Rapid7(RPD) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total ARR ended the second quarter at $379.9 million, growing 31% year-over-year, reflecting strong demand for the Insight platform [11][42] - Total revenue for Q2 was $98.9 million, exceeding guidance and growing 25% year-over-year, driven by a 27% increase in product revenue [42] - Recurring revenue represented 91% of total revenue, up from 87% in the prior year [42] - Operating profit for Q2 was $4.3 million, ahead of guidance, with adjusted EBITDA at $7.6 million [48] Business Line Data and Key Metrics Changes - Security transformation solutions, including IDR and InsightAppSec, showed strong momentum, representing over 50% of new business in the quarter [21] - ARR per customer grew by 20% year-over-year to approximately $41,600, indicating successful expansion in customer relationships [24][45] - Vulnerability management continued to grow, with solid year-to-date ARR and revenue growth exceeding 20% [22] Market Data and Key Metrics Changes - North America revenue grew by 25% year-over-year, comprising 83% of total revenue, while the rest of the world grew by 29% [43] - The company served over 9,100 customers globally, a 9% increase from the prior year [44] Company Strategy and Development Direction - The company aims to lead in enabling customers to transform their security operations around the cloud, focusing on security analytics, automation, and cloud enablement [31] - Rapid7's platform strategy allows customers to expand their security capabilities over time, addressing immediate priorities while facilitating long-term growth [20] - The company plans to pilot various Insight product bundles to maximize customer adoption and drive sales leverage [36] Management's Comments on Operating Environment and Future Outlook - Management noted that organizations are increasingly prioritizing security enablement as they navigate digital transformation and cloud migration [12][51] - The company raised its full-year guidance for ARR to a range of $404 million to $420 million, reflecting confidence in long-term growth despite economic uncertainties [56] - Management acknowledged the ongoing economic uncertainty but expressed optimism about the demand for security solutions [52][55] Other Important Information - The company welcomed a new Board member, Reeny Sondhi, who brings expertise in cloud and security [38] - The company reported a cash balance of $321 million at the end of Q2, up from $253.6 million in Q1, primarily due to proceeds from a convertible notes offering [49] Q&A Session Summary Question: Insights on SIEM demand post-COVID - Management observed that demand for cloud-based SIEM has increased significantly as organizations recognize the need for modern security solutions in a remote work environment [66][67] Question: Net revenue retention and upsell trends - Gross retention remained strong, with net revenue retention slightly declining from 106% to 105%, which was anticipated [70][71] Question: Urgency of cloud migration among CIOs - CIOs are accelerating their digital transformation efforts, with security becoming a critical part of the conversation as they move operations to the cloud [77][79] Question: Trends in security spending - Management noted that security spending has not slowed as much as expected, with many organizations continuing to invest in cybersecurity initiatives [86] Question: Impact of customer layoffs on business - Management indicated that the growth of technology assets typically outpaces any decline in employee numbers, minimizing the impact of layoffs on revenue [118]