Rapid7 Announces Fourth Quarter and Full-Year 2024 Financial Results

Annualized recurring revenue (“ARR”) of $840 million, an increase of 4% year-over-yearFull-year revenue of $844 million, up 9% year-over-year; Product subscriptions revenue of $809 million, up 9% year-over-yearFull-year GAAP operating income of $35 million; Full-year non-GAAP operating income of $164 millionFull-year net cash provided by operating activities of $172 million; Free cash flow of $154 million BOSTON, Feb. 12, 2025 (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 2024. “As we reflect on 2024, I’m proud of the progress we made to position Rapid7 for long-term growth and success. We achieved $840 million in ARR and delivered over $150 million in free cash flow, while advancing our strategic priorities to innovate, scale, and empower our customers to consolidate and secure their operations more effectively. Continued momentum in Managed Detection and Response and the launch of our Exposure Command platform have further strengthened our ability to deliver measurable value for customers,” said Corey Thomas, Chairman and CEO of Rapid7. “As we move through 2025, our focus remains on accelerating growth, deepening customer engagement, and driving innovation to solidify Rapid7 as the security operations platform of choice for organizations worldwide.” Fourth Quarter 2024 Financial Results and Other Metrics As of December 31, 2024 2023 % Change (dollars in thousands)ARR$839,819 $805,670 4%Number of customers 11,727 11,526 2%ARR per customer$71.6 $69.9 2% Three Months Ended December 31, Year Ended December 31, 2024 2023 % Change 2024 2023 % Change (in thousands, except per share data)Product subscriptions revenue$206,328 $194,819 6% $808,906 $740,168 9%Professional services revenue 9,933 10,449 (5%) 35,101 37,539 (6)%Total revenue$216,261 $205,268 5% $844,007 $777,707 9% North America revenue$163,014 $158,695 3% $643,405 $607,448 6%Rest of world revenue 53,247 46,573 14% 200,602 170,259 18%Total revenue$216,261 $205,268 5% $844,007 $777,707 9% GAAP gross profit$150,369 $145,442 $592,972 $545,661 GAAP gross margin 70% 71% 70% 70% Non-GAAP gross profit$157,902 $152,265 $622,343 $575,052 Non-GAAP gross margin 73% 74% 74% 74% GAAP income (loss) from operations$7,279 $10,000 $35,035 $(84,288) GAAP operating margin 3% 5% 4% (11)% Non-GAAP income from operations$39,995 $41,498 $163,508 $102,221 Non-GAAP operating margin 18% 20% 19% 13% GAAP net income (loss)$2,172 $19,116 $25,526 $(152,815) GAAP net income (loss) per share, basic$0.03 0.31 $0.41 $(2.52) GAAP net income (loss) per share, diluted$0.03 $0.26 $0.40 $(2.52) Non-GAAP net income$34,342 $51,691 $163,138 $107,232 Non-GAAP net income per share: Basic$0.54 $0.84 $2.61 $1.76 Diluted$0.48 $0.72 $2.28 $1.52 Adjusted EBITDA$46,310 $47,819 $188,450 $126,661 Net cash provided by operating activities$63,773 $63,466 $171,670 $104,278 Free cash flow$58,842 $60,254 $154,083 $84,034 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. Certain prior periods reflect immaterial corrections. See Exhibit 1 for additional information. Recent Business Highlights In November, Rapid7 won “Security Vendor of the Year” at the CRN Channel Awards 2024. The award is one of the oldest and most prestigious in the UK IT channel, and acknowledges Rapid7’s overall contribution to business development within the channel.In November, Rapid7’s Managed Extended Detection & Response added coverage for Microsoft security telemetry, integrating organizations' existing Microsoft telemetry into Rapid7's Command Platform for broader, faster threat detection and remediation, without additional infrastructure or complex integration requirements.In November, Rapid7 expanded Exposure Command to add support for Amazon Web Services (“AWS”) Resource Control Policies, providing additional visibility, insights, and best practices to guide customers in addressing complex enterprise Identity and Access Management challenges across the modern attack surface.In December, Rapid7’s Managed Extended Detection & Response added coverage for AWS environments, bringing customers deeper cloud detection and response capabilities by combining cloud native telemetry, AWS security telemetry, and enhanced detections in the Rapid7 Command Platform.In December, Rapid7 achieved the In Process Designation from the Federal Risk and Authorization Management Program (“FedRAMPⓇ”) for its InsightGovCloud Platform, indicating that Rapid7 is actively working towards authorization and highlighting Rapid7’s continued commitment to partnering with federal agencies to invest in security solutions that enable continuous threat exposure management and enhance the resilience of their organizations.In January, Rapid7 earned the highest possible score on the Human Rights Campaign Foundation’s 2025 Corporate Equality Index, the nation’s foremost report for measuring corporate policies and practices related to LGBTQ+ workplace equality. First Quarter and Full-Year 2025 Guidance Rapid7 anticipates ARR, revenue, non-GAAP income from operations, non-GAAP net income per share and free cash flow to be in the following ranges: First Quarter 2025 Full-Year 2025 (in millions, except per share data)ARR $870 to $890 Year-over-year growth 4% to 6% Revenue $207 to $209 $860 to $870 Year-over-year growth 1% to 2% 2% to 3% Non-GAAP income from operations $23 to $25 $125 to $135 Non-GAAP net income per share $0.33 to $0.36 $1.72 to $1.85 Weighted average shares outstanding 75.6 77.3 Free cash flow Approximately $135 million 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 2025 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, litigation-related expenses and discrete tax 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, including, but not limited to, non-ordinary course 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, February 12, 2025, 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 from operations, non-GAAP net income, non-GAAP net income 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 from operations, non-GAAP net income and non-GAAP net income 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, change in the fair value of derivative assets, restructuring expense, induced conversion expense and discrete tax items. Non-GAAP net income per basic and diluted share is calculated as non-GAAP net income divided by the weighted average shares used to compute net income 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 our former 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, including accretion expense associated with contingent consideration, 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, that was completed during fiscal year 2024, 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. Discrete tax items. We exclude certain discrete tax items such as income tax expenses or benefits that are not related to ongoing business operations in the current year and adjustments to uncertain tax position reserves as these charges are not indicative of our ongoing operating results, and they are not considered when we are forecasting our future results. Anti-dilutive impact of capped call transaction. Our capped call 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 income (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, (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 ARR. ARR is defined as the annual value of all recurring revenue related to 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, which can be impacted by contract start and end dates and renewal rates, and does not include revenue reported as 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 of 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 2025, and the assumptions underlying such guidance. 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, our ability to successfully grow our sales of our cloud-based solutions, including through the shift to a consolidated platform sales approach, effectiveness of our restructuring plan that was completed during fiscal year 2024, 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, exposure to greater than anticipated tax liabilities, 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 7, 2024, 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 ChwalkSenior Director, Investor Relationsinvestors@rapid7.com(617) 865-4277 Press contact: Alice RandallDirector, Global Corporate Communicationspress@rapid7.com(214) 693-4727 RAPID7, INC.Consolidated Balance Sheets (Unaudited)(in thousands) December 31, 2024 December 31, 2023Assets Current assets: Cash and cash equivalents$334,686 $213,629 Short-term investments 187,025 169,544 Accounts receivable, net 168,242 164,862 Deferred contract acquisition and fulfillment costs, current portion 52,134 45,008 Prepaid expenses and other current assets 44,024 41,407 Total current assets 786,111 634,450 Long-term investments 37,274 56,171 Property and equipment, net 32,245 39,642 Operating lease right-of-use assets 48,877 54,693 Deferred contract acquisition and fulfillment costs, non-current portion 73,672 76,601 Goodwill 575,268 536,351 Intangible assets, net 85,719 94,546 Other assets 12,868 12,894 Total assets$1,652,034 $1,505,348 Liabilities and Stockholders’ Equity (Deficit) Current liabilities: Accounts payable$18,908 $15,812 Accrued expenses and other current liabilities 88,802 85,025 Convertible senior notes, current portion, net 45,895 — Operating lease liabilities, current portion 15,493 13,452 Deferred revenue, current portion 461,118 455,503 Total current liabilities 630,216 569,792 Convertible senior notes, non-current portion, net 888,356 929,996 Operating lease liabilities, non-current portion 68,430 81,130 Deferred revenue, non-current portion 27,078 32,577 Other long-term liabilities 20,243 10,032 Total liabilities 1,634,323 1,623,527 Stockholders’ equity (deficit): Common stock$635 $617 Treasury stock (4,765) (4,765)Additional paid-in-capital 1,011,080 898,185 Accumulated other comprehensive (loss) income (1,205) 1,344 Accumulated deficit (988,034) (1,013,560)Total stockholders’ equity (deficit) 17,711 (118,179)Total liabilities and stockholders’ equity (deficit)$1,652,034 $1,505,348 Note: Certain prior periods reflect immaterial corrections. See Exhibit 1 for additional information. RAPID7, INC.Consolidated Statements of Operations (Unaudited)(in thousands, except share and per share data) Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 Revenue: Product subscriptions$206,328 $194,819 $808,906 $740,168 Professional services 9,933 10,449 35,101 37,539 Total revenue 216,261 205,268 844,007 777,707 Cost of revenue: Product subscriptions 58,932 52,369 225,547 203,140 Professional services 6,960 7,457 25,488 28,906 Total cost of revenue 65,892 59,826 251,035 232,046 Total gross profit 150,369 145,442 592,972 545,661 Operating expenses: Research and development 46,334 40,031 173,126 177,937 Sales and marketing 72,767 73,557 298,809 313,661 General and administrative 23,989 19,623 86,002 85,340 Impairment of long-lived assets — — — 30,784 Restructuring — 2,231 — 22,227 Total operating expenses 143,090 135,442 557,937 629,949 Income (loss) from operations 7,279 10,000 35,035 (84,288)Other income (expense), net: Interest income 5,551 4,177 21,063 10,177 Interest expense (2,783) (2,695) (10,963) (64,700)Other (expense) income, net (4,361) 3,571 (3,680) (14,522)Income (loss) before income taxes 5,686 15,053 41,455 (153,333)Provision for (benefit from) income taxes 3,514 (4,063) 15,929 (518)Net income (loss)$2,172 $19,116 $25,526 $(152,815)Net income (loss) per share, basic$0.03 $0.31 $0.41 $(2.52)Net income (loss) per share, diluted (1)$0.03 $0.26 $0.40 $(2.52)Weighted-average common shares outstanding, basic 63,339,306 61,497,797 62,607,583 60,756,087 Weighted-average common shares outstanding, diluted 63,901,277 73,728,912 63,183,651 60,756,087 (1) We 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, 2024 and the years ended December 31, 2024 and 2023, the 2025, 2027 and 2029 Notes were anti-dilutive. On an if-converted basis, for the three months ended December 31, 2023, the 2027 and 2029 Notes were dilutive and the 2025 Note was anti-dilutive. Note: Certain prior periods reflect immaterial corrections. See Exhibit 1 for additional information. RAPID7, INC.Consolidated Statements of Cash Flows (Unaudited)(in thousands) Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 Cash flows from operating activities: Net income (loss)$2,172 $19,116 $25,526 $(152,815)Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 11,436 11,411 44,893 45,939 Amortization of debt issuance costs 1,122 1,077 4,447 4,138 Stock-based compensation expense 27,412 24,177 107,961 111,636 Deferred income taxes (1,049) (5,624) 791 (5,624)Impairment of long-lived assets — — — 30,784 Change in fair value of derivative assets — — — 15,511 Induced conversion expense — — — 53,889 Other 3,031 (5,157) (1,503) 469 Change in operating assets and liabilities: Accounts receivable (27,912) (26,449) (5,480) (14,021)Deferred contract acquisition and fulfillment costs (3,703) (9,046) (4,196) (18,534)Prepaid expenses and other assets (3,257) (9,558) 2,805 (4,125)Accounts payable 13,227 6,704 2,777 5,449 Accrued expenses 7,584 20,390 (9,829) 2,422 Deferred revenue 36,317 36,839 (795) 30,472 Other liabilities (2,607) (414) 4,273 (1,312)Net cash provided by operating activities 63,773 63,466 171,670 104,278 Cash flows from investing activities: Business acquisition, net of cash acquired (103) — (37,301) (34,841)Purchases of property and equipment (1,183) (367) (3,425) (4,366)Capitalization of internal-use software costs (3,748) (2,845) (14,162) (15,878)Purchases of investments — (82,816) (242,494) (276,829)Sales/maturities of investments 58,000 49,750 250,500 150,450 Other investments — 2,710 360 2,710 Net cash provided by (used in) investing activities 52,966 (33,568) (46,522) (178,754)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)Payments for repurchase of convertible senior notes — — — (199,998)Payments related to business acquisitions (500) — (500) (2,250)Proceeds from capped call settlement — — — 17,518 Taxes paid related to net share settlement of equity awards (847) (1,558) (4,730) (5,570)Proceeds from employee stock purchase plan — — 9,246 11,323 Proceeds from stock option exercises 130 69 1,566 3,053 Net cash (used in) provided by financing activities (1,217) (2,198) 5,582 79,597 Effects of exchange rates on cash, cash equivalents and restricted cash (3,529) 3,212 (2,756) 1,202 Net increase in cash, cash equivalents and restricted cash 111,993 30,912 127,974 6,323 Cash, cash equivalents and restricted cash, beginning of period 230,108 183,215 214,127 207,804 Cash, cash equivalents and restricted cash, end of period$342,101 $214,127 $342,101 $214,127 Supplemental cash flow information: Cash paid for interest on convertible senior notes 518 518 6,358 4,605 Cash paid for income taxes, net of refunds 1,876 459 8,949 1,624 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents 334,686 213,629 334,686 213,629 Restricted cash included in prepaid expenses and other current assets and other assets 7,415 498 7,415 498 Total cash, cash equivalents and restricted cash$342,101 $214,127 $342,101 $214,127 Note: Certain prior periods reflect immaterial corrections. See Exhibit 1 for additional information. 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, 2024 2023 2024 2023 GAAP gross profit$150,369 $145,442 $592,972 $545,661 Add: Stock-based compensation expense1 3,109 2,430 12,208 11,005 Add: Amortization of acquired intangible assets2 4,424 4,393 17,163 18,386 Non-GAAP gross profit$157,902 $152,265 $622,343 $575,052 Non-GAAP gross margin 73.0% 74.2% 73.7% 73.9% GAAP gross profit - Product subscriptions$147,396 $142,450 $583,359 $537,028 Add: Stock-based compensation expense 2,576 1,932 10,376 8,439 Add: Amortization of acquired intangible assets 4,424 4,393 17,163 18,386 Non-GAAP gross profit - Product subscriptions$154,396 $148,775 $610,898 $563,853 Non-GAAP gross margin - Product subscriptions 74.8% 76.4% 75.5% 76.2% GAAP gross profit - Professional services$2,973 $2,992 $9,613 $8,633 Add: Stock-based compensation expense 533 498 1,832 2,566 Non-GAAP gross profit - Professional services$3,506 $3,490 $11,445 $11,199 Non-GAAP gross margin - Professional services 35.3% 33.4% 32.6% 29.8% GAAP income (loss) from operations$7,279 $10,000 $35,035 $(84,288)Add: Stock-based compensation expense1 27,412 24,177 107,961 111,636 Add: Amortization of acquired intangible assets2 5,121 5,090 19,951 21,499 Add: Acquisition-related expenses3 183 — 751 363 Add: Impairment of long-lived assets — — — 30,784 Add: Restructuring expense — 2,231 (190) 22,227 Non-GAAP income from operations$39,995 $41,498 $163,508 $102,221 GAAP net income (loss)$2,172 $19,116 $25,526 $(152,815)Add: Stock-based compensation expense1 27,412 24,177 107,961 111,636 Add: Amortization of acquired intangible assets2 5,121 5,090 19,951 21,499 Add: Amortization of debt issuance costs 1,122 1,077 4,447 4,138 Add: Acquisition-related expenses3 183 — 751 363 Add: Impairment of long-lived assets — — — 30,784 Add: Change in fair value of derivative assets — — — 15,511 Add: Restructuring expense4 — 2,231 (190) 22,227 Add: Induced conversion expense — — — 53,889 Add: Discrete tax items5 (1,668) — 4,692 — Non-GAAP net income$34,342 $51,691 $163,138 $107,232 Add: Interest expense of convertible senior notes6 1,571 1,571 6,285 2,667 Numerator for non-GAAP earnings per share, diluted calculation$35,913 $53,262 $169,423 $109,899 Weighted average shares used in GAAP earnings per share calculation, basic 63,339,306 61,497,797 62,607,583 60,756,087 Dilutive effect of convertible senior notes6 11,183,611 11,183,611 11,183,611 10,429,891 Dilutive effect of employee equity incentive plans7 561,971 1,047,504 576,068 916,134 Weighted average shares used in non-GAAP earnings per share calculation, diluted 75,084,888 73,728,912 74,367,262 72,102,112 Non-GAAP net income per share: Basic$0.54 $0.84 $2.61 $1.76 Diluted$0.48 $0.72 $2.28 $1.52 1 Includes stock-based compensation expense as follows: Cost of revenue$3,109 $2,430 $12,208 $11,005 Research and development 10,703 7,749 37,566 39,183 Sales and marketing 6,615 6,482 28,718 30,350 General and administrative 6,985 7,516 29,469 31,098 2 Includes amortization of acquired intangible assets as follows: Cost of revenue$4,424 $4,393 $17,163 $18,386 Sales and marketing 652 652 2,608 2,608 General and administrative 45 45 180 505 3 Includes acquisition-related expenses as follows: General and administrative$183 $— $751 $363 4 For the year ended December 31, 2024, restructuring expense was included within general and administrative expense in our consolidated statements of operations. 5 Includes discrete tax items as follows:Provision for income taxes$(1,668) $— $4,692 $— 6 We 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. Adjustments for interest expense, if applicable, on our convertible senior notes for purposes of calculating non-GAAP earnings per share are done gross of any tax impact. On an if-converted basis, for the three months ended December 31, 2024 and 2023, the 2025, 2027 and 2029 Notes were dilutive. On an if-converted basis, for the year ended December 31, 2024, the 2025, 2027 and 2029 Notes were dilutive. For the year ended December 31, 2023, the 2027 and 2029 Notes were dilutive and the 2025 Notes were anti-dilutive. 7 We use the treasury method to compute the dilutive effect of employee equity incentive plan awards. Note: Certain prior periods reflect immaterial corrections. See Exhibit 1 for additional information. RAPID7, INC.Reconciliation of Net Income (Loss) to Adjusted EBITDA (Unaudited)(in thousands) Three Months Ended December 31, Year Ended December 31, 2024 2023 2024 2023 GAAP net income (loss)$2,172 $19,116 $25,526 $(152,815)Interest income (5,551) (4,177) (21,063) (10,177)Interest expense 2,783 2,695 10,963 64,700 Other (income) expense, net 4,361 (3,571) 3,680 14,522 Provision for (benefit from) income taxes 3,514 (4,063) 15,929 (518)Depreciation expense 2,658 3,118 11,059 14,047 Amortization of intangible assets 8,778 8,293 33,834 31,892 Stock-based compensation expense 27,412 24,177 107,961 111,636 Acquisition-related expenses 183 — 751 363 Impairment of long-lived assets — — — 30,784 Restructuring expense — 2,231 (190) 22,227 Adjusted EBITDA$46,310 $47,819 $188,450 $126,661 Note: Certain prior period reflect immaterial corrections. See Exhibit 1 for additional information. 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, 2024 2023 2024 2023 Net cash provided by operating activities$63,773 $63,466 $171,670 $104,278 Less: Purchases of property and equipment (1,183) (367) (3,425) (4,366)Less: Capitalized internal-use software costs (3,748) (2,845) (14,162) (15,878)Free cash flow$58,842 $60,254 $154,083 $84,034 First Quarter and Full-Year 2025 GuidanceGAAP to Non-GAAP Reconciliation(in millions, except per share data) First Quarter 2025 Full-Year 2025Reconciliation of GAAP income from operations to non-GAAP income from operations: Anticipated GAAP loss from operations$(10)to$(8) $(13)to$(3)Add: Anticipated stock-based compensation expense 28 to 28 118 to 118 Add: Anticipated amortization of acquired intangible assets 5 to 5 20 to 20 Anticipated non-GAAP income from operations$23 to$25 $125 to$135 Reconciliation of GAAP net income to non-GAAP net income: Anticipated GAAP net loss$(11)to$(9) $(15)to$(5)Add: Anticipated stock-based compensation expense 28 to 28 118 to 118 Add: Anticipated amortization of acquired intangible assets 5 to 5 20 to 20 Add: Anticipated amortization of debt issuance costs 1 to 1 4 to 4 Anticipated non-GAAP net income$23 to$25 $127 to$137 Add: Anticipated interest expense on convertible senior notes 2 to 2 6 to 6 Numerator for non-GAAP earnings per share calculation$25 to$27 $133 to$143 Anticipated GAAP net loss per share, diluted$(0.15) $(0.12) $(0.19) $(0.06)Anticipated non-GAAP net income per share, diluted$0.33 $0.36 $1.72 $1.85 Weighted average shares used in earnings per share calculation, diluted 75.6 77.3 The reconciliation does not reflect any items that are unknown at this time, including, but not limited to, non-ordinary course 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 2025Reconciliation of net cash provided by operating activities to free cash flow: Anticipated net cash provided by operating activities$153 Less: Anticipated purchases of property and equipment (3)Less: Anticipated capitalized internal-use software costs (15)Anticipated free cash flow$135 Exhibit 1 - Immaterial Correction of an Error During the fourth quarter of 2024, we identified an immaterial error related to stock-based compensation expense associated with certain restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted during fiscal years 2023 and 2024 that resulted in an understatement of stock-based compensation expense in fiscal year 2023 and the year-to-date period ended September 30, 2024. We have concluded that our previously issued financial statements were not materially misstated as a result of this error and have corrected the error in these prior periods. The correction of this error resulted in (i) an increase in additional paid-in capital and a corresponding increase to accumulated deficit as of December 31, 2023 of approximately $3.6 million and (ii) an increase in additional paid-in capital and a corresponding increase to accumulated deficit as of September 30, 2024 of approximately $7.2 million. There was no change to net cash provided by operating activities, net cash used in investing activities and net cash provided by financing activities in our consolidated statements of cash flows for the year ended December 31, 2023 and the year-to-date period ended September 30, 2024. Additionally, there was no change to our ARR, revenue, non-GAAP net income (loss) from operations, non-GAAP net income (loss) or free cash flow. The following table sets forth the effect of the immaterial error correction to certain line items of our consolidated statements of operations for (i) the three months ended December 31, 2023, (ii) the fiscal year ended December 31, 2023, and (iii) the three months ended March 31, 2024, June 30, 2024 and September 30, 2024, respectively: Three Months Ended Year Ended Three Months Ended December 31, 2023 March 31, 2024 June 30, 2024 September 30, 2024 Adjustment Adjustment Adjustment Adjustment Adjustment (in thousands, except for per share amounts)Consolidated Statement of Operations: Cost of revenue - product subscriptions$62 $236 $79 $125 $121 Cost of revenue - professional services$16 $69 $12 $19 $19 Research and development expense$302 $1,161 $378 $392 $411 Sales and marketing expense$243 $1,025 $290 $331 $300 General and administrative expense$309 $1,064 $93 $790 $293 Net income (loss)$(932) $(3,555) $(852) $(1,657) $(1,144)Net income (loss) per share, basic$(0.02) $(0.06) $(0.02) $(0.03) $(0.02)Net income (loss) per share, diluted$(0.01) $(0.06) $(0.01) $(0.02) $(0.01)

Rapid7 Announces Fourth Quarter and Full-Year 2024 Financial Results

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