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| 8-K - 8-K - Rapid7, Inc. | rp-20200210.htm |
Exhibit 99.1
Rapid7 Announces Fourth Quarter and Full-Year 2019 Financial Results
•Annualized recurring revenue (ARR) of $338.7 million, an increase of 35% year-over-year
•Fourth quarter 2019 revenue of $91.6 million and full year 2019 revenue of $326.9 million
•Fourth quarter 2019 year-over-year revenue growth of 33% and full-year 2019 year-over-year revenue growth of 34%
•Customer growth of 16% year-over-year
•Guiding 2020 ARR year-over-year growth between 24% to 26% and year-over-year revenue growth between 21% and 24%
Boston, MA – February 10, 2020 – Rapid7, Inc. (NASDAQ: RPD), a leading provider of security analytics and automation, today announced financial results for the fourth quarter and full-year 2019.
"Rapid7 capped off another great year in 2019 with strong full-year operating results. Our ARR grew by 35% and we again exceeded the high end of our guidance with revenue growth of 34% while delivering a 9-point improvement in non-GAAP operating margin from the prior year." said Corey Thomas, Chairman and CEO of Rapid7.
"These results reflect a healthy demand environment and consistent execution. With a leading and well-diversified product portfolio, we see a large opportunity in front of us and are well positioned for future growth. As a result, for 2020, we expect strong ARR growth of 25%, at the midpoint, while continuing to deliver operating leverage."
Fourth Quarter 2019 Financial Results and Other Metrics
| Three Months Ended December 31, | |||||||||||||||||
| 2019 | 2018 | % Change | |||||||||||||||
| (dollars in thousands) | |||||||||||||||||
| Annualized recurring revenue | $ | 338,714 | $ | 251,819 | 35 | % | |||||||||||
| Number of customers | 9,022 | 7,808 | 16 | % | |||||||||||||
| ARR per customer | $ | 37.5 | $ | 32.3 | 16 | % | |||||||||||
| Recurring revenue as a percentage of total revenue | 87 | % | 83 | % | |||||||||||||
| Renewal rate* | 108 | % | 119 | % | |||||||||||||
* For the three months ended December 31, 2018, our renewal rate was adjusted from 120%, as previously disclosed, to 119% based on a reclassification of certain upsells and cross-sells.
rapid7.com
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||||||||
| 2019 | 2018 | % Change | 2019 | 2018 | % Change | ||||||||||||||||||||||||||||||
| (in thousands, except per share data) | |||||||||||||||||||||||||||||||||||
| Products revenue | $ | 74,326 | $ | 50,420 | 47 | % | $ | 261,119 | $ | 168,571 | 55 | % | |||||||||||||||||||||||
| Maintenance and support revenue | 8,671 | 10,246 | (15) | % | 36,778 | 42,223 | (13) | % | |||||||||||||||||||||||||||
| Professional services revenue | 8,651 | 8,104 | 7 | % | 29,050 | 33,297 | (13) | % | |||||||||||||||||||||||||||
| Total revenue | $ | 91,648 | $ | 68,770 | 33 | % | $ | 326,947 | $ | 244,091 | 34 | % | |||||||||||||||||||||||
| North America revenue | $ | 76,258 | $ | 58,488 | 30 | % | $ | 274,481 | $ | 207,727 | 32 | % | |||||||||||||||||||||||
| Rest of world revenue | 15,390 | 10,282 | 50 | % | 52,466 | 36,364 | 44 | % | |||||||||||||||||||||||||||
| Total revenue | $ | 91,648 | $ | 68,770 | 33 | % | $ | 326,947 | $ | 244,091 | 34 | % | |||||||||||||||||||||||
| GAAP gross profit | $ | 66,286 | $ | 49,484 | $ | 235,801 | $ | 173,008 | |||||||||||||||||||||||||||
| GAAP gross margin | 72 | % | 72 | % | 72 | % | 71 | % | |||||||||||||||||||||||||||
| Non-GAAP gross profit | $ | 68,554 | $ | 51,138 | $ | 244,720 | $ | 178,685 | |||||||||||||||||||||||||||
| Non-GAAP gross margin | 75 | % | 74 | % | 75 | % | 73 | % | |||||||||||||||||||||||||||
| GAAP loss from operations | $ | (12,315) | $ | (10,812) | $ | (45,995) | $ | (53,038) | |||||||||||||||||||||||||||
| GAAP operating margin | (13) | % | (16) | % | (14) | % | (22) | % | |||||||||||||||||||||||||||
| Non-GAAP income (loss) from operations | $ | 785 | $ | (2,695) | $ | 2,404 | $ | (20,381) | |||||||||||||||||||||||||||
| Non-GAAP operating margin | 1 | % | (4) | % | 1 | % | (8) | % | |||||||||||||||||||||||||||
| GAAP net loss | $ | (14,346) | $ | (13,020) | $ | (53,845) | $ | (55,545) | |||||||||||||||||||||||||||
| GAAP net loss per share, basic and diluted | $ | (0.29) | $ | (0.27) | $ | (1.10) | $ | (1.20) | |||||||||||||||||||||||||||
| Non-GAAP net income (loss) | $ | 1,484 | $ | (2,368) | $ | 4,306 | $ | (19,057) | |||||||||||||||||||||||||||
| Non-GAAP net income (loss) per share, basic | $ | 0.03 | $ | (0.05) | $ | 0.09 | $ | (0.41) | |||||||||||||||||||||||||||
| Non-GAAP net income (loss) per share, diluted | $ | 0.03 | $ | (0.05) | $ | 0.08 | $ | (0.41) | |||||||||||||||||||||||||||
| Adjusted EBITDA | $ | 3,654 | $ | (658) | $ | 12,453 | $ | (13,428) | |||||||||||||||||||||||||||
| Cash provided by (used in) operating activities | $ | 7,824 | $ | 11,934 | $ | (1,420) | $ | 6,066 | |||||||||||||||||||||||||||
rapid7.com
Recent Business Highlights
•In November 2019, Forrester Consulting conducted a study on behalf of Rapid7 which highlighted that InsightVM customers could realize more than 300% ROI over a three-year period, over 20% reduction in false positives and 60% reduction in patching efforts compared to their incumbent vulnerability management solution.
•In December 2019, Rapid7 announced that InsightIDR, its cloud Security Information and Event Management (SIEM) offering is available for purchase in Amazon Web Services (AWS) Marketplace, highlighting Rapid7's ongoing commitment to helping its customers secure their cloud environments.
•In January 2020, Frost & Sullivan recognized Rapid7 with its 2019 Global SOAR Company of the year award, highlighting Rapid7's focus on mid-market enterprises.
Please see investors.rapid7.com for our Financial Metrics spreadsheet.
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.
First Quarter and Full-Year 2020 Guidance
Rapid7 anticipates annualized recurring revenue, revenue, non-GAAP (loss) income from operations, and non-GAAP net (loss) income per share to be in the following ranges:
First Quarter and Full-Year 2020 Guidance (in millions, except per share data) | |||||||||||||||||||||||
First Quarter 2020 | Full-Year 2020 | ||||||||||||||||||||||
| Annualized recurring revenue | $ | 420.0 | $ | 426.8 | |||||||||||||||||||
| Year-over-year growth | 24 | % | 26 | % | |||||||||||||||||||
| Revenue | $ | 91.6 | to | $ | 93.2 | $ | 396.0 | to | $ | 404.0 | |||||||||||||
| Year-over-year growth | 25 | % | to | 27 | % | 21 | % | to | 24 | % | |||||||||||||
| Non-GAAP (loss) income from operations | $ | (6.3) | to | $ | (5.3) | $ | 7.0 | to | $ | 11.0 | |||||||||||||
| Non-GAAP net (loss) income per share | $ | (0.13) | to | $ | (0.11) | $ | 0.11 | to | $ | 0.18 | |||||||||||||
| Weighted average shares outstanding | 50.2 | 55.0 | |||||||||||||||||||||
Guidance for the first quarter and full-year 2020 does not include any potential impact of foreign exchange gains or losses. The weighted average shares outstanding for the first quarter of 2020 represent basic shares outstanding given our projected non-GAAP net loss. The weighted average shares outstanding for full year 2020 represent non-GAAP 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 non-recurring items. Rapid7 has provided a reconciliation of each non-GAAP guidance measure to the most comparable GAAP measures in the financial statement tables included in this press release. The reconciliation does not reflect any items that are unknown at this time, such as acquisition-related expenses, follow-on public offering costs, and 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 10, 2020, to discuss its results at 4:30 p.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 http://investors.rapid7.com. A telephone replay of the conference call will be available at 855-859-2056 or 404-537-3406 (access code 1729437) until February 18, 2020. A webcast replay will be available at http://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
rapid7.com
vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks. Over 9,000 customers rely on Rapid7 technology, services, and research to improve security outcomes and securely advance their organizations. For more information, visit our website, check out our blog, or follow us on Twitter.
Non-GAAP Financial Measures and Other Business 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.
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.
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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 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.
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 future financial and business performance for the first quarter and full-year 2020, market opportunities, future growth and operating leverage are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “opportunity,” “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 September 30, 2019 filed with the
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Securities and Exchange Commission on November 5, 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.
###
Investor contact:
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)
| December 31, 2019 | December 31, 2018 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 123,413 | $ | 99,565 | ||||||||||
| Short-term investments | 116,158 | 159,210 | ||||||||||||
| Accounts receivable, net | 87,927 | 74,935 | ||||||||||||
| Deferred contract acquisition and fulfillment costs, current portion | 17,047 | 12,321 | ||||||||||||
| Prepaid expenses and other current assets | 20,051 | 9,746 | ||||||||||||
| Total current assets | 364,596 | 355,777 | ||||||||||||
| Long-term investments | 22,887 | 44,892 | ||||||||||||
| Property and equipment, net | 50,670 | 17,523 | ||||||||||||
| Operating lease right-of-use assets | 60,984 | — | ||||||||||||
| Deferred contract acquisition and fulfillment costs, non-current portion | 34,213 | 27,634 | ||||||||||||
| Goodwill | 97,866 | 88,420 | ||||||||||||
| Intangible assets, net | 28,561 | 23,955 | ||||||||||||
| Other assets | 5,136 | 1,168 | ||||||||||||
| Total assets | $ | 664,913 | $ | 559,369 | ||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 6,836 | $ | 7,048 | ||||||||||
| Accrued expenses | 41,021 | 37,376 | ||||||||||||
| Operating lease liabilities, current portion | 7,179 | — | ||||||||||||
| Deferred revenue, current portion | 231,518 | 189,855 | ||||||||||||
| Other current liabilities | 119 | 707 | ||||||||||||
| Total current liabilities | 286,673 | 234,986 | ||||||||||||
| Convertible senior notes, net | 185,200 | 174,688 | ||||||||||||
| Operating lease liabilities, non-current portion | 72,294 | — | ||||||||||||
| Deferred revenue, non-current portion | 36,226 | 58,716 | ||||||||||||
| Other long-term liabilities | 1,352 | 3,660 | ||||||||||||
| Total liabilities | 581,745 | 472,050 | ||||||||||||
| Stockholders’ equity: | ||||||||||||||
| Common stock | 499 | 476 | ||||||||||||
| Treasury stock | (4,764) | (4,764) | ||||||||||||
| Additional paid-in-capital | 605,650 | 556,223 | ||||||||||||
| Accumulated other comprehensive loss | 213 | (31) | ||||||||||||
| Accumulated deficit | (518,430) | (464,585) | ||||||||||||
| Total stockholders’ equity | 83,168 | 87,319 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 664,913 | $ | 559,369 | ||||||||||
RAPID7, INC.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||||||||
| Revenue: | |||||||||||||||||||||||||||||
| Products | $ | 74,326 | $ | 50,420 | $ | 261,119 | $ | 168,571 | |||||||||||||||||||||
| Maintenance and support | 8,671 | 10,246 | 36,778 | 42,223 | |||||||||||||||||||||||||
| Professional services | 8,651 | 8,104 | 29,050 | 33,297 | |||||||||||||||||||||||||
| Total revenue | 91,648 | 68,770 | 326,947 | 244,091 | |||||||||||||||||||||||||
| Cost of revenue: | |||||||||||||||||||||||||||||
| Products | 17,016 | 11,430 | 59,684 | 39,810 | |||||||||||||||||||||||||
| Maintenance and support | 2,454 | 1,921 | 8,495 | 7,678 | |||||||||||||||||||||||||
| Professional services | 5,892 | 5,935 | 22,967 | 23,595 | |||||||||||||||||||||||||
| Total cost of revenue | 25,362 | 19,286 | 91,146 | 71,083 | |||||||||||||||||||||||||
| Total gross profit | 66,286 | 49,484 | 235,801 | 173,008 | |||||||||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||||||||
| Research and development | 21,719 | 17,828 | 79,364 | 67,743 | |||||||||||||||||||||||||
| Sales and marketing | 44,508 | 32,531 | 157,722 | 123,310 | |||||||||||||||||||||||||
| General and administrative | 12,374 | 9,937 | 44,710 | 34,993 | |||||||||||||||||||||||||
| Total operating expenses | 78,601 | 60,296 | 281,796 | 226,046 | |||||||||||||||||||||||||
| Loss from operations | (12,315) | (10,812) | (45,995) | (53,038) | |||||||||||||||||||||||||
| Other income (expense), net: | |||||||||||||||||||||||||||||
| Interest income | 1,253 | 1,709 | 6,014 | 3,229 | |||||||||||||||||||||||||
| Interest expense | (3,449) | (3,253) | (13,389) | (4,934) | |||||||||||||||||||||||||
| Other income (expense), net | 294 | (269) | (433) | (336) | |||||||||||||||||||||||||
| Loss before income taxes | (14,217) | (12,625) | (53,803) | (55,079) | |||||||||||||||||||||||||
| Provision for income taxes | 129 | 395 | 42 | 466 | |||||||||||||||||||||||||
| Net loss | $ | (14,346) | $ | (13,020) | $ | (53,845) | $ | (55,545) | |||||||||||||||||||||
| Net loss per share, basic and diluted | $ | (0.29) | $ | (0.27) | $ | (1.10) | $ | (1.20) | |||||||||||||||||||||
| Weighted-average common shares outstanding, basic and diluted | 49,604,522 | 47,397,034 | 48,731,791 | 46,456,825 | |||||||||||||||||||||||||
RAPID7, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||
| Cash flows from operating activities: | ||||||||||||||||||||||||||
| Net loss | $ | (14,346) | $ | (13,020) | $ | (53,845) | $ | (55,545) | ||||||||||||||||||
| Adjustments to reconcile net loss to net cash provided by (used in) operating activities: | ||||||||||||||||||||||||||
| Depreciation and amortization | 4,559 | 3,360 | 16,528 | 11,097 | ||||||||||||||||||||||
| Amortization of debt discount and issuance costs | 2,730 | 2,535 | 10,513 | 3,831 | ||||||||||||||||||||||
| Stock-based compensation expense | 11,174 | 6,594 | 40,664 | 27,593 | ||||||||||||||||||||||
| Provision for doubtful accounts | 459 | 260 | 2,241 | 740 | ||||||||||||||||||||||
| Deferred income taxes | 116 | (69) | (645) | (69) | ||||||||||||||||||||||
| Foreign currency re-measurement (gain) loss | (315) | 191 | 255 | 757 | ||||||||||||||||||||||
| Other non-cash items | (254) | (161) | (1,889) | (506) | ||||||||||||||||||||||
| Changes in operating assets and liabilities: | ||||||||||||||||||||||||||
| Accounts receivable | (25,660) | (20,972) | (14,800) | (1,685) | ||||||||||||||||||||||
| Deferred contract acquisition and fulfillment costs | (5,903) | (6,405) | (11,306) | (12,790) | ||||||||||||||||||||||
| Prepaid expenses and other assets | (3,813) | 2,147 | (13,691) | (287) | ||||||||||||||||||||||
| Accounts payable | (1,040) | 3,110 | 92 | 3,675 | ||||||||||||||||||||||
| Accrued expenses | 9,581 | 8,192 | 4,759 | 6,018 | ||||||||||||||||||||||
| Deferred revenue | 30,810 | 25,183 | 18,686 | 22,870 | ||||||||||||||||||||||
| Other liabilities | (274) | 989 | 1,018 | 367 | ||||||||||||||||||||||
| Net cash provided by (used in) operating activities | 7,824 | 11,934 | (1,420) | 6,066 | ||||||||||||||||||||||
| Cash flows from investing activities: | ||||||||||||||||||||||||||
| Business acquisitions, net of cash acquired | — | (14,460) | (14,607) | (14,460) | ||||||||||||||||||||||
| Purchases of property and equipment | (2,375) | (4,409) | (29,428) | (12,813) | ||||||||||||||||||||||
| Capitalization of internal-use software costs | (1,401) | (760) | (6,087) | (3,265) | ||||||||||||||||||||||
| Purchases of investments | (33,839) | (54,476) | (148,047) | (233,421) | ||||||||||||||||||||||
| Sales/maturities of investments | 37,693 | 30,650 | 214,980 | 70,226 | ||||||||||||||||||||||
| Net cash provided by (used in) investing activities | 78 | (43,455) | 16,811 | (193,733) | ||||||||||||||||||||||
| Cash flows from financing activities: | ||||||||||||||||||||||||||
| Proceeds from issuance of convertible senior notes, net of issuance costs paid of $6,879 | — | (408) | — | 223,121 | ||||||||||||||||||||||
| Purchase of capped calls related to convertible senior notes | — | — | — | (26,910) | ||||||||||||||||||||||
| Proceeds from follow-on public offering, net of offering costs of $608 | — | — | — | 30,907 | ||||||||||||||||||||||
| Taxes paid related to net share settlement of equity awards | (2,026) | (485) | (6,952) | (2,197) | ||||||||||||||||||||||
| Proceeds from employee stock purchase plan | — | — | 5,521 | 3,637 | ||||||||||||||||||||||
| Proceeds from stock option exercises | 2,295 | 1,085 | 10,219 | 7,606 | ||||||||||||||||||||||
| Net cash provided by financing activities | 269 | 192 | 8,788 | 236,164 | ||||||||||||||||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 317 | (266) | (331) | (694) | ||||||||||||||||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | 8,488 | (31,595) | 23,848 | 47,803 | ||||||||||||||||||||||
| Cash, cash equivalents and restricted cash, beginning of period | 114,925 | 131,160 | 99,565 | 51,762 | ||||||||||||||||||||||
| Cash, cash equivalents and restricted cash, end of period | $ | 123,413 | $ | 99,565 | $ | 123,413 | $ | 99,565 | ||||||||||||||||||
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, | |||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||
| Total gross profit (GAAP) | $ | 66,286 | $ | 49,484 | $ | 235,801 | $ | 173,008 | ||||||||||||||||||
Add: Stock-based compensation expense1 | 610 | 371 | 2,580 | 1,692 | ||||||||||||||||||||||
Add: Amortization of acquired intangible assets2 | 1,658 | 1,283 | 6,339 | 3,985 | ||||||||||||||||||||||
| Total gross profit (non-GAAP) | $ | 68,554 | $ | 51,138 | $ | 244,720 | $ | 178,685 | ||||||||||||||||||
| Gross margin (non-GAAP) | 74.8 | % | 74.4 | % | 74.9 | % | 73.2 | % | ||||||||||||||||||
| Gross profit (GAAP) - Products | $ | 57,310 | $ | 38,990 | $ | 201,435 | $ | 128,761 | ||||||||||||||||||
| Add: Stock-based compensation expense | 209 | 69 | 789 | 493 | ||||||||||||||||||||||
| Add: Amortization of acquired intangible assets | 1,658 | 1,283 | 6,339 | 3,985 | ||||||||||||||||||||||
| Total gross profit (non-GAAP) - Products | $ | 59,177 | $ | 40,342 | $ | 208,563 | $ | 133,239 | ||||||||||||||||||
| Gross margin (non-GAAP) - Products | 79.6 | % | 80.0 | % | 79.9 | % | 79.0 | % | ||||||||||||||||||
| Gross profit (GAAP) - Maintenance and support | $ | 6,217 | $ | 8,325 | $ | 28,283 | $ | 34,545 | ||||||||||||||||||
| Add: Stock-based compensation expense | 160 | 72 | 616 | 233 | ||||||||||||||||||||||
| Total gross profit (non-GAAP) - Maintenance and support | $ | 6,377 | $ | 8,397 | $ | 28,899 | $ | 34,778 | ||||||||||||||||||
| Gross margin (non-GAAP) - Maintenance and support | 73.5 | % | 82.0 | % | 78.6 | % | 82.4 | % | ||||||||||||||||||
| Gross profit (GAAP) - Professional services | $ | 2,759 | $ | 2,169 | $ | 6,083 | $ | 9,702 | ||||||||||||||||||
| Add: Stock-based compensation expense | 241 | 230 | 1,175 | 966 | ||||||||||||||||||||||
| Total gross profit (non-GAAP) - Professional services | $ | 3,000 | $ | 2,399 | $ | 7,258 | $ | 10,668 | ||||||||||||||||||
| Gross margin (non-GAAP) - Professional services | 34.7 | % | 29.6 | % | 25.0 | % | 32.0 | % | ||||||||||||||||||
| GAAP Loss from operations | $ | (12,315) | $ | (10,812) | $ | (45,995) | $ | (53,038) | ||||||||||||||||||
Add: Stock-based compensation expense1 | 11,174 | 6,594 | 40,664 | 27,593 | ||||||||||||||||||||||
Add: Amortization of acquired intangible assets2 | 1,690 | 1,323 | 6,479 | 4,144 | ||||||||||||||||||||||
Add: Acquisition-related expenses3 | — | — | 514 | 115 | ||||||||||||||||||||||
Add: Follow-on public offering costs4 | — | — | — | 205 | ||||||||||||||||||||||
Add: Litigation-related expenses5 | 236 | 200 | 742 | 600 | ||||||||||||||||||||||
| Non-GAAP Income (loss) from operations | $ | 785 | $ | (2,695) | $ | 2,404 | $ | (20,381) | ||||||||||||||||||
| GAAP Net loss | $ | (14,346) | $ | (13,020) | $ | (53,845) | $ | (55,545) | ||||||||||||||||||
Add: Stock-based compensation expense1 | 11,174 | 6,594 | 40,664 | 27,593 | ||||||||||||||||||||||
Add: Amortization of acquired intangible assets2 | 1,690 | 1,323 | 6,479 | 4,144 | ||||||||||||||||||||||
Add: Acquisition-related expenses3 | — | — | 514 | 115 | ||||||||||||||||||||||
Add: Follow-on public offering costs4 | — | — | — | 205 | ||||||||||||||||||||||
Add: Litigation-related expenses5 | 236 | 200 | 742 | 600 | ||||||||||||||||||||||
Add: Release of valuation allowance, acquisition-related | — | — | (761) | — | ||||||||||||||||||||||
Add: Amortization of debt discount and issuance costs | 2,730 | 2,535 | 10,513 | 3,831 | ||||||||||||||||||||||
| Non-GAAP Net income (loss) | $ | 1,484 | $ | (2,368) | $ | 4,306 | $ | (19,057) | ||||||||||||||||||
| Reconciliation of net income (loss) per share, basic: | ||||||||||||||||||||||||||
| GAAP net loss per share, basic | $ | (0.29) | $ | (0.27) | $ | (1.10) | $ | (1.20) | ||||||||||||||||||
| Non-GAAP adjustment to net loss per share | $ | 0.32 | $ | 0.22 | $ | 1.19 | $ | 0.79 | ||||||||||||||||||
| Non-GAAP net income (loss) per share, basic | $ | 0.03 | $ | (0.05) | $ | 0.09 | $ | (0.41) | ||||||||||||||||||
| Reconciliation of net income (loss) per share, diluted: | ||||||||||||||||||||||||||
| GAAP net loss per share, diluted | $ | (0.29) | $ | (0.27) | $ | (1.10) | $ | (1.20) | ||||||||||||||||||
| Non-GAAP adjustment to net loss per share | $ | 0.32 | $ | 0.22 | $ | 1.18 | $ | 0.79 | ||||||||||||||||||
| Non-GAAP net income (loss) per share, diluted | $ | 0.03 | $ | (0.05) | $ | 0.08 | $ | (0.41) | ||||||||||||||||||
| Weighted average shares used in GAAP per share calculation, basic and diluted | 49,604,522 | 47,397,034 | 48,731,791 | 46,456,825 | ||||||||||||||||||||||
| Weighted average common shares used in non-GAAP per share calculation: | ||||||||||||||||||||||||||
| Basic | 49,604,522 | 47,397,034 | 48,731,791 | 46,456,825 | ||||||||||||||||||||||
| Diluted | 52,584,791 | 47,397,034 | 52,058,103 | 46,456,825 | ||||||||||||||||||||||
1 Includes stock-based compensation expense as follows: | ||||||||||||||||||||||||||
| Cost of revenue | $ | 610 | $ | 371 | $ | 2,580 | $ | 1,692 | ||||||||||||||||||
| Research and development | 4,446 | 2,422 | 15,670 | 10,822 | ||||||||||||||||||||||
| Sales and marketing | 3,430 | 1,885 | 11,883 | 7,569 | ||||||||||||||||||||||
| General and administrative | 2,688 | 1,916 | 10,531 | 7,510 | ||||||||||||||||||||||
2 Includes amortization of acquired intangible assets as follows: | ||||||||||||||||||||||||||
| Cost of revenue | $ | 1,658 | $ | 1,283 | $ | 6,339 | $ | 3,985 | ||||||||||||||||||
| Sales and marketing | 32 | 39 | 137 | 154 | ||||||||||||||||||||||
| General and administrative | — | 1 | 3 | 5 | ||||||||||||||||||||||
3 Includes acquisition-related expenses as follows: | ||||||||||||||||||||||||||
| General and administrative | $ | — | $ | — | $ | 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 | $ | 236 | $ | 200 | $ | 742 | $ | 600 | ||||||||||||||||||
Reconciliation of GAAP Net Loss to Adjusted EBITDA (Unaudited)
(in thousands)
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||||||
| Net loss | $ | (14,346) | $ | (13,020) | $ | (53,845) | $ | (55,545) | ||||||||||||||||||
| Interest income | (1,253) | (1,709) | (6,014) | (3,229) | ||||||||||||||||||||||
| Interest expense | 3,449 | 3,253 | 13,389 | 4,934 | ||||||||||||||||||||||
| Other (income) expense, net | (294) | 269 | 433 | 336 | ||||||||||||||||||||||
| Provision for income taxes | 129 | 395 | 42 | 466 | ||||||||||||||||||||||
| Depreciation expense | 2,537 | 1,870 | 8,963 | 6,486 | ||||||||||||||||||||||
| Amortization of intangible assets | 2,022 | 1,490 | 7,565 | 4,611 | ||||||||||||||||||||||
| Stock-based compensation expense | 11,174 | 6,594 | 40,664 | 27,593 | ||||||||||||||||||||||
| Acquisition-related expenses | — | — | 514 | 115 | ||||||||||||||||||||||
| Follow-on public offering costs | — | — | — | 205 | ||||||||||||||||||||||
| Litigation-related expenses | 236 | 200 | 742 | 600 | ||||||||||||||||||||||
| Adjusted EBITDA | $ | 3,654 | $ | (658) | $ | 12,453 | $ | (13,428) | ||||||||||||||||||
First Quarter and Full-Year 2020 Guidance
GAAP to Non-GAAP Reconciliation
(in millions, except per share data)
First Quarter 2020 | Full-Year 2020 | ||||||||||||||||||||||
| Reconciliation of GAAP to non-GAAP (loss) income from operations: | |||||||||||||||||||||||
| Anticipated GAAP loss from operations | $ | (20.8) | to | $ | (19.8) | $ | (55.5) | to | $ | (51.5) | |||||||||||||
| Add: Anticipated stock-based compensation expense | 12.8 | to | 12.8 | 55.8 | to | 55.8 | |||||||||||||||||
| Add: Anticipated amortization of acquired intangible assets | 1.7 | to | 1.7 | 6.7 | to | 6.7 | |||||||||||||||||
| Anticipated non-GAAP (loss) income from operations | $ | (6.3) | to | $ | (5.3) | $ | 7.0 | to | $ | 11.0 | |||||||||||||
| Reconciliation of GAAP to non-GAAP net (loss) income: | |||||||||||||||||||||||
| Anticipated GAAP net loss | $ | (23.8) | to | $ | (22.8) | $ | (68.1) | to | $ | (64.1) | |||||||||||||
| Add: Anticipated stock-based compensation expense | 12.8 | to | 12.8 | 55.8 | to | 55.8 | |||||||||||||||||
| Add: Anticipated amortization of acquired intangible assets | 1.7 | to | 1.7 | 6.7 | to | 6.7 | |||||||||||||||||
| Add: Anticipated amortization of debt discount and issuance costs | 2.7 | to | 2.7 | 11.4 | to | 11.4 | |||||||||||||||||
| Anticipated non-GAAP net (loss) income | $ | (6.6) | to | $ | (5.6) | $ | 5.8 | to | $ | 9.8 | |||||||||||||
| Anticipated GAAP net loss per share | $ | (0.47) | $ | (0.45) | $ | (1.33) | $ | (1.25) | |||||||||||||||
| Anticipated non-GAAP net (loss) income per share | $ | (0.13) | $ | (0.11) | $ | 0.11 | $ | 0.18 | |||||||||||||||
| Weighted average shares used in GAAP per share calculation, basic and diluted | 50.2 | 51.1 | |||||||||||||||||||||
| Weighted average shares used in non-GAAP per share calculation: | |||||||||||||||||||||||
| Basic | 50.2 | 51.1 | |||||||||||||||||||||
| Diluted | 50.2 | 55.0 | |||||||||||||||||||||