Rapid7, Inc. (Form: 8-K, Received: 02/10/2020 16:10:57)
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549 
FORM 8-K 
CURRENT REPORT

Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): February 10, 2020
Rapid7, Inc.
(Exact name of registrant as specified in its charter)
 
Delaware   001-37496   35-2423994
(State or other jurisdiction
of incorporation)
  (Commission
File Number)
  (IRS Employer
Identification No.)
120 Causeway Street, Boston, Massachusetts   02114
(Address of principal executive offices)   (Zip Code)
Registrant’s telephone number, including area code: (617) 247-1717
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
 
Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each class Trading symbol(s) Name of each exchange on which registered
Common Stock, $0.01 par value per share RPD The Nasdaq Global Market

Indicate by check mark whether the registrant is an emerging growth company as defined in as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company  ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐




Item 2.02 Results of Operations and Financial Condition.
On February 10, 2020, Rapid7, Inc. (the “Company”) issued a press release announcing its financial results for the fiscal fourth quarter and fiscal year ended December 31, 2019. The Company’s press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information included in this Current Report on Form 8-K and the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.
 
Item 9.01 Financial Statements and Exhibits.
 
(i)Exhibits
Exhibit
No.
   Description
99.1      
104    Cover Page Interactive Data File (embedded within the inline XBRL document)




SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
 
    Rapid7, Inc.
Dated: February 10, 2020     By:   /s/ Jeff Kalowski
      Jeff Kalowski
      Chief Financial Officer



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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, 2020Rapid7, 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.







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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    % 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 % (4) % % (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   

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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
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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

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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 —         
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



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