 third quarter and full-year 2022 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, August 3, 2022, to discuss its results at 4:30 p.m. Eastern Time. The call will be accessible by telephone at 888-330-2384 (domestic) or +1 240-789-2701 (international) with the event code 8484206. The call will also be available live via webcast on Rapid7's website at https://investors.rapid7.com. A webcast replay of the conference call will be available at https://investors.rapid7.com.

About Rapid7

Rapid7, Inc. (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 (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 our past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in their financial and operational decision-making.

While our non-GAAP financial measures are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, you should review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not rely on any single financial measure to evaluate our business.

Non-GAAP Financial Measures

We disclose the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) per share, adjusted EBITDA and free cash flow. We also disclose non-GAAP gross margin and non-GAAP operating margin derived from these financial measures.

We define non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs and certain other items such as acquisition-related expenses, 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 issuance costs. The expense for the amortization of debt issuance costs related to our convertible senior notes and revolving credit facility is a non-cash item, and we believe the exclusion of this interest expense provides a more useful comparison of our operational performance in different periods.

Induced conversion expense. In conjunction with the 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.

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 third quarter and full-year 2022 , the assumptions underlying such guidance, including the timing of global economic recovery, market opportunities, future growth and operating leverage, and the ability of our solutions to drive profitable, sustainable growth. Our use of the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “will” and similar expressions are intended to identify forward-looking statements. The events described in our forward-looking statements are subject to a number of risks and uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Risks that could cause or contribute to such differences include, but are not limited to, growing macroeconomic uncertainty, unstable market and economic conditions, 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, and 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 May 5, 2022 and in the subsequent reports that we file with the SEC. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed in any forward-looking statements we may make. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.

Investor contact:

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)
 
    June 30, 2022   December 31, 2021
Assets        
Current assets:        
Cash and cash equivalents   $ 163,469     $ 164,582  
Short-term investments     76,244       58,850  
Accounts receivable, net     124,701       146,094  
Deferred contract acquisition and fulfillment costs, current portion     31,367       29,974  
Prepaid expenses and other current assets     34,221       33,236  
Total current assets     430,002       432,736  
Long-term investments     14,330       34,068  
Property and equipment, net     50,533       50,225  
Operating lease right-of-use assets     84,937       83,751  
Deferred contract acquisition and fulfillment costs, non-current portion     60,878       57,191  
Goodwill     515,631       515,258  
Intangible assets, net     105,785       111,591  
Other assets     23,452       11,191  
Total assets   $ 1,285,548     $ 1,296,011  
Liabilities and Stockholders’ Equity (Deficit)        
Current liabilities:        
Accounts payable   $ 6,832     $ 3,521  
Accrued expenses     66,348       82,620  
Operating lease liabilities, current portion     11,809       9,630  
Deferred revenue, current portion     395,208       372,067  
Other current liabilities     3,473       842  
Total current liabilities     483,670       468,680  
Convertible senior notes, non-current portion, net     813,950       812,063  
Operating lease liabilities, non-current portion     89,473       90,865  
Deferred revenue, non-current portion     33,098       33,056  
Other long-term liabilities     13,512       17,342  
Total liabilities     1,433,703       1,422,006  
Stockholders’ equity (deficit):        
Common stock     586       577  
Treasury stock     (4,764 )     (4,764 )
Additional paid-in-capital     681,194       615,032  
Accumulated other comprehensive loss     (4,538 )     (812 )
Accumulated deficit     (820,633 )     (736,028 )
Total stockholders’ equity (deficit)     (148,155 )     (125,995 )
Total liabilities and stockholders’ equity (deficit)   $ 1,285,548     $ 1,296,011  


 
RAPID7, INC.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
 
  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2021       2022       2021  
Revenue:              
Products $ 159,122     $ 119,147     $ 308,147     $ 228,432  
Professional services   8,333       7,274       16,692       15,440  
Total revenue   167,455       126,421       324,839       243,872  
Cost of revenue:              
Products   45,867       33,169       89,339       62,819  
Professional services   8,408       6,139       16,225       12,778  
Total cost of revenue   54,275       39,308       105,564       75,597  
Total gross profit   113,180       87,113       219,275       168,275  
Operating expenses:              
Research and development   48,907       35,305       98,719       68,385  
Sales and marketing   78,034       56,246       153,180       111,224  
General and administrative   20,890       17,488       42,406       33,708  
Total operating expenses   147,831       109,039       294,305       213,317  
Loss from operations   (34,651 )     (21,926 )     (75,030 )     (45,042 )
Other income (expense), net:              
Interest income   243       122       355       218  
Interest expense   (2,758 )     (3,059 )     (5,451 )     (8,453 )
Other income (expense), net   (2,403 )     148       (3,006 )     (919 )
Loss before income taxes   (39,569 )     (24,715 )     (83,132 )     (54,196 )
Provision for income taxes   37       9,449       1,473       9,813  
Net loss $ (39,606 )   $ (34,164 )   $ (84,605 )   $ (64,009 )
Net loss per share, basic and diluted $ (0.68 )   $ (0.62 )   $ (1.46 )   $ (1.18 )
Weighted-average common shares outstanding, basic and diluted   58,239,958       55,392,383       57,983,790       54,169,464  


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

 
  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2021       2022       2021  
Cash flows from operating activities:              
Net loss         $ (39,606 )   $ (34,164 )   $ (84,605 )   $ (64,009 )
Adjustments to reconcile net loss to cash provided by operating activities:              
Depreciation and amortization           10,223       7,028       20,392       13,768  
Amortization of debt issuance costs           1,011       1,133       1,990       1,791  
Stock-based compensation expense           32,411       23,814       61,333       44,676  
Deferred income taxes                 3,924             3,924  
Induced conversion expense                             2,740  
Other           1,755       42       2,281       1,446  
Change in operating assets and liabilities:              
Accounts receivable           (18,180 )     (21,598 )     18,147       12,816  
Deferred contract acquisition and fulfillment costs           (2,141 )     (3,497 )     (5,080 )     (5,453 )
Prepaid expenses and other assets           (3,971 )     530       (10,527 )     394  
Accounts payable           (5,116 )     (1,879 )     3,557       (1,329 )
Accrued expenses           11,555       7,837       (12,493 )     (7,592 )
Deferred revenue           19,353       21,233       23,183       22,220  
Other liabilities           155       4,783       (326 )     4,389  
Net cash provided by operating activities           7,449       9,186       17,852       29,781  
Cash flows from investing activities:              
Business acquisition, net of cash acquired                 (2,700 )           (52,420 )
Purchases of property and equipment           (4,171 )     (1,699 )     (7,224 )     (2,671 )
Capitalization of internal-use software costs           (4,536 )     (2,447 )     (8,058 )     (4,205 )
Purchases of investments           (26,861 )     (52,914 )     (58,997 )     (59,308 )
Sales/maturities of investments           57,529       46,038       60,329       87,938  
Other investments           (500 )           (500 )     (1,500 )
Net cash provided by (used in) investing activities           21,461       (13,722 )     (14,450 )     (32,166 )
Cash flows from financing activities:              
Proceeds from issuance of convertible senior notes, net of issuance costs paid                  (1,660 )           585,440  
Purchase of capped calls related to convertible senior notes                             (76,020 )
Payment of debt issuance costs           (71 )           (71 )      
Payments for repurchase of convertible senior notes           (12 )     (2,002 )     (12 )     (184,649 )
Payments related to business acquisitions           (300 )           (300 )     (2,431 )
Taxes paid related to net share settlement of equity awards           (1,645 )     (3,347 )     (5,106 )     (6,671 )
Proceeds from employee stock purchase plan                       5,710       4,467  
Proceeds from stock option exercises           246       1,103       1,205       2,530  
Net cash (used in) provided by financing activities           (1,782 )     (5,906 )     1,426       322,666  
Effects of exchange rates on cash, cash equivalents and restricted cash           (2,871 )     207       (3,671 )     (293 )
Net increase (decrease) in cash, cash equivalents and restricted cash           24,257       (10,235 )     1,157       319,988  
Cash, cash equivalents and restricted cash, beginning of period           141,917       503,840       165,017       173,617  
Cash, cash equivalents and restricted cash, end of period         $ 166,174     $ 493,605     $ 166,174     $ 493,605  


 
RAPID7, INC.    
GAAP to Non-GAAP Reconciliation (Unaudited)    
(in thousands, except share and per share data)
 
  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2021       2022       2021  
GAAP gross profit         $ 113,180     $ 87,113     $ 219,275     $ 168,275  
Add: Stock-based compensation expense1           2,775       1,812       4,865       3,366  
Add: Amortization of acquired intangible assets2           4,844       2,920       9,688       5,661  
Non-GAAP gross profit         $ 120,799     $ 91,845     $ 233,828     $ 177,302  
Non-GAAP gross margin           72.1 %     72.7 %     72.0 %     72.7 %
               
GAAP gross profit - Products         $ 113,255     $ 85,978     $ 218,808     $ 165,613  
Add: Stock-based compensation expense           2,012       1,200       3,507       2,218  
Add: Amortization of acquired intangible assets           4,844       2,920       9,688       5,661  
Non-GAAP gross profit - Products         $ 120,111     $ 90,098     $ 232,003     $ 173,492  
Non-GAAP gross margin - Products           75.5 %     75.6 %     75.3 %     75.9 %
               
GAAP gross profit - Professional services         $ (75 )   $ 1,135     $ 467     $ 2,662  
Add: Stock-based compensation expense           763       612       1,358       1,148  
Non-GAAP gross profit - Professional services         $ 688     $ 1,747     $ 1,825     $ 3,810  
Non-GAAP gross margin - Professional services           8.3 %     24.0 %     10.9 %     24.7 %
               
GAAP loss from operations         $ (34,651 )   $ (21,926 )   $ (75,030 )   $ (45,042 )
Add: Stock-based compensation expense1           32,411       23,814       61,333       44,676  
Add: Amortization of acquired intangible assets2           5,723       3,068       11,446       5,957  
Add: Acquisition-related expenses3                 863             2,031  
Add: Litigation-related expenses4                 251       115       354  
Non-GAAP income (loss) from operations         $ 3,483     $ 6,070     $ (2,136 )   $ 7,976  
               
GAAP net loss         $ (39,606 )   $ (34,164 )   $ (84,605 )   $ (64,009 )
Add: Stock-based compensation expense1           32,411       23,814       61,333       44,676  
Add: Amortization of acquired intangible assets2           5,723       3,068       11,446       5,957  
Add: Acquisition-related expenses3                 9,828             10,996  
Add: Litigation-related expenses4                 251       115       354  
Add: Amortization of debt issuance costs           1,011       1,133       1,990       1,791  
Add: Induced conversion expense                             2,740  
Non-GAAP net (loss) income         $ (461 )   $ 3,930     $ (9,721 )   $ 2,505  
               
Reconciliation of net (loss) income per share, basic              
GAAP net loss per share, basic         $ (0.68 )   $ (0.62 )   $ (1.46 )   $ (1.18 )
Non-GAAP adjustments to net loss           0.67       0.69       1.29       1.23  
Non-GAAP net (loss) income per share, basic          $ (0.01 )   $ 0.07     $ (0.17 )   $ 0.05  
               
Reconciliation of net (loss) income per share, diluted              
GAAP net loss per share, diluted         $ (0.68 )   $ (0.62 )   $ (1.46 )   $ (1.18 )
Non-GAAP adjustments to net loss           0.67       0.69       1.29       1.22  
Non-GAAP net (loss) income per share, diluted         $ (0.01 )   $ 0.07     $ (0.17 )   $ 0.04  
Weighted average shares used in GAAP and non-GAAP per share calculation, basic and diluted           58,239,958       55,392,383       57,983,790       54,169,464  
               
Weighted average shares used in GAAP and non-GAAP per share calculation:              
Basic   58,239,958       55,392,383       57,983,790       54,169,464  
Diluted   58,239,958       57,731,694       57,983,790       56,626,465  
               
1 Includes stock-based compensation expense as follows:              
Cost of revenue         $ 2,775     $ 1,812     $ 4,865     $ 3,366  
Research and development           13,925       9,420       26,949       17,235  
Sales and marketing           8,430       6,038       15,204       11,784  
General and administrative           7,281       6,544       14,315       12,291  
               
2 Includes amortization of acquired intangible assets as follows:              
Cost of revenue         $ 4,844     $ 2,920     $ 9,688     $ 5,661  
Sales and marketing           684       103       1,368       206  
General and administrative           195       45       390       90  
               
3 Includes acquisition-related expenses as follows:              
Sales and marketing                             122  
General and administrative                 863             1,909  
Provision for income taxes                 8,965             8,965  
               
4 Includes litigation-related expenses as follows:              
General and administrative         $     $ 251     $ 115     $ 354  


 
RAPID7, INC.
Reconciliation of Net Loss to Adjusted EBITDA (Unaudited)
(in thousands)
 
  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2021       2022       2021  
GAAP net loss         $ (39,606 )   $ (34,164 )   $ (84,605 )   $ (64,009 )
Interest income           (243 )     (122 )     (355 )     (218 )
Interest expense           2,758       3,059       5,451       8,453  
Other (income) expense, net           2,403       (148 )     3,006       919  
Provision for income taxes           37       9,449       1,473       9,813  
Depreciation expense           3,226       3,053       6,529       6,047  
Amortization of intangible assets           6,997       3,975       13,863       7,721  
Stock-based compensation expense           32,411       23,814       61,333       44,676  
Acquisition-related expenses                 863             2,031  
Litigation-related expenses                 251       115       354  
Adjusted EBITDA         $ 7,983     $ 10,030     $ 6,810     $ 15,787  


 
RAPID7, INC.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (Unaudited)
(in thousands)
 
  Three Months Ended June 30,   Six Months Ended June 30,
    2022       2021       2022       2021  
Net cash provided by operating activities         $ 7,449     $ 9,186     $ 17,852     $ 29,781  
Less: Purchases of property and equipment           (4,171 )     (1,699 )     (7,224 )     (2,671 )
Less: Capitalized internal-use software costs           (4,536 )     (2,447 )     (8,058 )     (4,205 )
Free cash flow         $ (1,258 )   $ 5,040     $ 2,570     $ 22,905  


 
Third Quarter and Full-Year 2022 Guidance
GAAP to Non-GAAP Reconciliation    
(in millions, except per share data)
 
  Third Quarter 2022   Full-Year 2022
Reconciliation of GAAP loss from operations to non-GAAP income from operations:              
Anticipated GAAP loss from operations         $ (33 ) to $ (31 )   $ (129 ) to $ (125 )
Add: Anticipated stock-based compensation expense           33   to   33       127   to   127  
Add: Anticipated amortization of acquired intangible assets           6   to   6       22   to   22  
Anticipated non-GAAP income from operations         $ 6     $ 8     $ 20     $ 24  
               
Reconciliation of GAAP net loss to non-GAAP net income:              
Anticipated GAAP net loss         $ (38 ) to $ (36 )   $ (148 ) to $ (144 )
Add: Anticipated stock-based compensation expense           33   to   33       127   to   127  
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 income         $ 2     $ 4     $ 5     $ 9  
               
Anticipated GAAP net loss per share, basic and diluted         $ (0.64 )   $ (0.61 )   $ (2.52 )   $ (2.45 )
Anticipated non-GAAP net income per share, diluted         $ 0.03     $ 0.06     $ 0.08     $ 0.15  
               
Weighted average shares used in GAAP per share calculation, basic and diluted               59.2               58.8      
                               
Weighted average shares used in non-GAAP per share calculation, diluted               66.2               60.2      

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 2022
Reconciliation of net cash provided by operating activities to free cash flow:      
Net cash provided by operating activities         $ 80   to $ 85  
Purchases of property and equipment           (22 ) to   (22 )
Capitalized internal-use software costs           (18 ) to   (18 )
Free cash flow         $ 40     $ 45  

 


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