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Rapid7 Announces Fourth Quarter and Full-Year 2023 Financial Results

  • Annualized recurring revenue (“ARR”) of $806 million, an increase of 13% year-over-year
  • Full-year revenue of $778 million, up 14% year-over-year; Products revenue of $740 million, up 14% year-over-year
  • Full-year GAAP operating loss of $81 million; Full-year non-GAAP operating income of $102 million
  • Full-year net cash provided by operating activities of $104 million; Free cash flow of $84 million

BOSTON, Feb. 07, 2024 (GLOBE NEWSWIRE) -- Rapid7, Inc. (Nasdaq: RPD), a leader in extended risk and threat detection, today announced its financial results for the fourth quarter and full-year 2023.

“Rapid7 delivered solid results to end the year, exceeding our guided ranges on ARR, revenue, non-GAAP operating income, and free cash flow. Mainstream enterprise customers continue to choose Rapid7 for the strength of our consolidated security operations platform, our integrated expertise, and our compelling value proposition,” said Corey Thomas, Chairman and CEO of Rapid7.

“As we enter 2024, we are focused on making platform and services investments that enhance our customers’ experience and position us to drive durable, long-term growth. Our sustained focus on driving efficient, profitable growth is reflected in our free cash flow outlook, which we expect to be at least $160 million for the full-year.”

Fourth Quarter 2023 Financial Results and Other Metrics

 As of December 31,
  2023   2022   % Change 
 (dollars in thousands)
Annualized recurring revenue$805,670  $714,231   13%
Number of customers 11,526   10,929   5%
ARR per customer$69.9  $65.4   7%



 Three Months Ended December 31, Year Ended December 31,
  2023   2022  % Change  2023   2022  % Change
 (in thousands, except per share data)
Products revenue$194,819  $172,892   13% $740,168  $647,535   14%
Professional services revenue 10,449   11,587   (10%)  37,539   37,548   0%
Total revenue$205,268  $184,479   11% $777,707  $685,083   14%
            
North America revenue$158,695  $145,990   9% $607,448  $541,812   12%
Rest of world revenue 46,573   38,489   21%  170,259   143,271   19%
Total revenue$205,268  $184,479   11% $777,707  $685,083   14%
            
GAAP gross profit$145,520  $129,544    $545,966  $470,734   
GAAP gross margin 71%  70%    70%  69%  
Non-GAAP gross profit$152,265  $136,677    $575,052  $499,594   
Non-GAAP gross margin 74%  74%    74%  73%  
            
GAAP income (loss) from operations$10,932  $(13,349)   $(80,733) $(111,614)  
GAAP operating margin 5%  (7)%    (10)%  (16)%  
Non-GAAP income from operations$41,498  $19,477    $102,221  $30,386   
Non-GAAP operating margin 20%  11%    13%  4%  
            
GAAP net income (loss)$20,048  $(11,385)   $(149,260) $(124,717)  
GAAP net income (loss) per share, basic$0.33  $(0.19)   $(2.46) $(2.13)  
GAAP net income (loss) per share, diluted$0.27  $(0.19)   $(2.46) $(2.13)  
Non-GAAP net income$51,691  $22,490    $107,232  $21,368   
Non-GAAP net income per share:           
Basic$0.84  $0.38    $1.76  $0.36   
Diluted$0.72  $0.35    $1.52  $0.35   
            
Adjusted EBITDA$47,819  $24,700    $126,661  $49,441   
            
Net cash provided by operating activities$63,466  $40,242    $104,278  $78,204   
Free cash flow$60,254  $28,450    $84,034  $40,677   


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 February, Rapid7 added a new Managed Digital Risk Protection (“DRP”) service for external threat monitoring and remediation; Customers can add Managed DRP to their Managed Threat Complete or Managed Detection and Response service for extended visibility and response support across their internal and external attack surfaces.
  • In December, Rapid7 was recognized by Newsweek as one of “America’s Greatest Workplaces for Diversity for 2024,” reflecting Rapid7’s commitment to the positive impact diversity plays in driving organizational success, attracting and retaining exceptional talent, and creating positive career experiences for all people.
  • In November, Rapid7 was positioned in the Leaders Category in the 2023 IDC MarketScape: Worldwide Risk-Based Vulnerability Management Platforms 2023 Vendor Assessment. According to IDC, "Organizations that want to use a cybersecurity platform with security monitoring, alerting, and response capability alongside exposure management will want to look at Rapid7."
  • In November, Rapid7 announced AI-driven threat detection capabilities for the cloud, to improve SOC teams’ visibility and response time to cyber threats across public cloud environments.

First Quarter and Full-Year 2024 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:

 First Quarter 2024 Full-Year 2024
 (in millions, except per share data)
Annualized recurring revenue    $885to$895
Year-over-year growth    10%to11%
Revenue$203to$205  $848to$856
Year-over-year growth11%to12%  9%to10%
Non-GAAP income from operations$37to$39  $150to$158
Non-GAAP net income per share$0.52to$0.55  $2.10to$2.21
Weighted average shares outstanding74.4  75.1
Free cash flow    At least $160


The guidance provided above is forward-looking in nature. Actual results may differ materially. See the cautionary note regarding “Forward-Looking Statements” below. Guidance for the first quarter and full-year 2024 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 such as acquisition-related expenses, impairment of long-lived assets, restructuring expense, induced conversion expense, change in the fair value of derivative assets and litigation-related expenses. 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, February 7, 2024, 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 (Nasdaq: RPD) is on a mission to create a safer digital world by making cybersecurity simpler and more accessible. We empower security professionals to manage a modern attack surface through our best-in-class technology, leading-edge research, and broad, strategic expertise. Rapid7’s comprehensive security solutions help more than 11,000 global customers unite cloud risk management and threat detection to reduce attack surfaces and eliminate threats with speed and precision. For more information, visit our website, check out our blog, or follow us on LinkedIn or 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 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 issuance costs and certain other items such as acquisition-related expenses, impairment of long-lived assets, restructuring expense, induced conversion expense, change in the fair value of derivative assets and litigation-related expenses. Non-GAAP net income (loss) per basic and diluted share is calculated as non-GAAP net income (loss) divided by the weighted average shares used to compute net income (loss) per share, with the number of weighted average shares decreased, 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 third quarter of 2023 partial repurchase of our 2.25% convertible senior notes due 2025, we incurred a non-cash induced conversion expense of $53.9 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 non-ordinary course litigation expense because we do not consider legal costs and settlement fees incurred in litigation and litigation-related matters of non-ordinary course lawsuits and other disputes to be indicative of our core operating performance. We do not adjust for ordinary course legal expenses, including legal costs and settlement fees resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

Acquisition-related expenses. We exclude acquisition-related expenses as costs that are unrelated to the current operations and are neither comparable to the prior period nor predictive of future results.

Change in fair value of derivative assets. The expense for the change in fair value of derivative assets related to our capped calls settlement is a non-cash item and we believe the exclusion of this other income (expense) provides a more useful comparison of our operational performance in different periods.

Impairment of long-lived assets. Impairment of long-lived assets consists of impairment charges allocated to the carrying amount of certain operating right-of-use assets and the associated leasehold improvements when the carrying amounts exceed their respective fair values and we believe the exclusion of the impairment charges provides a more useful comparison of our operational performance in different periods.

Restructuring expense. We exclude non-ordinary course restructuring expenses related to our restructuring plan because we do not believe these charges are indicative of our core operating performance and we believe the exclusion of the restructuring expenses provides a more useful comparison of our performance in different periods.

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. 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, (8) acquisition-related expenses, (9) litigation-related expenses, (10) impairment of long-lived assets and (11) restructuring expense. 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 cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business and an important part of the compensation provided to our employees.

Other Metrics

Annualized Recurring Revenue (ARR). ARR is defined as the annual value of all recurring revenue related contracts in place at the end of the period. ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or replace these items. ARR is not a forecast of future revenue and can be impacted by contract start and end dates and renewal rates, and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of operations.

Number of Customers. We define a customer as any entity that has an active Rapid7 recurring revenue contract as of the specified measurement date, excluding InsightOps and Logentries only customers with a contract value less than $2,400 per year.

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

Cautionary Language Concerning Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the statements regarding our financial guidance for the first quarter and full-year 2024, the assumptions underlying such guidance, our free cash flow projections for 2024 and our ability to drive profitable 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, fluctuations in our quarterly results, effectiveness of our restructuring plan, failure to meet our publicly announced guidance or other expectations about our business, our ability to sustain our revenue growth rate, the ability of our products and professional services to correctly detect vulnerabilities, renewal of our customer's subscriptions, 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 that could affect our business and results described in our filings with the Securities and Exchange Commission (the “SEC”), including our most recent Quarterly Report on Form 10-Q filed with the SEC on November 6, 2023, particularly in the section entitled "Item 1.A Risk Factors," 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:

Elizabeth Chwalk
Senior Director, Investor Relations
investors@rapid7.com
(617) 865-4277

Press contact:

Caitlin O'Connor
Director, Communications
press@rapid7.com
(857) 990-4240



RAPID7, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands)
 
 December 31, 2023 December 31, 2022
Assets   
Current assets:   
Cash and cash equivalents$213,629  $207,287 
Short-term investments 169,544   84,162 
Accounts receivable, net 164,862   152,045 
Deferred contract acquisition and fulfillment costs, current portion 45,008   34,906 
Prepaid expenses and other current assets 41,407   31,907 
Total current assets 634,450   510,307 
Long-term investments 56,171   9,756 
Property and equipment, net 39,642   57,891 
Operating lease right-of-use assets 54,693   79,342 
Deferred contract acquisition and fulfillment costs, non-current portion 76,601   68,169 
Goodwill 536,351   515,631 
Intangible assets, net 94,546   101,269 
Other assets 12,894   16,626 
Total assets$1,505,348  $1,358,991 
Liabilities and Stockholders’ Deficit   
Current liabilities:   
Accounts payable$15,812  $10,255 
Accrued expenses 84,489   80,306 
Operating lease liabilities, current portion 13,452   12,444 
Deferred revenue, current portion 455,503   426,599 
Other current liabilities 536   1,663 
Total current liabilities 569,792   531,267 
Convertible senior notes, non-current portion, net 929,996   815,948 
Operating lease liabilities, non-current portion 81,130   85,946 
Deferred revenue, non-current portion 32,577   31,040 
Other long-term liabilities 10,032   14,864 
Total liabilities 1,623,527   1,479,065 
Stockholders’ deficit:   
Common stock 617   597 
Treasury stock (4,765)  (4,764)
Additional paid-in-capital 894,630   746,249 
Accumulated other comprehensive income (loss) 1,344   (1,411)
Accumulated deficit (1,010,005)  (860,745)
Total stockholders’ deficit (118,179)  (120,074)
Total liabilities and stockholders’ deficit$1,505,348  $1,358,991 



RAPID7, INC.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
 
 Three Months Ended December 31, Year Ended December 31,
  2023   2022   2023   2022 
Revenue:       
Products$194,819  $172,892  $740,168  $647,535 
Professional services 10,449   11,587   37,539   37,548 
Total revenue 205,268   184,479   777,707   685,083 
Cost of revenue:       
Products 52,307   46,916   202,904   182,212 
Professional services 7,441   8,019   28,837   32,137 
Total cost of revenue 59,748   54,935   231,741   214,349 
Total gross profit 145,520   129,544   545,966   470,734 
Operating expenses:       
Research and development 39,729   42,629   176,776   189,970 
Sales and marketing 73,314   78,261   312,636   307,409 
General and administrative 19,314   22,003   84,276   84,969 
Impairment of long-lived assets       30,784    
Restructuring 2,231      22,227    
Total operating expenses 134,588   142,893   626,699   582,348 
Income (loss) from operations 10,932   (13,349)  (80,733)  (111,614)
Other income (expense), net:       
Interest income 4,177   960   10,177   1,813 
Interest expense (2,695)  (2,782)  (64,700)  (10,982)
Other income (expense), net 3,571   3,690   (14,522)  (1,522)
Income (loss) before income taxes 15,985   (11,481)  (149,778)  (122,305)
(Benefit from) provision for income taxes (4,063)  (96)  (518)  2,412 
Net income (loss)$20,048  $(11,385) $(149,260) $(124,717)
Net income (loss) per share, basic$0.33  $(0.19) $(2.46) $(2.13)
Net income (loss) per share, diluted$0.27  $(0.19) $(2.46) $(2.13)
Weighted-average common shares outstanding, basic 61,497,797   59,328,736   60,756,087   58,552,065 
Weighted-average common shares outstanding, diluted 73,728,912   59,328,736   60,756,087   58,552,065 



RAPID7, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 
 Three Months Ended December 31, Year Ended December 31,
  2023   2022   2023   2022 
Cash flows from operating activities:       
Net income (loss)$20,048  $(11,385) $(149,260) $(124,717)
Adjustments to reconcile net income (loss) to cash provided by operating activities:       
Depreciation and amortization 11,411   10,451   45,939 �� 41,038 
Amortization of debt issuance costs 1,077   1,049   4,138   4,085 
Stock-based compensation expense 23,245   27,598   108,081   119,902 
Deferred income taxes (5,624)  (1,440)  (5,624)  (1,440)
Impairment of long-lived assets       30,784    
Change in fair value of derivative assets       15,511    
Induced conversion expense       53,889    
Other (5,157)  (4,028)  469   (200)
Change in operating assets and liabilities:       
Accounts receivable (26,449)  (30,475)  (14,021)  (9,050)
Deferred contract acquisition and fulfillment costs (9,046)  (7,911)  (18,534)  (15,910)
Prepaid expenses and other assets (9,558)  3,072   (4,125)  (2,231)
Accounts payable 6,704   (527)  5,449   7,977 
Accrued expenses 20,390   15,982   2,422   3,741 
Deferred revenue 36,839   34,219   30,472   52,516 
Other liabilities (414)  3,637   (1,312)  2,493 
Net cash provided by operating activities 63,466   40,242   104,278   78,204 
Cash flows from investing activities:       
Business acquisition, net of cash acquired       (34,841)   
Purchases of property and equipment (367)  (7,295)  (4,366)  (20,382)
Capitalization of internal-use software costs (2,845)  (4,497)  (15,878)  (17,145)
Purchases of investments (82,816)  (28,279)  (276,829)  (122,765)
Sales/maturities of investments 49,750   34,925   150,450   121,304 
Other investments 2,710      2,710   (1,000)
Net cash used in investing activities (33,568)  (5,146)  (178,754)  (39,988)
Cash flows from financing activities:       
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $7,909 (709)     292,091    
Purchase of capped calls related to convertible senior notes       (36,570)   
Payment of debt issuance costs          (71)
Payments for repurchase of convertible senior notes       (199,998)  (12)
Payments related to business acquisitions       (2,250)  (300)
Proceeds from capped call settlement       17,518    
Taxes paid related to net share settlement of equity awards (1,558)  (719)  (5,570)  (7,462)
Proceeds from employee stock purchase plan       11,323   11,943 
Proceeds from stock option exercises 69   1,697   3,053   3,318 
Net cash (used in) provided by financing activities (2,198)  978   79,597   7,416 
Effects of exchange rates on cash, cash equivalents and restricted cash 3,212   2,862   1,202   (2,845)
Net increase in cash, cash equivalents and restricted cash 30,912   38,936   6,323   42,787 
Cash, cash equivalents and restricted cash, beginning of period 183,215   168,868   207,804   165,017 
Cash, cash equivalents and restricted cash, end of period$214,127  $207,804  $214,127  $207,804 



RAPID7, INC.
GAAP to Non-GAAP Reconciliation (Unaudited)
(in thousands, except share and per share data)
 
 Three Months Ended December 31, Year Ended December 31,
  2023   2022   2023   2022 
GAAP gross profit$145,520  $129,544  $545,966  $470,734 
Add: Stock-based compensation expense1 2,352   2,757   10,700   10,367 
Add: Amortization of acquired intangible assets2 4,393   4,376   18,386   18,493 
Non-GAAP gross profit$152,265  $136,677  $575,052  $499,594 
Non-GAAP gross margin 74.2%  74.1%  73.9%  72.9%
        
GAAP gross profit - Products$142,512  $125,976  $537,264  $465,323 
Add: Stock-based compensation expense 1,870   2,049   8,202   7,562 
Add: Amortization of acquired intangible assets 4,393   4,376   18,386   18,493 
Non-GAAP gross profit - Products$148,775  $132,401  $563,852  $491,378 
Non-GAAP gross margin - Products 76.4%  76.6%  76.2%  75.9%
        
GAAP gross profit - Professional services$3,008  $3,568  $8,702  $5,411 
Add: Stock-based compensation expense 482   708   2,498   2,805 
Non-GAAP gross profit - Professional services$3,490  $4,276  $11,200  $8,216 
Non-GAAP gross margin - Professional services 33.4%  36.9%  29.8%  21.9%
        
GAAP income (loss) loss from operations$10,932  $(13,349) $(80,733) $(111,614)
Add: Stock-based compensation expense1 23,245   27,598   108,081   119,902 
Add: Amortization of acquired intangible assets2 5,090   5,228   21,499   21,983 
Add: Acquisition-related expenses3       363    
Add: Litigation-related expenses4          115 
Add: Impairment of long-lived assets       30,784    
Add: Restructuring expense 2,231      22,227    
Non-GAAP income from operations$41,498  $19,477  $102,221  $30,386 
        
GAAP net income (loss)$20,048  $(11,385) $(149,260) $(124,717)
Add: Stock-based compensation expense1 23,245   27,598   108,081   119,902 
Add: Amortization of acquired intangible assets2 5,090   5,228   21,499   21,983 
Add: Acquisition-related expenses3       363    
Add: Litigation-related expenses4          115 
Add: Amortization of debt issuance costs 1,077   1,049   4,138   4,085 
Add: Induced conversion expense       53,889    
Add: Change in fair value of derivative assets       15,511    
Add: Impairment of long-lived assets       30,784    
Add: Restructuring expense 2,231      22,227    
Non-GAAP net income (loss)$51,691  $22,490  $107,232  $21,368 
Add: Interest expense of convertible senior notes5 1,571   1,669   2,667   1,500 
Numerator for non-GAAP earnings per share calculation$53,262  $24,159  $109,899  $22,868 
        
Weighted average shares used in GAAP earnings per share calculation, basic 61,497,797   59,328,736   60,756,087   58,552,065 
Dilutive effect of convertible senior notes5 11,183,611   9,572,956   10,429,891   5,803,831 
Dilutive effect of employee equity incentive plans6 1,047,504   709,258   916,134   1,251,725 
Weighted average shares used in non-GAAP earnings per share calculation, diluted 73,728,912   69,610,950   72,102,112   65,607,621 
        
Non-GAAP net income (loss) per share:       
Basic$0.84  $0.38  $1.76  $0.36 
Diluted$0.72  $0.35  $1.52  $0.35 
        
1Includes stock-based compensation expense as follows:       
Cost of revenue$2,352  $2,757  $10,700  $10,367 
Research and development 7,447   9,591   38,022   49,940 
Sales and marketing 6,238   7,966   29,325   31,217 
General and administrative 7,208   7,284   30,034   28,378 
        
2Includes amortization of acquired intangible assets as follows:       
Cost of revenue$4,393  $4,376  $18,386  $18,493 
Sales and marketing 652   657   2,608   2,710 
General and administrative 45   195   505   780 
        
3Includes acquisition-related expenses as follows:       
General and administrative$  $  $363  $ 
        
4Includes litigation-related expenses as follows:       
General and administrative$  $  $  $115 
        
5We use the if-converted method to compute diluted earnings per share with respect to our convertible senior notes. There was no add-back of interest expense or additional dilutive shares related to the convertible senior notes where the effect was anti-dilutive. On an if-converted basis, for the three months ended December 31, 2023, the 2025, 2027 and the 2029 Notes were dilutive and for the three months ended December 31, 2022, the 2025 and 2027 Notes were dilutive. On an if converted basis, for the year ended December 31, 2023, the 2029 and 2027 Notes were dilutive and the 2025 Notes were anti-dilutive and for the year ended December 31, 2022, the 2025 Note was dilutive and the 2027 Note was anti-dilutive.
        
6We use the treasury method to compute the dilutive effect of employee equity incentive plan awards.



RAPID7, INC.
Reconciliation of Net Income (Loss) to Adjusted EBITDA (Unaudited)
(in thousands)
 
 Three Months Ended December 31, Year Ended December 31,
  2023   2022   2023   2022 
GAAP net income (loss)$20,048  $(11,385) $(149,260) $(124,717)
Interest income (4,177)  (960)  (10,177)  (1,813)
Interest expense 2,695   2,782   64,700   10,982 
Other (income) expense, net (3,571)  (3,690)  14,522   1,522 
(Benefit from) provision for income taxes (4,063)  (96)  (518)  2,412 
Depreciation expense 3,118   3,563   14,047   13,571 
Amortization of intangible assets 8,293   6,888   31,892   27,467 
Stock-based compensation expense 23,245   27,598   108,081   119,902 
Acquisition-related expenses       363    
Litigation-related expenses          115 
Impairment of long-lived assets       30,784    
Restructuring expense 2,231      22,227    
Adjusted EBITDA$47,819  $24,700  $126,661  $49,441 



RAPID7, INC.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (Unaudited)
(in thousands)
 
 Three Months Ended December 31, Year Ended December 31,
  2023   2022   2023   2022 
Net cash provided by operating activities$63,466  $40,242  $104,278  $78,204 
Less: Purchases of property and equipment (367)  (7,295)  (4,366)  (20,382)
Less: Capitalized internal-use software costs (2,845)  (4,497)  (15,878)  (17,145)
Free cash flow$60,254  $28,450  $84,034  $40,677 

 


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