- ARR: $816 million, 9% growth over the prior year.
- New ARR from Threat Complete Offerings: Over 40% of new ARR in the quarter.
- Revenue: $208 million, 9% growth over the prior year.
- Recurring Product Subscription Revenue: $200 million, 10% growth over the prior year.
- International Revenue: Grew 19% year over year, now 23% of total revenue.
- Profit Gross Margin: 76%.
- Total Gross Margin: 74%.
- Sales and Marketing Expenses: 33% of revenue.
- R&D Expenses: 15% of revenue.
- G&A Expenses: 7% of revenue.
- Operating Income: $39 million, 19% operating margin.
- Adjusted EBITDA: $45 million.
- Net Income per Diluted Share: $0.58.
- Cash, Cash Equivalents, and Investments: $494 million.
- Free Cash Flow: $29 million.
- Full-Year Ending ARR Guidance: $850 million to $860 million, 6% to 7% growth over the prior year.
- Full-Year Revenue Guidance: $833 million to $837 million, 7% to 8% growth.
- Full-Year Operating Income Guidance: $152 million to $156 million.
- Full-Year Net Income per Share Guidance: $2.15 to $2.20.
- Full-Year Free Cash Flow Guidance: $150 million to $160 million.
- Q3 Revenue Guidance: $209 million to $211 million, 5% to 6% growth over the prior year.
- Q3 Operating Income Guidance: $36 million to $38 million.
- Q3 Net Income per Share Guidance: $0.50 to $0.53.
Release Date: August 06, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rapid7 Inc (RPD, Financial) ended the second quarter with $816 million in ARR, representing 9% growth over the prior year.
- The company's consolidated threat complete offerings drove over 40% of new ARR in the quarter.
- Sales pipeline generated across strategic partners grew 15% year over year in the second quarter.
- Rapid7 Inc (RPD) introduced its new command platform at Black Hat, which aims to provide integrated risk visibility across the full attack surface.
- The company reported a total revenue of $208 million for the second quarter, growing 9% over the prior year and exceeding the guided range.
Negative Points
- ARR growth in the second quarter was weighted towards sales expansion, with total customer base growing only 2% year over year.
- Professional services revenue declined sequentially as the company continues to deemphasize certain lower-value services.
- The demand environment continues to be choppy, with relative stability in customer spending trends expected to continue.
- Incremental costs in the second half of the year related to the Noetic acquisition and higher advisory and legal fees are expected to impact profitability.
- The company is facing budget pressures from customers, which could impact future growth and spending.
Q & A Highlights
Q: Corey, nice to see the stability in the results. Can you elaborate on the go-to-market changes and their potential impact on second-half performance?
A: Corey Thomas, CEO: The primary drivers are gearing up for the evolution of our go-to-market motion, focusing on the command and exposure command launches. We aim to upgrade our VM customers to our new command platform. We have three established leaders ready to take over integrated roles across regions. Additionally, I want to spend more direct time with our sales leaders to accelerate the business.
Q: How important are partners going to be, especially with new product rollouts and broader distribution?
A: Corey Thomas, CEO: Partners are critical. We focus on ensuring our products and services are relevant for the next five years. We are making good traction with partners, increasing our investment and service around it. Partners like our offering, and we are seeing positive momentum.
Q: Could you talk about how sales productivity and attrition levels have trended relative to your internal expectations?
A: Corey Thomas, CEO: We have seen very healthy retention of the sales force, in line with our expectations. Our sales team is excited about the new command launch and the new products, which is bolstering retention.
Q: Can you share any anecdotes from customers regarding the new command platform and early momentum?
A: Corey Thomas, CEO: We are seeing a lot of early interest and the highest pre-launch pipeline build in Rapid7’s history. We have already closed the first set of deals. Our primary goal this year is to build pipeline for reacceleration next year.
Q: How are you thinking about the command platform upsell and market changes towards CTEM or attack surface management?
A: Corey Thomas, CEO: Customers want a high-confidence view of their overall attack surface, integrating data from all security telemetry. We are seeing a shift to CTEM, providing real value to customers in ways traditional vulnerability management did not.
Q: Can you provide more color on pricing, packaging, and go-to-market for the command platform?
A: Corey Thomas, CEO: We aim to make 100% visibility into customers’ environments affordable and achievable. It will be a reasonable uplift for existing vulnerability management customers, improving NRR expansion growth and retention.
Q: How are you addressing customer concerns regarding pricing and ROI?
A: Corey Thomas, CEO: We have a high ROI story, solving big problems for customers at a reasonable incremental cost. We are taking this strategy out to all our customers, making it compelling and attractive.
Q: What needs to happen for ARR growth to improve back to double digits over the next year or so?
A: Corey Thomas, CEO: We have latent demand in detection response and the command platform, which allows us to participate in higher-value areas. We are making investments in the partner ecosystem and focusing on enabling our team.
Q: Can you comment on the overall pipeline for the second half relative to the first half?
A: Corey Thomas, CEO: The primary dynamic was a poor Q1. We normalized and stabilized in Q2, setting up well for the second half. We took a detailed look at our pipeline and believe we will be in the guidance range.
Q: How are you planning to sustain upsell momentum in the face of budget constraints and elongated sales cycles?
A: Corey Thomas, CEO: We have a high ROI story, solving big problems for customers at a reasonable incremental cost. We are taking this strategy out to all our customers, making it compelling and attractive.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
