Rapid7(US:RPD)2024-02-08 04:37Financial Data and Key Metrics Changes - Rapid7 ended 2023 with $806 million in ARR, growing 13% year-over-year, and exceeded revenue, operating income, and free cash flow guidance [28][74] - Full year revenue reached $778 million, a 14% increase from the previous year, with product revenue also growing 14% to $740 million [74][100] - Operating income for the year was $102 million, reflecting an over 800 basis points margin expansion, and free cash flow was $84 million, representing an 11% free cash flow margin [33][74] Business Line Data and Key Metrics Changes - The company saw strong demand for its integrated security operations platform, particularly in detection and response and cloud security solutions [28][32] - ASPs increased due to larger deals tied to package offerings, with a balanced contribution from new and existing customers [6][28] - Professional services revenue declined by 10% to $10 million as the company deemphasized lower-value services [100] Market Data and Key Metrics Changes - International revenue grew 21% year-over-year, representing 23% of total revenue, while North America revenue grew 9%, accounting for 77% of total revenue [100] - The company expects total ARR for 2024 to be between $885 million and $895 million, indicating a growth of 10% to 11% [75] Company Strategy and Development Direction - Rapid7 is focused on building a leadership position in the extended SOC by integrating and contextualizing more data across digital attack surfaces [3][70] - The company aims to drive cloud security adoption in mainstream enterprises and enhance its AI capabilities to improve security operations [30][71] - Investments are being made to strengthen the managed SOC and expand the partner ecosystem, particularly in managed services [29][97] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the macro environment being stable, with a focus on delivering strong free cash flow growth and maintaining high confidence in ARR growth [38][70] - The company is prepared for a potentially noisy market but believes it can achieve growth through strategic investments and operational efficiency [70][125] - Management highlighted the importance of funding for security projects and the need for customers to continue investing in security solutions [113] Other Important Information - The company has rightsized its cost structure, resulting in a decline in sales and marketing expenses to 32% of revenue, down from 38% the previous year [7] - The focus on operational efficiency and streamlining costs has positioned the company for durable growth in the medium to long term [4][33] Q&A Session Summary Question: Can you discuss the assumptions in the 2024 guidance regarding conversion rates and the macro environment? - Management indicated that they are focused on high confidence in their guidance, with a strategy to ensure they can exceed targets if market conditions improve [11][12] Question: What are the catalysts for increasing customer count and ARR growth? - Management emphasized a strategic approach to growing customer count, focusing on quality over quantity, and leveraging partnerships to drive growth [22][60] Question: How does the company plan to address the declining customer count? - Management stated that they aim to grow strategically and focus on enhancing the value proposition for existing customers while expanding the partner network [22][24] Question: What is the outlook for net new ARR in 2024? - Management expects net new ARR additions to be flat to slightly down, but they have growth levers in place to potentially exceed this outlook if market conditions are favorable [63][115] Question: How is the company addressing the competitive landscape in the mid-market? - Management noted that the mid-market remains stable and healthy, with adjustments made earlier to align with market expectations [126]