Rapid7(US:RPD)2025-05-12 20:15PART I. FINANCIAL INFORMATION Condensed Consolidated Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2025, including balance sheets, statements of operations, cash flows, and notes on accounting policies, acquisitions, debt, and a prior period error correction Q1 2025 Key Financial Highlights (in thousands) | Metric | Q1 2025 (in thousands) | Q1 2024 (in thousands) | | :--- | :--- | :--- | | Total Revenue | $210,253 | $205,101 | | Gross Profit | $150,773 | $144,107 | | Income (Loss) from Operations | $(101) | $9,716 | | Net Income | $2,105 | $1,406 | | Net Income per Share, Diluted | $0.03 | $0.02 | Balance Sheet Summary (as of March 31, 2025, in thousands) | Category | March 31, 2025 (in thousands) | December 31, 2024 (in thousands) | | :--- | :--- | :--- | | Total Current Assets | $732,645 | $786,111 | | Total Assets | $1,644,810 | $1,652,034 | | Total Current Liabilities | $589,155 | $630,216 | | Total Liabilities | $1,592,088 | $1,634,323 | | Total Stockholders' Equity | $52,722 | $17,711 | - An immaterial error was identified in Q4 2024 related to understated stock-based compensation expense in fiscal years 2023 and 2024, leading to a revision of comparative financial information presented209091 Condensed Consolidated Balance Sheets The balance sheet as of March 31, 2025, shows total assets of $1.64 billion and total liabilities of $1.59 billion, with cash and cash equivalents at $291.5 million and stockholders' equity increasing to $52.7 million Condensed Consolidated Balance Sheets (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $291,462 | $334,686 | | Total current assets | $732,645 | $786,111 | | Goodwill | $575,268 | $575,268 | | Total assets | $1,644,810 | $1,652,034 | | Liabilities and Stockholders' Equity | | | | Deferred revenue, current portion | $447,798 | $461,118 | | Total current liabilities | $589,155 | $630,216 | | Convertible senior notes non-current portion, net | $889,303 | $888,356 | | Total liabilities | $1,592,088 | $1,634,323 | | Total stockholders' equity | $52,722 | $17,711 | Condensed Consolidated Statements of Operations For the three months ended March 31, 2025, total revenue was $210.3 million, a 2.5% increase, resulting in a loss from operations of $0.1 million and net income of $2.1 million Condensed Consolidated Statements of Operations (in thousands) | Account | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Total revenue | $210,253 | $205,101 | | Total gross profit | $150,773 | $144,107 | | Total operating expenses | $150,874 | $134,391 | | Income (loss) from operations | $(101) | $9,716 | | Net income | $2,105 | $1,406 | | Net income per share, diluted | $0.03 | $0.02 | Condensed Consolidated Statements of Cash Flows Net cash from operating activities was $29.8 million, while investing activities used $79.2 million, ending the quarter with $298.7 million in cash and equivalents Condensed Consolidated Statements of Cash Flows (in thousands) | Activity | Three Months Ended Mar 31, 2025 | Three Months Ended Mar 31, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $29,757 | $31,070 | | Net cash used in investing activities | $(79,213) | $(41,694) | | Net cash provided by financing activities | $4,732 | $4,362 | | Net decrease in cash, cash equivalents and restricted cash | $(43,390) | $(7,755) | | Cash, cash equivalents and restricted cash, end of period | $298,711 | $206,375 | Notes to Unaudited Condensed Consolidated Financial Statements These notes detail revenue recognition, the $51.2 million Noetic Cyber acquisition, convertible senior notes including the $46.5 million 2025 redemption, an $88 million Israeli tax assessment, and a new $660 million cloud services commitment - The company acquired Noetic Cyber, Inc. on July 3, 2024, for a purchase price with an aggregate fair value of $51.2 million, consisting of cash, contingent consideration, and deferred payments3539 - As of March 31, 2025, the company had outstanding 2.25% Notes due 2025, 0.25% Notes due 2027, and 1.25% Notes due 2029, with $46.5 million paid to redeem the outstanding 2025 Notes subsequent to the balance sheet date on May 1, 20255559 - In January 2025, the company amended a contract with a cloud services provider, increasing its total purchase obligation to $660 million over a five-year period81 - The company received an initial assessment from the Israel Tax Authority (ITA) for approximately $88 million related to fiscal year 2021, which the company is contesting and has not recorded any impact from86 Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses Q1 2025 performance, including 2.5% revenue growth to $210.3 million and $837.2 million ARR, analyzing revenue, expenses, liquidity, and capital resources, noting sufficient funds for the next 12 months despite increased commitments Key Metrics as of March 31 | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Total Revenue (Q1, in thousands) | $210,253 | $205,101 | | Annualized Recurring Revenue (ARR, in thousands) | $837,220 | $807,196 | | Number of Customers | 11,685 | 11,462 | | ARR per Customer (in thousands) | $71.6 | $70.4 | - Total revenue increased by $5.2 million (2.5%) in Q1 2025 compared to Q1 2024, primarily driven by an $8.1 million increase in revenue from existing customers through renewals, upsells, and cross-sells144 - Operating expenses increased by $16.5 million year-over-year, driven by higher personnel costs in R&D, increased commissions and marketing expenses in Sales & Marketing, and higher professional fees in General & Administrative148149151 - As of March 31, 2025, the company had $291.5 million in cash and cash equivalents and $301.1 million in investments, which management believes are sufficient to meet operating and capital requirements for at least the next 12 months156 Overview Rapid7, a global cybersecurity provider, focuses on simplifying SecOps through its Command Platform, serving over 11,000 customers in 151 countries, with recurring revenue comprising 96% of total revenue - The company's strategic focus is on being a leading provider of integrated security operations solutions, combining exposure management with threat detection and response101102 - As of March 31, 2025, the company had over 11,000 customers in 151 countries, including 39% of the Fortune 100103 - Recurring revenue, which includes term software licenses, subscriptions, and managed services, constituted 96% of total revenue for the three months ended March 31, 2025107 Results of Operations Q1 2025 total revenue increased 2.5% to $210.3 million, with product subscriptions up and professional services down, while gross margin improved, operating expenses rose across all categories, leading to an operating loss Revenue Comparison (in thousands) | Revenue Type | Q1 2025 | Q1 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Product subscriptions | $203,935 | $196,918 | $7,017 | 3.6% | | Professional services | $6,318 | $8,183 | $(1,865) | (22.8)% | | Total revenue | $210,253 | $205,101 | $5,152 | 2.5% | Operating Expense Comparison (in thousands) | Expense Category | Q1 2025 | Q1 2024 | Change $ | Change % | | :--- | :--- | :--- | :--- | :--- | | Research and development | $47,888 | $41,368 | $6,520 | 15.8% | | Sales and marketing | $79,400 | $73,095 | $6,305 | 8.6% | | General and administrative | $23,586 | $19,928 | $3,658 | 18.4% | Liquidity and Capital Resources As of March 31, 2025, liquidity included $291.5 million cash and $301.1 million investments, with $29.8 million cash from operations, significant cash used in investing, and future commitments including a $46.5 million note redemption and a $660 million cloud services obligation - Net cash provided by operating activities was $29.8 million for Q1 2025, compared to $31.1 million in Q1 2024160162 - Net cash used in investing activities was $79.2 million, primarily for net purchases of investments ($75.5 million) and capitalization of internal-use software ($3.7 million)164 - On May 1, 2025, the company paid $46.5 million to redeem the outstanding portion of its 2025 Convertible Senior Notes158 - The company has a total purchase obligation of $660 million with a cloud services provider over five years, starting in 202515781 Quantitative and Qualitative Disclosures About Market Risk The company identifies foreign currency, interest rate, and inflation as primary market risks, managing foreign exchange with forward contracts, and believes none had a material effect on its financial condition as of March 31, 2025 - Foreign currency exchange risk is managed through forward contracts designated as cash flow hedges, with a hypothetical 10% adverse change in exchange rates not expected to be material171172 - Interest rate risk affects cash equivalents and investments, and while the fair value of convertible senior notes fluctuates, a hypothetical 10% change in interest rates is not expected to be material to the financial statements173175176 - As of March 31, 2025, the company does not believe that inflation had a material effect on its business, financial condition, or results of operations177 Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting during the quarter - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of March 31, 2025180 - There were no changes in internal control over financial reporting during the quarter that materially affected, or are reasonably likely to materially affect, internal controls182 PART II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course litigation and claims, with management believing the outcomes will not materially adversely affect its business or financial condition - The company states that the outcome of ordinary course legal matters is not expected to have a material adverse effect on its business184 Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the fiscal year ended December 31, 2024 - There have been no material changes to the risk factors disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2024185 Unregistered Sales of Equity Securities and Use of Proceeds During the reporting period, the company had no unregistered sales of equity securities and made no purchases of its own equity securities - The company reported no unregistered sales of equity securities or issuer purchases of its equity securities during the quarter186188 Other Information No executive officers or directors adopted, terminated, or modified a Rule 10b5-1 trading plan or any non-Rule 10b5-1 equity trading arrangement during the quarter - No executive officers or directors terminated or modified a 10b5-1 equity trading plan during the quarter191 Exhibits This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and a Cooperation Agreement with JANA Partners Management, LP - A list of exhibits filed with the report is provided, including required CEO/CFO certifications and a Cooperation Agreement with JANA Partners Management, LP193