Document
false0001560327 0001560327 2019-11-05 2019-11-05


 
 
 
 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
 
 
 
FORM 8-K 
 
 
 
CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 5, 2019 
 
 
 
Rapid7, Inc.
(Exact name of registrant as specified in its charter)
 
 
 
 
Delaware
 
001-37496
 
35-2423994
(State or other jurisdiction
of incorporation)
 
(Commission
File Number)
 
(IRS Employer
Identification No.)
120 Causeway Street,
Boston,
Massachusetts
 
02114
(Address of principal executive offices)
 
(Zip Code)

Registrant’s telephone number, including area code: (617) 247-1717
 
 
 
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
 
 
 
Title of each class
Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value per share
RPD
The Nasdaq Global Market
Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐





 
 
 
 
 
Item 2.02
Results of Operations and Financial Condition.
On November 5, 2019, Rapid7, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal quarter ended September 30, 2019. The Company’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information included in this Item 2.02 and in the accompanying Exhibit 99.1 shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01
Financial Statements and Exhibits.
 
(d)
Exhibits
 
 
 
Exhibit
No.
  
Description
 
 
99.1
  
104
 
Cover Page Interactive Data File (embedded within the inline XBRL document)





SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
 
 
 
 
 
 
 
 
 
 
 
Rapid7, Inc.
 
 
 
 
Dated: November 5, 2019
 
 
 
By:
 
/s/ Jeff Kalowski
 
 
 
 
 
 
Jeff Kalowski
 
 
 
 
 
 
Chief Financial Officer
 



Exhibit
https://cdn.kscope.io/dae08e93282889b504e04974c4754b24-logoa02.jpg

Exhibit 99.1
 Rapid7 Announces Third Quarter 2019 Financial Results
 
Annualized recurring revenue (ARR) of $310.2 million, an increase of 43% year-over-year
Revenue of $83.2 million, 33% year-over-year growth and customer growth of 17% year-over-year
Raising 2019 revenue growth guidance to 32% to 33%
Raising 2019 non-GAAP operating income guidance to $0 to $1 million
Boston, MA – November 5, 2019Rapid7, Inc. (Nasdaq: RPD), a leading provider of security analytics and automation, today announced its financial results for the third quarter of 2019.

"Rapid7 had a great third quarter. Our results reflect a good demand environment, great expense control and excellent execution across the board. With a strong focus on product innovation and a well-diversified product portfolio, we see a large opportunity in front of us and are well positioned for future growth. As a result, we are raising our total revenue and non-GAAP operating income guidance for the full-year 2019," said Corey Thomas, Chairman and CEO of Rapid7.

Third Quarter 2019 Financial Results and Other Metrics
 
Three Months Ended September 30,
 
2019
 
2018
 
% Change
 
(dollars in thousands)
Annualized recurring revenue
$
310,184

 
$
217,415

 
43
%
Number of customers
8,625

 
7,399

 
17
%
ARR per customer
$
36.0

 
$
29.4

 
22
%
Recurring revenue as a percentage of total revenue
88
%
 
82
%
 
 
Renewal rate*
111
%
 
118
%
 
 
*For the three months ended September 30, 2018, our renewal rate was adjusted from 120%, as previously disclosed, to 118% based on a reclassification of certain upsells and cross-sells.

rapid7.com

https://cdn.kscope.io/dae08e93282889b504e04974c4754b24-logoa02.jpg

 
Three Months Ended September 30,
 
2019
 
2018
 
% Change
 
(in thousands, except per share data)
Products revenue
$
67,298

 
$
43,829

 
54
 %
Maintenance and support revenue
9,178

 
10,614

 
(14
)%
Professional services revenue
6,679

 
7,922

 
(16
)%
Total revenue
$
83,155

 
$
62,365

 
33
 %
 
 
 
 
 
 
North America revenue
$
69,883

 
$
53,232

 
31
 %
Rest of world revenue
13,272

 
9,133

 
45
 %
Total revenue
$
83,155

 
$
62,365

 
 
 
 
 
 
 
 
GAAP gross profit
$
59,525

 
$
44,555

 
 
GAAP gross margin
72
 %
 
71
 %
 
 
Non-GAAP gross profit
$
61,865

 
$
45,934

 
 
Non-GAAP gross margin
74
 %
 
74
 %
 
 
 
 
 
 
 
 
GAAP loss from operations
$
(11,756
)
 
$
(11,301
)
 
 
GAAP operating margin
(14
)%
 
(18
)%
 
 
Non-GAAP income (loss) from operations
$
542

 
$
(2,822
)
 
 
Non-GAAP operating margin
1
 %
 
(5
)%
 
 
 
 
 
 
 
 
GAAP net loss
$
(14,406
)
 
$
(11,831
)
 
 
GAAP net loss per share, basic and diluted
$
(0.29
)
 
$
(0.25
)
 
 
Non-GAAP net income (loss)
$
571

 
$
(2,056
)
 
 
Non-GAAP net income (loss) per share, basic
$
0.01

 
$
(0.04
)
 
 
Non-GAAP net income (loss) per share, diluted
$
0.01

 
$
(0.04
)
 
 
 
 
 
 
 
 
Adjusted EBITDA
$
3,446

 
$
(1,102
)
 
 
 
 
 
 
 
 
Cash provided by (used in) operating activities
$
1,839

 
$
(4,050
)
 
 
Recent Business Highlights
 
In October, Forrester Research recognized Rapid7 as a leader in The Forrester WaveTM: Vulnerability Risk Management, Q4 2019 report.
Please see investors.rapid7.com for our Financial Metrics spreadsheet.
For additional details on the reconciliation of non-GAAP measures to their nearest comparable GAAP measures, please refer to the accompanying financial data tables contained in this press release.


rapid7.com

https://cdn.kscope.io/dae08e93282889b504e04974c4754b24-logoa02.jpg

Fourth Quarter and Full-Year 2019 Guidance

Rapid7 anticipates total revenue, non-GAAP income (loss) from operations, and non-GAAP net income (loss) per share to be in the following ranges:
Fourth Quarter and Full-Year 2019 Guidance (in millions, except per share data)
 
 
 
 
 
 
 
Fourth Quarter 2019
 
Full-Year 2019
Revenue
$
87.4

to
$
89.0

 
$
322.7

to
$
324.3

Year-over-year growth
27
%
to
29
%
 
32
%
to
33
%
Non-GAAP (loss) income from operations
$
(1.6
)
to
$
(0.6
)
 
$

to
$
1.0

Non-GAAP net (loss) income per share
$
(0.02
)
to
$

 
$
0.03

to
$
0.05

Weighted average shares outstanding
 
 
49.6

 
 
 
52.1


Guidance for the fourth quarter and full-year 2019 does not include any potential impact of foreign exchange gains or losses. The weighted average shares outstanding for the fourth quarter of 2019 represent basic shares outstanding given our projected non-GAAP net loss. The weighted average shares outstanding for full-year 2019 represent diluted shares outstanding given our projected non-GAAP net income.
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 historical non-GAAP financial measures to the most comparable GAAP measures in the financial statement tables included in this press release. A reconciliation of non-GAAP guidance measures to the most comparable GAAP measures is not available on a forward-looking basis without unreasonable efforts due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures.
Conference Call and Webcast Information
Rapid7 will host a conference call today, November 5, 2019, to discuss its results at 8:00 a.m. Eastern Time. The call will be accessible by telephone at 877-357-4230 (domestic) or 629-228-0721 (international). The call will also be available live via webcast on the Company’s website at https://investors.rapid7.com. A telephone replay of the conference call will be available at 855-859-2056 or 404-537-3406 (access code 9168155) until November 12, 2019. 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 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 8,500 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.

rapid7.com

https://cdn.kscope.io/dae08e93282889b504e04974c4754b24-logoa02.jpg


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 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, follow-on public offering costs, and litigation-related expenses. Non-GAAP net income (loss) per basic and dilutive 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 the 1.25% convertible senior note issued in August 2018.

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. In August 2018, we issued $230 million of convertible senior notes, which bear interest at an annual fixed rate of 1.25%. The imputed interest rate of the convertible senior notes was approximately 7.37%. This is a result of the debt discount recorded for the conversion feature that is required to be separately accounted for as equity, and debt issuance costs, which reduce the carrying value of the convertible debt instrument. The debt discount is amortized as interest expense together with the issuance costs of the debt. The expense for the amortization of debt discount and debt issuance costs 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 and follow-on public offering costs. We exclude acquisition-related expenses and follow-on public offering costs 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. In connection with the issuance of our convertible senior notes, we entered into capped call transactions to offset potential dilution from the embedded conversion feature in the 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 basic and diluted share to provide investors with useful information in evaluating the financial performance of the company 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 (benefit from) 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. Adjusted EBITDA should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using this non-GAAP financial measure, including that other companies may calculate this measure differently than we do, that it does not reflect our capital expenditures or future requirements for capital expenditures and that it does not reflect changes in, or cash requirements for, our working capital and excludes some items that are cash based.


rapid7.com

https://cdn.kscope.io/dae08e93282889b504e04974c4754b24-logoa02.jpg

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. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our anticipated total revenue and our future financial and business performance for the fourth quarter and full-year 2019, market opportunities and future growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “will” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, risks related to our rapid growth and ability to sustain our revenue growth rate, the ability of our products and professional services to correctly detect vulnerabilities, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, our ability to integrate acquired operations, 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 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarter ended June 30, 2019 filed with the Securities and Exchange Commission on August 1, 2019, and 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 contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law. 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.
###
Neeraj Mahajan, CFA
Vice President, Investor Relations
investors@rapid7.com
(857) 990-4074
Press contact:
Caitlin Doherty
press@rapid7.com
(857) 990-4240


rapid7.com




RAPID7, INC.    
Consolidated Balance Sheets (Unaudited)     
(in thousands)    
 
 
 
September 30, 2019
 
December 31, 2018
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
114,925

 
$
99,565

Short-term investments
 
131,815

 
159,210

Accounts receivable, net
 
62,422

 
74,935

Deferred contract acquisition and fulfillment costs, current portion
 
14,905

 
12,321

Prepaid expenses and other current assets
 
15,827

 
9,746

Total current assets
 
339,894

 
355,777

Long-term investments
 
10,997

 
44,892

Property and equipment, net
 
51,519

 
17,523

Operating lease right-of-use assets
 
61,217

 

Deferred contract acquisition and fulfillment costs, non-current portion
 
30,452

 
27,634

Goodwill
 
97,866

 
88,420

Intangible assets, net
 
29,183

 
23,955

Other assets
 
5,466

 
1,168

Total assets
 
$
626,594

 
$
559,369

Liabilities and Stockholders’ Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
6,549

 
$
7,048

Accrued expenses
 
33,174

 
37,376

Operating lease liabilities, current portion
 
6,460

 

Deferred revenue, current portion
 
200,314

 
189,855

Other current liabilities
 
285

 
707

Total current liabilities
 
246,782

 
234,986

Convertible senior notes, net
 
182,471

 
174,688

Operating lease liabilities, non-current portion
 
73,266

 

Deferred revenue, non-current portion
 
36,620

 
58,716

Other long-term liabilities
 
1,280

 
3,660

Total liabilities
 
540,419

 
472,050

Stockholders’ equity:
 
 
 
 
Common stock
 
493

 
476

Treasury stock
 
(4,764
)
 
(4,764
)
Additional paid-in-capital
 
594,226

 
556,223

Accumulated other comprehensive income (loss)
 
304

 
(31
)
Accumulated deficit
 
(504,084
)
 
(464,585
)
Total stockholders’ equity
 
86,175

 
87,319

Total liabilities and stockholders’ equity
 
$
626,594

 
$
559,369







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,
 
2019
 
2018
 
2019

2018
Revenue:
 
 
 
 
 
 
 
Products
$
67,298

 
$
43,829

 
$
186,793

 
$
118,151

Maintenance and support
9,178

 
10,614

 
28,107

 
31,977

Professional services
6,679

 
7,922

 
20,399

 
25,193

Total revenue
83,155

 
62,365

 
235,299

 
175,321

Cost of revenue:
 
 
 
 
 
 
 
Products
15,627

 
10,294

 
42,668

 
28,380

Maintenance and support
2,076

 
1,901

 
6,041

 
5,757

Professional services
5,927

 
5,615

 
17,075

 
17,660

Total cost of revenue
23,630

 
17,810

 
65,784

 
51,797

Total gross profit
59,525

 
44,555

 
169,515

 
123,524

Operating expenses:
 
 
 
 
 
 
 
Research and development
20,154

 
17,111

 
57,645

 
49,915

Sales and marketing
39,904

 
30,570

 
113,214

 
90,779

General and administrative
11,223

 
8,175

 
32,336

 
25,056

Total operating expenses
71,281

 
55,856

 
203,195

 
165,750

Loss from operations
(11,756
)
 
(11,301
)
 
(33,680
)
 
(42,226
)
Other income (expense), net:
 
 
 
 
 
 
 
Interest income
1,448

 
813

 
4,761

 
1,520

Interest expense
(3,399
)
 
(1,679
)
 
(9,940
)
 
(1,681
)
Other income (expense), net
(492
)
 
181

 
(727
)
 
(67
)
Loss before income taxes
(14,199
)
 
(11,986
)
 
(39,586
)
 
(42,454
)
Provision for (benefit from) income taxes
207

 
(155
)
 
(87
)
 
71

Net loss
$
(14,406
)
 
$
(11,831
)
 
$
(39,499
)
 
$
(42,525
)
Net loss per share, basic and diluted
$
(0.29
)
 
$
(0.25
)
 
$
(0.82
)
 
$
(0.92
)
Weighted-average common shares outstanding, basic and diluted
49,020,449

 
46,914,077

 
48,437,686

 
46,139,978







RAPID7, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019

2018
 
2019

2018
Cash flows from operating activities:
 
 
 
 
 
 
 
Net loss
$
(14,406
)
 
$
(11,831
)
 
$
(39,499
)
 
$
(42,525
)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
 
 
 
 
 
 
 
Depreciation and amortization
4,598

 
2,660

 
11,969

 
7,737

Amortization of debt discount and issuance costs
2,679

 
1,296

 
7,783

 
1,296

Stock-based compensation expense
10,426

 
7,424

 
29,490

 
20,999

Provision for doubtful accounts
429

 
24

 
1,782

 
480

Deferred income taxes

 

 
(761
)
 

Foreign currency re-measurement loss
379

 
95

 
570

 
566

Other non-cash (income) expense
(345
)
 
(274
)
 
(1,635
)
 
(345
)
Changes in operating assets and liabilities:
 
 
 
 
 
 
 
Accounts receivable
6,311

 
(5,299
)
 
10,860

 
19,287

Deferred contract acquisition and fulfillment costs
(2,231
)
 
(1,854
)
 
(5,403
)
 
(6,385
)
Prepaid expenses and other assets
(544
)
 
1,168

 
(9,878
)
 
(2,434
)
Accounts payable
(1,052
)
 
(1,826
)
 
1,132

 
565

Accrued expenses
2,490

 
5,632

 
(4,822
)
 
(2,174
)
Deferred revenue
(7,058
)
 
(1,312
)
 
(12,124
)
 
(2,313
)
Other liabilities
163

 
47

 
1,292

 
(622
)
Net cash provided by (used in) operating activities
1,839

 
(4,050
)
 
(9,244
)
 
(5,868
)
Cash flows from investing activities:
 
 
 
 
 
 
 
Business acquisition, net of cash acquired
14

 

 
(14,607
)
 

Purchases of property and equipment
(9,341
)
 
(2,754
)
 
(27,053
)
 
(8,404
)
Capitalization of internal-use software costs
(1,534
)
 
(1,092
)
 
(4,686
)
 
(2,505
)
Purchases of investments
(41,776
)
 
(168,290
)
 
(114,208
)
 
(178,945
)
Sales/maturities of investments
36,985

 
6,448

 
177,287

 
39,576

Net cash (used in) provided by investing activities
(15,652
)
 
(165,688
)
 
16,733

 
(150,278
)
Cash flows from financing activities:
 
 
 
 
 
 
 
Proceeds from issuance of convertible senior notes, net of issuance costs

 
223,529

 

 
223,529

Purchase of capped calls related to convertible senior notes

 
(26,910
)
 

 
(26,910
)
Proceeds from follow-on public offering, net of offering costs

 

 

 
30,907

Taxes paid related to net share settlement of equity awards
(2,087
)
 
(707
)
 
(4,926
)
 
(1,712
)
Proceeds from employee stock purchase plan
2,887

 
2,005

 
5,521

 
3,637

Proceeds from stock option exercises
1,866

 
1,864

 
7,924

 
6,521

Net cash provided by financing activities
2,666

 
199,781

 
8,519

 
235,972

Effect of exchange rate changes on cash, cash equivalents and restricted cash
(497
)
 
(114
)
 
(648
)
 
(428
)
Net increase in cash, cash equivalents and restricted cash
(11,644
)
 
29,929

 
15,360

 
79,398

Cash, cash equivalents and restricted cash, beginning of period
126,569

 
101,231

 
99,565

 
51,762

Cash, cash equivalents and restricted cash, end of period
$
114,925

 
$
131,160

 
$
114,925

 
$
131,160







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,
 
2019

2018
 
2019

2018
GAAP gross profit
$
59,525

 
$
44,555

 
$
169,515

 
$
123,524

Add: Stock-based compensation expense1
679

 
478

 
1,970

 
1,321

Add: Amortization of acquired intangible assets2
1,661

 
901

 
4,681

 
2,702

Non-GAAP gross profit
$
61,865

 
$
45,934

 
$
176,166

 
$
127,547

Non-GAAP gross margin
74.4
%
 
73.7
%
 
74.9
%
 
72.8
%
 
 
 
 
 
 
 
 
GAAP gross profit - Products
$
51,671

 
$
33,535

 
$
144,125

 
$
89,771

Add: Stock-based compensation expense
216

 
142

 
580

 
424

Add: Amortization of acquired intangible assets
1,661

 
901

 
4,681

 
2,702

Non-GAAP gross profit - Products
$
53,548

 
$
34,578

 
$
149,386

 
$
92,897

Non-GAAP gross margin - Products
79.6
%
 
78.9
%
 
80.0
%
 
78.6
%
 
 
 
 
 
 
 
 
GAAP gross profit - Maintenance and support
$
7,102

 
$
8,713

 
$
22,066

 
$
26,220

Add: Stock-based compensation expense
170

 
73

 
456

 
161

Non-GAAP gross profit - Maintenance and support
$
7,272

 
$
8,786

 
$
22,522

 
$
26,381

Non-GAAP gross margin - Maintenance and support
79.2
%
 
82.8
%
 
80.1
%
 
82.5
%
 
 
 
 
 
 
 
 
GAAP gross profit - Professional services
$
752

 
$
2,307

 
$
3,324

 
$
7,533

Add: Stock-based compensation expense
293

 
263

 
934

 
736

Non-GAAP gross profit - Professional services
$
1,045

 
$
2,570

 
$
4,258

 
$
8,269

Non-GAAP gross margin - Professional services
15.6
%
 
32.4
%
 
20.9
%
 
32.8
%
 
 
 
 
 
 
 
 
GAAP Loss from operations
$
(11,756
)
 
$
(11,301
)
 
$
(33,680
)
 
$
(42,226
)
Add: Stock-based compensation expense1
10,426

 
7,424

 
29,490

 
20,999

Add: Amortization of acquired intangible assets2
1,694

 
940

 
4,789

 
2,821

Add: Acquisition-related expenses3

 
115

 
514

 
115

Add: Follow-on public offering costs4

 

 

 
205

Add: Litigation-related expenses5
178

 

 
506

 
400

Non-GAAP Income (loss) from operations
$
542

 
$
(2,822
)
 
$
1,619

 
$
(17,686
)
 
 
 
 
 
 
 
 
GAAP Net loss
$
(14,406
)
 
$
(11,831
)
 
$
(39,499
)
 
$
(42,525
)
Add: Stock-based compensation expense1
10,426

 
7,424

 
29,490

 
20,999

Add: Amortization of acquired intangible assets2
1,694

 
940

 
4,789

 
2,821

Add: Acquisition-related expenses3

 
115

 
514

 
115

Add: Follow-on public offering costs4

 

 

 
205

Add: Litigation-related expenses5
178

 

 
506

 
400

Add: Release of valuation allowance, acquisition-related

 

 
(761
)
 

Add: Amortization of debt discount and issuance costs
2,679

 
1,296

 
7,783

 
1,296

Non-GAAP Net income (loss)
$
571

 
$
(2,056
)
 
$
2,822

 
$
(16,689
)
 
 
 
 
 
 
 
 
Reconciliation of net income (loss) per share, basic
 
 
 
 
 
 
 
GAAP net loss per share, basic
$
(0.29
)
 
$
(0.25
)
 
$
(0.82
)
 
$
(0.92
)





Non-GAAP adjustments to net loss
0.30

 
0.21

 
0.88

 
0.56

Non-GAAP net income (loss) per share, basic
$
0.01

 
$
(0.04
)
 
$
0.06

 
$
(0.36
)
 
 
 
 
 
 
 
 
Reconciliation of net income (loss) per share, diluted
 
 
 
 
 
 
 
GAAP net loss per share, diluted
$
(0.29
)
 
$
(0.25
)
 
$
(0.82
)
 
$
(0.92
)
Non-GAAP adjustments to net loss
0.30

 
0.21

 
0.87

 
0.56

Non-GAAP net income (loss) per share, diluted
$
0.01

 
$
(0.04
)
 
$
0.05

 
$
(0.36
)
 
 
 
 
 
 
 
 
Weighted average shares used in GAAP per share calculation, basic and diluted
49,020,449

 
46,914,077

 
48,437,686

 
46,139,978

 
 
 
 
 
 
 
 
Weighted average shares used in non-GAAP per share calculation:
 
 
 
 
 
 
 
Basic
49,020,449

 
46,914,077

 
48,437,686

 
46,139,978

Diluted
52,404,657

 
46,914,077

 
51,879,345

 
46,139,978

 
 
 
 
 
 
 
 
1 Includes stock-based compensation expense as follows:
 
 
 
 
 
 
 
Cost of revenue
$
679

 
$
478

 
$
1,970

 
$
1,321

Research and development
3,996

 
2,984

 
11,224

 
8,400

Sales and marketing
3,047

 
2,066

 
8,453

 
5,684

General and administrative
2,704

 
1,896

 
7,843

 
5,594

 
 
 
 
 
 
 
 
2 Includes amortization of acquired intangible assets as follows:
 
 
 
 
 
 
 
Cost of revenue
$
1,661

 
$
901

 
$
4,681

 
$
2,702

Sales and marketing
32

 
38

 
105

 
115

General and administrative
1

 
1

 
3

 
4

 
 
 
 
 
 
 
 
3 Includes acquisition-related expenses as follows:
 
 
 
 
 
 
 
General and administrative
$

 
$
115

 
$
514

 
$
115

 
 
 
 
 
 
 
 
4 Includes follow-on public offering costs as follows:
 
 
 
 
 
 
 
General and administrative
$

 
$

 
$

 
$
205

 
 
 
 
 
 
 
 
5 Includes litigation-related expenses as follows:
 
 
 
 
 
 
 
General and administrative
$
178

 
$

 
$
506

 
$
400







RAPID7, INC.
Reconciliation of Net Loss to Adjusted EBITDA (Unaudited)
(in thousands)
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
 
2019

2018
 
2019
 
2018
GAAP net loss
$
(14,406
)

$
(11,831
)
 
$
(39,499
)
 
$
(42,525
)
Interest income
(1,448
)

(813
)
 
(4,761
)
 
(1,520
)
Interest expense
3,399

 
1,679

 
9,940

 
1,681

Other (income) expense, net
492


(181
)
 
727

 
67

Provision for (benefit from) income taxes
207


(155
)
 
(87
)
 
71

Depreciation expense
2,520


1,591

 
6,426

 
4,616

Amortization of intangible assets
2,078


1,069

 
5,543

 
3,121

Stock-based compensation expense
10,426


7,424

 
29,490

 
20,999

Acquisition-related expenses


115

 
514

 
115

Follow-on public offering costs



 

 
205

Litigation-related expenses
178



 
506

 
400

Adjusted EBITDA
$
3,446


$
(1,102
)
 
$
8,799

 
$
(12,770
)