Core Insights - Rapid7 has been recognized as a Leader in the Frost Radar™ for Managed Detection and Response (MDR), highlighting its deep integration between MDR and exposure management, which enhances visibility and innovation in AI-powered Security Operations Centers (SOCs) [1][2][3] Group 1: MDR Service Features - Rapid7's MDR service includes 24/7 threat monitoring, unlimited incident response, proactive threat hunting, and active remediation, all delivered through a transparent platform [2][4] - The service is noted for its ability to provide deep visibility and third-party telemetry across various environments, including endpoint, network, cloud, and identities, tailored to each organization's needs [2][3] - AI automation is utilized for alert triage, achieving a market-leading accuracy of 99.93%, which saves over 200 SOC hours per week [2][3] Group 2: Strategic Focus and Innovation - Rapid7 emphasizes a unified platform approach that integrates managed services, automation, and visibility, evolving MDR in line with proactive and preventive strategies within Continuous Threat Exposure Management (CTEM) [3][4] - The company is committed to transparency, customer trust, and continuous innovation, which are key factors in its recognition as a leader in the MDR market [3][4] - Rapid7's global SOC enhances detection and response capabilities, enabling organizations to quickly identify and mitigate attacks [4] Group 3: Company Overview - Rapid7, Inc. aims to create a safer digital world by simplifying cybersecurity and making it more accessible, serving over 11,000 global customers [5] - The company provides comprehensive security solutions that integrate cloud risk management with threat detection and response, focusing on reducing attack surfaces and eliminating threats efficiently [5][6]

Financial Data and Key Metrics Changes - Rapid7 ended Q1 2025 with an ARR of $837 million, reflecting a 4% year-over-year growth, which was below expectations [6][22][23] - Revenue for Q1 2025 was $210 million, growing 3% year-over-year and exceeding guided ranges [24][27] - Product revenue increased by 4% year-over-year, while professional services revenue declined due to a strategic shift away from lower-margin engagements [24][25] - Operating income for the quarter was $32 million, above the guided range, with an adjusted EBITDA of $39 million [25][26] Business Line Data and Key Metrics Changes - The detection and response (DNR) business continued to be the core growth driver, representing over half of total ARR and maintaining mid-teens growth [8][10] - The risk and exposure management business faced challenges, with growth deceleration and missed expectations, particularly in traditional vulnerability management offerings [8][9][15] - ARR per customer grew by 2% year-over-year to approximately $72,000, with a total customer base of 11,685, also reflecting a 2% year-over-year increase [22][24] Market Data and Key Metrics Changes - International revenue accounted for 25% of total revenue and grew by 10% year-over-year, indicating strong performance outside the U.S. [24] - The North American mid-market enterprise segment experienced slower deal cycles and tighter budget controls, impacting overall performance [9][10] Company Strategy and Development Direction - The company aims to reaccelerate long-term growth and expand free cash flow, focusing on three strategic pillars: enhancing detection and response capabilities, upgrading the vulnerability management customer base to the exposure management platform, and improving cost structure [7][18][19] - Rapid7 is transitioning from a traditional standalone vulnerability management business to a more integrated risk and exposure management approach, which is expected to stabilize performance [15][16] Management's Comments on Operating Environment and Future Outlook - Management noted a more challenging macro environment than anticipated, with customers becoming increasingly cautious about investments and extended deal cycles becoming common [9][10] - The company adjusted its ARR guidance for the full year 2025 to a range of $850 million to $880 million, reflecting slower growth expectations [27][28] - Despite the cautious environment, management remains confident in the DNR business and its ability to drive growth, while also focusing on stabilizing the risk and exposure management segment [18][19] Other Important Information - The company fully repaid the remaining balance of its 2025 convertible notes, simplifying its capital structure [26] - Free cash flow for the quarter was $25 million, indicating strong operational discipline [26] Q&A Session Summary Question: Why is the upgrade cycle on Exposure Command taking longer than expected? - Management indicated that complexity in customer environments and budget constraints are primary factors affecting the upgrade cycle [34][35] Question: What needs to happen to reaccelerate ARR growth? - Management highlighted strong demand for DNR and the need to successfully upgrade the installed base as key drivers for reacceleration [41][43] Question: What is the timeline for stabilization in the risk and exposure management business? - Management expects moderate stabilization over the course of the year, with reacceleration anticipated moving forward [48][49] Question: Are there resilient customer segments amidst macro pressures? - Management noted that highly regulated industries and larger customers tend to be more resilient, while sectors like healthcare and education are experiencing more pressure [55][59] Question: How is the company addressing competition in the vulnerability management space? - Management emphasized the importance of upgrading the install base to integrated solutions to maintain competitiveness and customer retention [75][76] Question: What is the outlook for the DNR business independent of the VM dynamics? - Management expressed confidence in the DNR business's growth potential, citing strong demand and opportunities for new customer acquisition [83][84]

Financial Data and Key Metrics Changes - Rapid7 ended Q1 2025 with an ARR of $837 million, reflecting a 4% year-over-year growth, which was below expectations [5][20][21] - Revenue for Q1 was $210 million, growing 3% year-over-year and exceeding guided ranges [22][24] - Operating income for the quarter was $32 million, above the guided range due to timing of certain expenses [23][24] - Free cash flow for the quarter was $25 million, indicating strong operational discipline [24] Business Line Data and Key Metrics Changes - Detection and Response (DNR) business continued to be the core growth driver, representing over half of total ARR and maintaining mid-teens growth [7][9][10] - Risk and Exposure Management business faced challenges, with growth deceleration and negative performance in traditional vulnerability management offerings [7][13][21] - ARR per customer grew 2% year-over-year to approximately $72,000, with a total customer base of 11,685, also reflecting a 2% year-over-year increase [21][22] Market Data and Key Metrics Changes - International revenue represented 25% of total revenue and grew 10% year-over-year, indicating strong performance outside the U.S. [22] - The North American mid-market enterprise segment experienced slower deal cycles and tighter budget controls, impacting overall performance [8][9] Company Strategy and Development Direction - The company is focused on three strategic pillars: enhancing detection and response capabilities, upgrading vulnerability management customers to the exposure management platform, and improving cost structure [6][16] - Investments in innovation and operational efficiency are expected to drive future growth, particularly through the new operations center in India [6][10][16] Management's Comments on Operating Environment and Future Outlook - Management noted a more challenging macro environment than anticipated, with customers becoming cautious about investments and extending deal cycles [8][9][16] - The company adjusted its ARR guidance for 2025 to a range of $850 million to $880 million, reflecting increased budgetary uncertainty [25][26] - Despite challenges, management remains confident in the long-term growth strategy and the resilience of the DNR business [16][26] Other Important Information - The company fully repaid the remaining balance of its 2025 convertible notes, simplifying its capital structure [24] - New board members were welcomed, bringing expertise to support growth and industry leadership [18] Q&A Session Summary Question: Why is the upgrade cycle on Exposure Command taking longer than expected? - Management indicated that complexity in customer environments and budget constraints are primary factors affecting the upgrade cycle [30][32][33] Question: What needs to happen to reaccelerate ARR growth? - Management highlighted strong demand for DNR and the need to successfully upgrade the installed base as key drivers for reacceleration [39][42][44] Question: What is the timeline for stabilization in the risk and exposure management business? - Management expects moderate stabilization over the course of the year, with reacceleration anticipated moving forward [48][50] Question: Are there resilient customer segments amidst macro pressures? - Management noted that highly regulated industries and larger customers tend to be more resilient, while sectors like healthcare and education are experiencing pressure [56][60] Question: How is the company addressing competition in the cloud security market? - Management emphasized a focus on upgrading the existing install base rather than aggressive spending to acquire new customers, aiming for efficient growth [108][110][112]

Financial Data and Key Metrics Changes - Rapid7 ended 2024 with $840 million in ARR, growing 4% year over year [6][22] - Full year revenue reached $844 million, a 9% increase from the previous year, exceeding guidance [24] - Operating income was $164 million, representing a 19% operating margin, an expansion of over 600 basis points from the prior year [24] - Free cash flow for the year was $154 million, with a free cash flow margin of 18%, an increase of over 800 basis points from the prior year [25] Business Line Data and Key Metrics Changes - The Detection and Response (DNR) business generated over $400 million in ARR, with managed DNR growing in the mid-teens [7][14] - The risk and exposure management business showed over 20% year-over-year growth in pipeline generation during Q4 [7] - ARR per customer grew 2% year over year to approximately $72,000 [23] Market Data and Key Metrics Changes - International revenue grew 14% year over year, accounting for 25% of total revenue, while North America grew 3% and made up 75% of the mix [26] - The total customer base increased by 2% year over year, ending 2024 with over 11,700 customers globally [23] Company Strategy and Development Direction - The company is focusing on innovation in its detection and response offerings, expanding coverage and leveraging AI capabilities [8][10] - Rapid7 is scaling its partner ecosystem, with 80% to 90% of new ARR booked through the channel [8] - The launch of Exposure Command is seen as a significant milestone, validating the integrated approach to attack surface management [9][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the foundational work completed in 2024, positioning the company for more consistent execution and sustainable growth [10][12] - The company expects ARR growth of 4% to 6% in 2025, primarily driven by the DNR business [18][29] - Management acknowledged the competitive landscape but emphasized the strategic value of their integrated security operations platform [10][90] Other Important Information - The company plans to reinvest up to $30 million into strategic growth initiatives, including expanding MDR service capabilities and establishing an innovation center in India [20][30] - An Analyst Day is planned for later in the year to provide deeper insights into the business and strategy [21] Q&A Session Summary Question: Clarification on ARR for Detection and Response - Management confirmed that the DNR business is growing in the mid-teens, with the remainder of ARR being a mix of cloud VM and legacy products [34][35] Question: Margin Outlook for Managed DNR - Management indicated that overall product gross margins will remain stable in the mid-seventies, but managed services will have lower gross margins due to labor components [39] Question: Competitive Landscape in Cloud Security - Management highlighted the focus on integrated exposure management to reduce complexity for customers, targeting a broader market [46][47] Question: Confidence in Net New ARR Growth - Management expressed confidence in the pipeline and early conversion rates, expecting improvements in net new ARR throughout the year [74][76] Question: Churn and Downsell Pressure in VM - Management noted that churn in the VM segment is stabilizing, with expectations for improved retention as customers transition to more integrated products [98][99] Question: Strategic Options for Declining ARR - Management is considering all options for the declining ARR segment, focusing on customer pain points and the complexity of managing risk [104][105]