Core Viewpoint - Rapid7 (RPD) has experienced a significant decline of 22.7% over the past four weeks, but it is now in oversold territory, indicating a potential for a trend reversal as analysts expect better earnings than previously predicted [1] Group 1: Technical Indicators - The Relative Strength Index (RSI) is a key technical indicator used to determine if a stock is oversold, with readings below 30 typically indicating this condition [2] - RPD's current RSI reading is 22.29, suggesting that the heavy selling pressure may be exhausting itself, which could lead to a reversal towards the previous equilibrium of supply and demand [5] Group 2: Fundamental Indicators - There is a strong consensus among sell-side analysts that RPD's earnings estimates for the current year have increased by 1.5% over the last 30 days, which often correlates with price appreciation in the near term [7] - RPD holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate revisions and EPS surprises, indicating a strong potential for a turnaround [8]

Core Insights - Rapid7, Inc. is a cybersecurity company that provides security data and analytics solutions, competing with firms like Palo Alto Networks and CrowdStrike [1] - The stock price target set by Jefferies is $19, indicating a potential upside of approximately 6.74% from the current trading price of $17.80 [1][4] Financial Performance - Rapid7's stock reached a new 52-week low, trading as low as $17.73 and closing at $17.80, down from $18.68 [2][5] - The company reported an earnings per share (EPS) of $0.57 for the quarter, exceeding the consensus estimate of $0.45 by $0.12 [2][5] - Revenue for the quarter was $217.96 million, slightly above analyst expectations of $216.14 million, marking a 1.5% increase year-over-year [3][5] - The net margin for the quarter was 3.41%, and the return on equity was 149.12% [3] - For fiscal year 2025, Rapid7 has set its EPS guidance in the range of 2.02 to 2.09, with Q4 2025 guidance between 0.37 and 0.44 EPS [4]

Customer Base and Revenue - As of September 30, 2025, the company had over 11,000 customers in 150 countries, including 36% of the Fortune 100[111] - Recurring revenue for the three and nine months ended September 30, 2025 was 96% and 97% of total revenue, compared to 96% for both periods in 2024[118] - Total revenue for Q3 2025 was $217,960,000, a 1.5% increase from $214,654,000 in Q3 2024[141] - The increase in total revenue for the nine months ended September 30, 2025 was primarily driven by renewals and upselling activities, contributing $19,600,000[141] - Annualized recurring revenue (ARR) as of September 30, 2025, was $837.73 million, representing a year-over-year growth of 1.8%[158] - Total revenue for the three months ended September 30, 2025, was $217.96 million, reflecting a year-over-year growth of 1.5%[155] Financial Performance - Net income for Q3 2025 was $9,809,000, a decrease of $5,601,000 (36.4%) from $15,410,000 in Q3 2024[138] - GAAP net income for the nine months ended September 30, 2025, was $20.252 million, down from $23.354 million in the same period of 2024, reflecting a decrease of 13.4%[171] - Non-GAAP net income for the nine months ended September 30, 2025, was $119.679 million, compared to $128.796 million in 2024, showing a decline of 7.1%[171] - Non-GAAP income from operations for the nine months ended September 30, 2025, was $105.61 million, down from $123.51 million in the same period in 2024[156] - Adjusted EBITDA for Q3 2025 was $43.5 million, a decrease of 13.1% compared to $50.1 million in Q3 2024[172] Expenses and Costs - Total operating expenses for the nine months ended September 30, 2025 were $445,587,000, an increase of $30,740,000 (7.4%) from the same period in 2024[138] - Research and development expenses for Q3 2025 were $46,914,000, an increase of $1,938,000 (4.3%) from Q3 2024[145] - Sales and marketing expenses for Q3 2025 totaled $79,296,000, up $4,475,000 (6.0%) from Q3 2024[138] - General and administrative expenses for the nine months ended September 30, 2025, rose by $3.6 million (5.8%) compared to the same period in 2024, driven by a $1.9 million increase in personnel expenses and a $2.4 million rise in professional fees[149] - Total cost of revenue for Q3 2025 was $64,984,000, up 2.9% from $63,157,000 in Q3 2024[143] Cash Flow and Investments - Free cash flow for the nine months ended September 30, 2025, was $97.82 million, compared to $95.24 million in the same period in 2024[157] - Cash and cash equivalents as of September 30, 2025, totaled $130.6 million, down from $230.1 million at the end of Q3 2024[178] - Total cash used in investing activities for the nine months ended September 30, 2025, was $292.2 million, significantly higher than $99.5 million in 2024[182] - Operating activities generated $116.3 million in cash for the nine months ended September 30, 2025, compared to $107.9 million in 2024[180] Tax and Other Income - The company recorded a benefit to the tax provision for the three months ended September 30, 2025, due to the One Big Beautiful Bill Act signed on July 4, 2025[116] - Interest income for the nine months ended September 30, 2025, increased by $1.9 million (12.4%) compared to the same period in 2024, attributed to higher cash and cash equivalents[151] - Other income for the nine months ended September 30, 2025, increased by $4.9 million (720.3%) compared to the same period in 2024, primarily due to favorable foreign exchange rates[153] - The provision for income taxes for the nine months ended September 30, 2025, decreased by $8.2 million (66.1%) compared to the same period in 2024, influenced by a prior period tax expense related to an intercompany sale of intellectual property[154] Company Strategy and Outlook - The company aims to be a leader in delivering integrated risk and threat management across on-premise, cloud, and external attack surfaces[109] - The Command Platform integrates cloud security, SIEM, advanced detection and response, and vulnerability management offerings[108] - The company expects operating expenses to increase as a percentage of revenue as it prioritizes investments to drive growth[129] - Gross margin is expected to fluctuate over time based on factors such as average sales price and revenue mix[128] Debt and Financial Obligations - The company entered into a $200 million revolving credit facility on June 25, 2025, with a letter of credit sublimit of $20 million[112] - The company has a credit agreement allowing for borrowings up to $200 million, with incremental facilities based on Consolidated EBITDA[174] - The company has a minimum spend commitment of $125 million per year over the next five years under a cloud-services agreement, totaling $660 million[176] - The fair value of the company's 2027 Notes and 2029 Notes as of September 30, 2025, was $560.6 million and $264.9 million, respectively[193] Market Conditions - The company does not believe that inflation had a material effect on its business, financial condition, or results of operations as of September 30, 2025[195] - If costs become subject to significant inflationary pressures, the company may not be able to fully offset such higher costs through price increases, which could harm its business and financial condition[195] - As of September 30, 2025, a hypothetical 10% increase or decrease in interest rates would not have had a material impact on the company's financial statements[194]

Group 1 - The article does not provide any relevant content regarding company or industry insights [1]

Core Insights - Rapid7 reported revenue of $217.96 million for the quarter ended September 2025, reflecting a year-over-year increase of 1.5% and surpassing the Zacks Consensus Estimate of $216.01 million by 0.9% [1] - The company's EPS was $0.57, down from $0.66 in the same quarter last year, but exceeded the consensus estimate of $0.45 by 26.67% [1] Financial Performance Metrics - Annualized recurring revenue (ARR) was reported at $837.73 billion, slightly below the average estimate of $840.49 billion [4] - The number of customers stood at 11,618, which is lower than the estimated 11,694 [4] - ARR per customer was $72,100, exceeding the estimate of $71,939.58 [4] - Revenue from professional services was $7.81 million, outperforming the estimate of $6.19 million but showing a decline of 13.8% compared to the previous year [4] - Product revenue reached $210.15 million, slightly above the estimate of $209.82 million, marking a 2.2% increase year-over-year [4] - Non-GAAP gross profit from professional services was $1.62 million, exceeding the estimate of $1.18 million [4] - Non-GAAP gross profit from products was $158.24 million, slightly below the estimate of $158.36 million [4] Stock Performance - Over the past month, Rapid7 shares returned +0.4%, while the Zacks S&P 500 composite increased by +2.1% [3] - The stock currently holds a Zacks Rank 2 (Buy), indicating potential for outperformance in the near term [3]

Core Insights - Rapid7 reported quarterly earnings of $0.57 per share, exceeding the Zacks Consensus Estimate of $0.45 per share, but down from $0.66 per share a year ago, resulting in an earnings surprise of +26.67% [1] - The company achieved revenues of $217.96 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 0.90% and showing an increase from $214.65 million year-over-year [2] - Rapid7 has outperformed consensus EPS estimates three times over the last four quarters and has topped revenue estimates four times in the same period [2] Earnings Outlook - The future performance of Rapid7's stock will largely depend on management's commentary during the earnings call and the sustainability of its immediate price movement based on the latest earnings numbers [3][4] - The current consensus EPS estimate for the upcoming quarter is $0.45 on revenues of $218.2 million, and for the current fiscal year, it is $1.97 on revenues of $858.67 million [7] Industry Context - The Internet - Software industry, to which Rapid7 belongs, is currently ranked in the top 32% of over 250 Zacks industries, indicating a favorable outlook for stocks within this sector [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked using tools like the Zacks Rank [5][6]

Financial Data and Key Metrics Changes - Rapid7 ended Q3 2025 with $838 million in ARR, a 2% year-over-year growth, with revenue for the quarter at $218 million, also reflecting a 2% year-over-year increase [5][24] - Operating income was $37 million, exceeding guidance, and free cash flow generated in the quarter was $30 million, bringing year-to-date free cash flow to $98 million [5][25] - Product subscription revenue grew 2% year-over-year to $210 million, while professional services revenue continued to decline [24] Business Line Data and Key Metrics Changes - The Managed Detection and Response (MDR) business, which constitutes over half of ARR, continues to grow at double digits [6][19] - ARR per customer increased by 2%, with an average ARR per customer of over $72,000 [24] - International revenue represented 25% of total revenue and grew 8% year-over-year [24] Market Data and Key Metrics Changes - The customer spending environment remains challenged, particularly in large deals, but there are promising signs for future growth in detection and response [23] - The demand for integrated exposure and detection programs is growing, driven by regulatory pressures for compliance and reporting [15] Company Strategy and Development Direction - Rapid7 is focusing on enhancing its AI-powered security operations platform, integrating exposure management and threat detection to improve customer outcomes [9][18] - The company is making significant organizational changes, including new leadership appointments, to accelerate growth and improve operational alignment [6][20] - The strategy includes expanding partnerships, such as with Microsoft, to enhance managed detection and response capabilities [12][56] Management's Comments on Operating Environment and Future Outlook - Management acknowledges falling short of ARR guidance and is taking actions to rebuild confidence with the investment community [8] - The company is optimistic about its roadmap and strategy, despite longer deal cycles due to platform consolidation opportunities [10][18] - The outlook for Q4 includes a flat ARR quarter-over-quarter, with tightened full-year revenue guidance of $856-$858 million, representing 1%-2% growth [26][27] Other Important Information - The company is transitioning its traditional VM customer base to an integrated exposure management model through Exposure Command [19] - The new Chief Financial Officer, Rafe Brown, is expected to drive operational excellence and scale growth in SaaS businesses [20][48] Q&A Session Summary Question: Economic model of MDR and margin dynamics - Management indicated that MDR operates at higher gross margins than average MDR companies due to investments in automation and AI capabilities [31][32] Question: International vs. domestic growth rates - International revenue is growing faster than the overall business, with a focus on aligning sales processes across regions [33] Question: Pricing pressure in the MDR business - Despite flat ARR per customer growth, management believes they can continue to grow the MDR business profitably and effectively [35][36] Question: Large deal pipeline and Q4 outlook - Management is confident in the large deal pipeline but acknowledges variability in timing and conversion rates [41][42] Question: Leadership changes and priorities for Rafe Brown - Rafe Brown is expected to enhance operational acumen and drive growth through effective pricing and packaging strategies [47][48] Question: Value of traditional VM to SIEM MDR - Management is transitioning from traditional on-premise workloads to more strategic, value-added services, focusing on managed detection and response [51][53] Question: Expectations from Microsoft partnership - The partnership is expected to grow through technology integration and potential go-to-market collaboration [56] Question: Visibility around pipeline and close rates - Management is working on standardizing processes to improve visibility and accuracy in managing larger deal cycles [58] Question: Exposure Command's performance and customer engagement - Exposure Command is showing larger deal sizes and longer deal cycles, with a focus on upgrading existing customers [61][62]

Company Overview November 4, 2025 1 Disclaimers This presentation contains forward-looking statements. All statements contained in this presentation other than statements of historical facts, including, without limitation, statements regarding our market opportunity, demand for our product and service offerings, expectations regarding our annualized recurring revenue (ARR), free cash flow, and our other non-GAAP measures, our business strategy, plans and objectives for future operations and expectations reg ...

Financial Performance - Annualized recurring revenue (ARR) reached $838 million, a 2% increase year-over-year[4] - Total revenue for Q3 2025 was $218 million, up 2% from $214.7 million in Q3 2024[4] - Product subscriptions revenue was $210 million, reflecting a 2% year-over-year growth[5] - Total revenue for Q3 2025 was $217.96 million, a slight increase from $214.65 million in Q3 2024, representing a year-over-year growth of 1.1%[40] - Product subscriptions revenue reached $210.15 million in Q3 2025, compared to $205.59 million in Q3 2024, indicating a growth of 2.5%[40] - Net income for Q3 2025 was $9.81 million, down from $15.41 million in Q3 2024, reflecting a decrease of 36.5%[40] - Non-GAAP income from operations for Q3 2025 was $36.9 million, compared to $44 million in Q3 2024[5] - GAAP operating income was $5.9 million, down from $12.8 million in the same quarter last year[5] - GAAP net income for Q3 2025 was $9,809,000, a decrease of 36.5% compared to $15,410,000 in Q3 2024[47] - Adjusted EBITDA for Q3 2025 was $43,514,000, down 13.1% from $50,083,000 in Q3 2024[47] - Non-GAAP total gross profit for Q3 2025 was $159,857,000, slightly up from $159,048,000 in Q3 2024, resulting in a non-GAAP gross margin of 73%[44] - Non-GAAP gross profit for product subscriptions in Q3 2025 was $158,238,000, compared to $155,914,000 in Q3 2024, with a non-GAAP gross margin of 75%[44] Cash Flow and Liquidity - Free cash flow for the quarter was $30 million, down from $38.5 million in Q3 2024[5] - Free cash flow for Q3 2025 was $30,111,000, a decline of 21.7% compared to $38,502,000 in Q3 2024[48] - Cash flows from operating activities for the nine months ended September 30, 2025, totaled $116,250,000, an increase of 7.5% from $107,897,000 in the same period of 2024[42] - The company’s cash, cash equivalents, and restricted cash at the end of Q3 2025 were $130,613,000, a decrease from $230,108,000 at the end of Q3 2024[42] - Anticipated net cash provided by operating activities for full-year 2025 is projected to be between $149,000 and $159,000[51] - Anticipated free cash flow for full-year 2025 is expected to be between $125,000 and $135,000[51] Strategic Developments - Rapid7 announced a strategic expansion into the UAE to support digital transformation and cyber resilience goals[10] - New AI-generated risk intelligence capabilities were introduced as part of the Command Platform, enhancing remediation efforts[10] Management Changes - Rafe Brown was appointed as the new CFO, effective December 1, 2025, bringing extensive industry experience[2] Balance Sheet - Total assets as of September 30, 2025, were $1.67 billion, a slight increase from $1.65 billion at the end of 2024[38] - Total liabilities decreased from $1.63 billion at the end of 2024 to $1.54 billion as of September 30, 2025[38] - The company’s total stockholders' equity increased significantly from $17.71 million at the end of 2024 to $127.22 million as of September 30, 2025[38] - The company reported a total of 64.97 million weighted-average common shares outstanding for Q3 2025, compared to 62.90 million in Q3 2024[40] Future Projections and Risks - The company anticipates Q4 2025 revenue between $214 million and $216 million, with year-over-year growth expected to be between (1)% and 0%[8] - The company anticipates potential risks including macroeconomic uncertainty and competition, which could impact future performance[35] - Anticipated GAAP net loss for Q4 2025 is projected between $9,000 and $4,000, with non-GAAP net income expected between $27,000 and $32,000[50] - Anticipated non-GAAP net income per share for full-year 2025 is estimated to be between $2.02 and $2.09[50] Expenses - Stock-based compensation expense for the nine months ended September 30, 2025, was $81,059,000, slightly up from $80,549,000 in the same period of 2024[44] - Stock-based compensation expense for Q3 2025 was $26,327,000, slightly up from $25,738,000 in Q3 2024[47] - Amortization of intangible assets for Q3 2025 was $8,861,000, compared to $8,520,000 in Q3 2024, reflecting ongoing investment in intangible assets[47] - Interest income for Q3 2025 was $(6,167,000), compared to $(5,571,000) in Q3 2024, indicating an increase in interest expenses[47] Accounts Receivable - The company reported a decrease in accounts receivable of $8,419,000 in Q3 2025 compared to an increase of $2,442,000 in Q3 2024[42]

Core Insights - Rapid7, Inc. reported a third quarter 2025 Annual Recurring Revenue (ARR) of $838 million, reflecting a 2% year-over-year increase, driven by the success of its AI-driven Command Platform [2][4] - The company appointed Rafe Brown as Chief Financial Officer, effective December 1, 2025, succeeding Tim Adams, who announced his retirement [2][3] - Rapid7's total revenue for Q3 2025 was $218 million, also up 2% year-over-year, with product subscriptions revenue contributing $210 million [4][5] Financial Performance - ARR increased to $838 million from $823 million in Q3 2024, marking a 2% growth [3][4] - The number of customers remained stable at 11,618, with ARR per customer rising to $72.1 from $70.8, a 2% increase [3][4] - Total revenue for Q3 2025 was $218 million, compared to $215 million in Q3 2024, reflecting a 2% increase [4][5] - Product subscriptions revenue was $210 million, up from $206 million, while professional services revenue decreased by 14% to $7.8 million [4][5] - GAAP gross profit was $153 million, with a gross margin of 70%, while non-GAAP gross profit was $160 million, with a gross margin of 73% [4][5] Operational Highlights - The company reported a GAAP operating income of $5.9 million and a non-GAAP operating income of $37 million for Q3 2025 [4][5] - Net cash provided by operating activities was $38 million, with free cash flow of $30 million [4][5] - Rapid7's GAAP net income for Q3 2025 was $9.8 million, translating to a net income per share of $0.15 [5][6] Strategic Initiatives - Rapid7 announced an expanded partnership with Microsoft to enhance modern detection and response capabilities [7] - The company introduced new AI-generated risk intelligence features in its Command Platform to improve remediation processes [7] - Rapid7 was recognized in the Gartner Magic Quadrant for Security Information and Event Management (SIEM) for the seventh consecutive year [7] Guidance - For Q4 2025, Rapid7 anticipates ARR to remain approximately flat compared to Q3 2025, with revenue projected between $214 million and $216 million [8] - Non-GAAP income from operations is expected to range from $25 million to $30 million, with non-GAAP net income per share projected between $0.37 and $0.44 [8]