Rapid7 Announces Second Quarter 2020 Financial Results

8/6, 10:05 PM (Source: GlobeNewswire)

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  • Annualized recurring revenue (ARR) of $379.9 million, an increase of 31% year-over-year
  • Revenue of $98.9 million, 25% year-over-year growth; Products revenue of $92.4 million, 27% year-over-year growth
  • Total ARR per customer growth of 20% year-over-year
  • GAAP operating loss of $(15.7) million; Non-GAAP operating income of $4.3 million

BOSTON, Aug. 06, 2020 (GLOBE NEWSWIRE) -- Rapid7, Inc. (Nasdaq: RPD), a leading provider of security analytics and automation, today announced its financial results for the second quarter of 2020.

"Rapid7's solid execution drove results that exceeded expectations for both growth and profitability during the second quarter.  Strong ARR per customer growth of 20% drove quarter ending ARR to $379.9 million as customers turn to Rapid7 to transform their security programs in these dynamic times, while non-GAAP operating income of $4.3 million reflects underlying leverage in our business," said Corey Thomas, Chairman and CEO of Rapid7.

"Even amidst an uncertain landscape, our consistent first half execution provides us confidence in raising full year guidance and achieving non-GAAP operating profit for the full year."

Board of Directors Announcement

Rapid7 is pleased to announce the appointment of Reeny Sondhi to its board of directors, effective August 4, 2020. Ms. Sondhi has served as the Chief Security Officer of Autodesk, Inc. since July 2018. Previously, she was Autodesk’s Vice President, Chief of Product and Cloud Security from August 2015 to July 2018.

"We are privileged to have Reeny join the Rapid7 board," said Corey Thomas, Chairman and CEO of Rapid7. "Reeny is an accomplished technology leader with deep expertise across cloud and security, and she brings the perspective of our customers to the boardroom."

Prior to joining Autodesk, from March 2005 to August 2015, Ms. Sondhi was employed by EMC Corporation where she served most recently as Senior Director, Security Engineering and Assurance. Ms. Sondhi holds a B.S. in electronics engineering from Government Engineering College, Bhopal and a post graduate diploma in management from Institute of Management Development and Research.

Second Quarter 2020 Financial Results and Other Metrics

 Three Months Ended June 30,
 2020 2019 % Change
 (dollars in thousands)
Annualized recurring revenue$379,891   $290,016   31 %
Number of customers9,142   8,400   %
ARR per customer$41.6   $34.5   20 %
Recurring revenue as a percentage of total revenue91 % 87 %  
Renewal rate(1)105 % 113 %  

(1) For the three months ended June 30, 2019 our renewal rate was adjusted from 116%, as previously disclosed, to 113% based on a reclassification of certain upsells and cross-sells.


 Three Months Ended June 30,
 2020 2019 % Change
 (in thousands, except per share data)
Products revenue (2)$92,430    $72,579    27 %
Professional services revenue6,482    6,380    %
Total revenue$98,912    $78,959    25 %
      
North America revenue$82,557    $66,301    25 %
Rest of world revenue16,355    12,658    29 %
Total revenue$98,912    $78,959     
      
GAAP gross profit$69,831    $56,778     
GAAP gross margin71  % 72  %  
Non-GAAP gross profit$73,137    $59,158     
Non-GAAP gross margin74  % 75  %  
      
GAAP loss from operations$(15,732)  $(12,180)   
GAAP operating margin(16)% (15)%  
Non-GAAP income from operations$4,265    $500     
Non-GAAP operating margin %  %  
      
GAAP net loss$(21,466)  $(13,420)   
GAAP net loss per share, basic and diluted$(0.42)  $(0.28)   
Non-GAAP net income$2,795    $1,093     
Non-GAAP net income per share, basic$0.06    $0.02     
Non-GAAP net income per share, diluted$0.05    $0.02     
      
Adjusted EBITDA$7,556    $2,746     
      
Cash provided by operating activities$442    $2,483     

(2) Historically, we have presented revenue on our consolidated statement of operations as products, maintenance and support and professional services revenue. For the three months ended June 30, 2020, we have combined products and maintenance and support revenue together as products revenue on our consolidated statement of operations. Prior periods have been adjusted to conform with this presentation.

For additional details on the reconciliation of non-GAAP measures and certain other business metrics to their nearest comparable GAAP measures, please refer to the accompanying financial data tables included in this press release.

Recent Business Highlights

  • In May 2020, DivvyCloud by Rapid7 released a new core capability, Infrastructure as Code (IaC) Security. IaC integrates cloud security into the DevOps process, enabling Rapid7 to deliver seamless, full-lifecycle cloud security to customers.

  • In July 2020, Rapid7 was named a Gartner Peer Insights Customers' Choice for Security Information and Event Management (SIEM). Customers cited InsightIDR's ease-of-use and vendor integrations as top benefits.

  • In July 2020, Rapid7 released its National / Industry / Cloud Exposure Report (NICER) 2020, highlighting changes in the internet risk landscape across countries, industries and cloud environments. To view a copy of the report, please visit: https://www.rapid7.com/nicer.

Third Quarter and Full-Year 2020 Guidance

Rapid7 anticipates annualized recurring revenue, revenue, non-GAAP income (loss) from operations, and non-GAAP net loss per share to be in the following ranges:

 Third Quarter 2020 Full-Year 2020
 (dollars in millions)
Annualized recurring revenue    $404.0  to$420.0  
Year-over-year growth    19 %to24 %
Revenue$100.7  to$102.3   $399.0  to$403.0  
Year-over-year growth21 %to23 % 22 %to23 %
Non-GAAP (loss) income from operations$(0.5) to$0.5   $0.0  to$2.0  
Non-GAAP net loss per share$(0.06) to$(0.04)  $(0.14) to$(0.10) 
Weighted average shares outstanding  51.3     51.0  

The guidance provided above is forward-looking in nature. Actual results may differ materially. See the cautionary note regarding “Forward-Looking Statements” below. Guidance for the third quarter and full-year 2020 does not include any potential impact of foreign exchange gains or losses. The weighted average shares outstanding for the third quarter and full-year 2020 represent basic shares outstanding given our projected non-GAAP net loss. In addition, fluctuations in Rapid7’s quarterly operating results may be particularly pronounced in the current economic environment due to the uncertainty caused by, and the unprecedented nature of, the current COVID-19 pandemic, whose severity, duration and ultimate impact is difficult to predict at this time. The primary set of drivers of Rapid7’s actual financial performance relative to the ranges provided will be a function of how long portions of the economy remain closed, especially if there are broad regional or systematic closures as a result of a sustained pandemic resurgence, and the pace of recovery. The guidance provided above is based on a number of assumptions, estimates and expectations as of the date of this press release and, while presented with numerical specificity, this guidance is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Rapid7's control and are based upon specific assumptions with respect to future business decisions or economic conditions, some of which may change. Rapid7 undertakes no obligation to update guidance after this date.

Non-GAAP guidance excludes estimates for stock-based compensation expense, amortization of acquired intangible assets, amortization of debt discount and issuance costs, and certain other items. Rapid7 has provided a reconciliation of each non-GAAP guidance measure to the most comparable GAAP measures in the financial statement tables included in this press release. The reconciliation does not reflect any items that are unknown at this time, such as acquisition-related expenses and litigation-related expenses for the third and fourth quarters of 2020, which we are not able to predict without unreasonable effort due to their inherent uncertainty.

Conference Call and Webcast Information

Rapid7 will host a conference call today, August 6, 2020, to discuss its results at 4:30 p.m. Eastern Time. The call will be accessible by telephone at 877-357-4230 (domestic) or 629-228-0721 (international). The call will also be available live via webcast on Rapid7's website at https://investors.rapid7.com. A telephone replay of the conference call will be available at 855-859-2056 or 404-537-3406 (access code 9256427) until August 13, 2020. A webcast replay will be available at https://investors.rapid7.com.

About Rapid7

Rapid7 (Nasdaq: RPD) is advancing security with visibility, analytics, and automation delivered through our Insight cloud. Our solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks. Over 9,100 customers rely on Rapid7 technology, services, and research to improve security outcomes and securely advance their organizations. For more information, visit our website, check out our blog, or follow us on Twitter.

Non-GAAP Financial Measures and Other Metrics

To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we provide investors with certain non-GAAP financial measures and other metrics, which we believe are helpful to our investors. We use these non-GAAP financial measures and other metrics for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We also use certain non-GAAP financial measures as performance measures under our executive bonus plan. We believe that these non-GAAP financial measures and other metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

While our non-GAAP financial measures are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, you should review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not rely on any single financial measure to evaluate our business.

Non-GAAP Financial Measures

We disclose the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) per share and adjusted EBITDA. We also disclose non-GAAP gross margin and non-GAAP operating margin derived from these financial measures.

We define non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt discount and issuance costs and certain other items such as acquisition-related expenses and litigation-related expenses. Non-GAAP net income (loss) per basic and diluted share is calculated as non-GAAP net income (loss) divided by the weighted average shares used to compute net income (loss) per share, with the number of weighted average shares decreased to reflect the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes.

We believe these non-GAAP financial measures are useful to investors in assessing our operating performance due to the following factors:

Stock-based compensation expense. We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense. We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.

Amortization of acquired intangible assets. We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the intangible assets are valued at the time of acquisition and are amortized over several years after the acquisition.

Amortization of debt discount and issuance costs. The expense for the amortization of debt discount and debt issuance costs related to our convertible senior notes and revolving credit facility is a non-cash item, and we believe the exclusion of this interest expense provides a more useful comparison of our operational performance in different periods.

Litigation-related expenses. We exclude certain litigation-related expenses consisting of professional fees and related costs incurred by us related to significant litigation outside the ordinary course of business. We believe it is useful to exclude such expenses because we do not consider such amounts to be part of our ongoing operations.

Acquisition-related expenses. We exclude acquisition-related expenses as costs that are unrelated to the current operations and neither are comparable to the prior period nor predictive of future results.

Anti-dilutive impact of capped call transaction. Our capped calls transactions are intended to offset potential dilution from the conversion features in our convertible senior notes. Although we cannot reflect the anti-dilutive impact of the capped call transactions under GAAP, we do reflect the anti-dilutive impact of the capped call transactions in non-GAAP net income (loss) per basic and diluted share to provide investors with useful information in evaluating our financial performance on a per share basis.

Adjusted EBITDA (non-GAAP). Adjusted EBITDA is a non-GAAP measure that we define as net loss before (1) interest income, (2) interest expense, (3) other income (expense), net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, and (8) certain other items. We believe that the use of adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods. 

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business and an important part of the compensation provided to our employees.

Other Metrics

Annualized Recurring Revenue (ARR). ARR is defined as the annual value of all recurring revenue related contracts in place at the end of the period. ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or replace these items. ARR is not a forecast of future revenue and can be impacted by contract start and end dates and renewal rates, and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of operations.

Number of Customers. We define a customer as any entity that has (1) an active Rapid7 contract or a contract that expired within 90 days or less of the applicable measurement date; and for Logentries products, those customers with a contract value equal to or greater than $2,400 per year, or (2) purchased Rapid7 professional services within the 12 months preceding the applicable measurement date.

ARR per Customer. We define ARR per customer as ARR divided by the number of customers at the end of the period.

Recurring Revenue. We define recurring revenue as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support.

Renewal Rate. We calculate our renewal rate by dividing the dollar value of renewed customer agreements, including upsells and cross-sells of additional products, but excluding professional services, in a trailing 12-month period by the dollar value of the corresponding customer agreements.

Cautionary Language Concerning Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the statements regarding our financial guidance for the third quarter and full year 2020, the assumptions underlying such guidance and the timing of global economic recovery and the anticipated impact of COVID-19 on our guidance, business, financial condition and results of operations. Our use of the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “will” and similar expressions are intended to identify forward-looking statements. The events described in our forward-looking statements are subject to a number of risks and uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Risks that could cause or contribute to such differences include, but are not limited to, risks arising from the ongoing COVID-19 pandemic, fluctuations in our quarterly results, failure to meet our publicly announced guidance or other expectations about our business, our rapid growth and ability to sustain our revenue growth rate, the ability of our products and professional services to correctly detect vulnerabilities, our customers renewal of their subscriptions with us, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, our sales cycles, our ability to integrate acquired companies, including DivvyCloud, our ability to operate in compliance with applicable laws as well as other risks and uncertainties set forth in the “Risk Factors” section of our most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) on May 8, 2020 and in the subsequent reports that we file with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed in any forward-looking statements we may make. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.


Investor contact:

Sunil Shah
Vice President, Investor Relations
investors@rapid7.com
(857) 990-4074

Press contact:

Caitlin Doherty
press@rapid7.com
(857) 990-4240




RAPID7, INC.    
Consolidated Balance Sheets (Unaudited)     
(in thousands)    

  June 30, 2020 December 31, 2019
Assets    
Current assets:    
Cash and cash equivalents $279,343    $123,413  
Short-term investments 36,313    116,158  
Accounts receivable, net 76,823    87,927  
Deferred contract acquisition and fulfillment costs, current portion 18,439    17,047  
Prepaid expenses and other current assets 20,708    20,051  
Total current assets 431,626    364,596  
Long-term investments 5,365    22,887  
Property and equipment, net 48,904    50,670  
Operating lease right-of-use assets 72,005    60,984  
Deferred contract acquisition and fulfillment costs, non-current portion 35,815    34,213  
Goodwill 213,686    97,866  
Intangible assets, net 47,706    28,561  
Other assets 5,304    5,136  
Total assets $860,411    $664,913  
Liabilities and Stockholders’ Equity    
Current liabilities:    
Accounts payable $7,078    $6,836  
Accrued expenses 36,165    41,021  
Operating lease liabilities, current portion 9,436    7,179  
Deferred revenue, current portion 227,318    231,518  
Other current liabilities —    119  
   Total current liabilities 279,997    286,673  
Convertible senior notes, net 368,161    185,200  
Operating lease liabilities, non-current portion 80,081    72,294  
Deferred revenue, non-current portion 33,280    36,226  
Other long-term liabilities 8,204    1,352  
Total liabilities 769,723    581,745  
Stockholders’ equity:    
Common stock 509    499  
Treasury stock (4,764)  (4,764)
Additional paid-in-capital 657,678    605,650  
Accumulated other comprehensive income 85    213  
Accumulated deficit (562,820)  (518,430)
Total stockholders’ equity 90,688    83,168  
Total liabilities and stockholders’ equity $860,411    $664,913  



RAPID7, INC.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)

 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Revenue:       
Products$92,430   $72,579   $179,979   $138,424  
Professional services6,482   6,380   13,273   13,720  
Total revenue98,912   78,959   193,252   152,144  
Cost of revenue:       
Products23,118   16,637   44,373   31,006  
Professional services5,963   5,544   12,422   11,148  
Total cost of revenue29,081   22,181   56,795   42,154  
Total gross profit69,831   56,778   136,457   109,990  
Operating expenses:       
Research and development26,120   19,626   50,322   37,491  
Sales and marketing44,959   38,172   93,104   73,310  
General and administrative14,484   11,160   28,583   21,113  
Total operating expenses85,563   68,958   172,009   131,914  
Loss from operations(15,732)  (12,180)  (35,552)  (21,924) 
Other income (expense), net:       
Interest income208   1,582   1,256   3,313  
Interest expense(5,917)  (3,312)  (9,379)  (6,541) 
Other income (expense), net210   (29)  (237)  (235) 
Loss before income taxes(21,231)  (13,939)  (43,912)  (25,387) 
Provision for (benefit from) income taxes235   (519)  478   (294) 
Net loss$(21,466)  $(13,420)  $(44,390)  $(25,093) 
Net loss per share, basic and diluted$(0.42)  $(0.28)  $(0.88)  $(0.52) 
Weighted-average common shares outstanding, basic and diluted50,695,706   48,451,562   50,411,508   48,141,474  



RAPID7, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
Cash flows from operating activities:       
Net loss$(21,466)  $(13,420)  $(44,390)  $(25,093) 
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:       
Depreciation and amortization5,576   3,944   10,419   7,371  
Amortization of debt discount and issuance costs4,264   2,594   7,007   5,104  
Stock-based compensation expense16,446   10,430   29,793   19,064  
Provision for doubtful accounts481   916   1,008   1,353  
Deferred income taxes   (761)     (761) 
Foreign currency re-measurement loss(248)  (58)  199   191  
Other non-cash (income) expense(9)  (568)  (147)  (1,290) 
Changes in operating assets and liabilities:       
Accounts receivable(11,773)  (10,180)  10,835   4,549  
Deferred contract acquisition and fulfillment costs(2,478)  (2,078)  (2,994)  (3,172) 
Prepaid expenses and other assets1,638   (3,394)  1,773   (9,334) 
Accounts payable(3,873)  2,118   137   2,184  
Accrued expenses7,126   6,378   (7,437)  (7,312) 
Deferred revenue4,675   7,038   (11,996)  (5,066) 
Other liabilities83   (476)  (980)  1,129  
Net cash provided by (used in) operating activities442   2,483   (6,773)  (11,083) 
Cash flows from investing activities:       
Business acquisition, net of cash acquired(125,771)  (14,621)  (125,771)  (14,621) 
Purchases of property and equipment(1,199)  (9,249)  (3,955)  (17,712) 
Capitalization of internal-use software costs(1,474)  (1,551)  (2,948)  (3,152) 
Purchases of investments(24,987)  (9,403)  (49,259)  (72,432) 
Sales/maturities of investments32,675   67,564   146,599   140,302  
Net cash (used in) provided by investing activities(120,756)  32,740   (35,334)  32,385  
Cash flows from financing activities:       
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $6,500223,500      223,500     
Purchase of capped calls related to convertible senior notes(27,255)     (27,255)    
Payments of debt issuance costs(248)     (248)    
Taxes paid related to net share settlement of equity awards(1,917)  (1,860)  (3,450)  (2,839) 
Proceeds from employee stock purchase plan      3,346   2,634  
Proceeds from stock option exercises2,167   3,340   3,728   6,058  
Net cash provided by financing activities196,247   1,480   199,621   5,853  
Effect of exchange rate changes on cash, cash equivalents and restricted cash259   (3)  (301)  (151) 
Net increase in cash, cash equivalents and restricted cash76,192   36,700   157,213   27,004  
Cash, cash equivalents and restricted cash, beginning of period204,434   89,869   123,413   99,565  
Cash, cash equivalents and restricted cash, end of period$280,626   $126,569   $280,626   $126,569  



RAPID7, INC.    
GAAP to Non-GAAP Reconciliation (Unaudited)    
(in thousands, except share and per share data)   

 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
GAAP gross profit$69,831   $56,778   $136,457   $109,990  
Add: Stock-based compensation expense11,131   718   2,062   1,291  
Add: Amortization of acquired intangible assets22,175   1,662   3,833   3,020  
Non-GAAP gross profit$73,137   $59,158   $142,352   $114,301  
Non-GAAP gross margin73.9 % 74.9 % 73.7 % 75.1 %
        
GAAP gross profit - Products$69,312   $55,942   $135,606   $107,418  
Add: Stock-based compensation expense710   373   1,283   650  
Add: Amortization of acquired intangible assets2,175   1,662   3,833   3,020  
Non-GAAP gross profit - Products$72,197   $57,977   $140,722   $111,088  
Non-GAAP gross margin - Products78.1 % 79.9 % 78.2 % 80.3 %
        
GAAP gross profit - Professional services$519   $836   $851   $2,572  
Add: Stock-based compensation expense421   345   779   641  
Non-GAAP gross profit - Professional services$940   $1,181   $1,630   $3,213  
Non-GAAP gross margin - Professional services14.5 % 18.5 % 12.3 % 23.4 %
        
GAAP loss from operations$(15,732)  $(12,180)  $(35,552)  $(21,924) 
Add: Stock-based compensation expense116,446   10,430   29,793   19,064  
Add: Amortization of acquired intangible assets22,285   1,698   3,975   3,095  
Add: Acquisition-related expenses3831   297   1,138   514  
Add: Litigation-related expenses4435   255   978   328  
Non-GAAP income from operations$4,265   $500   $332   $1,077  
        
GAAP net loss$(21,466)  $(13,420)  $(44,390)  $(25,093) 
Add: Stock-based compensation expense116,446   10,430   29,793   19,064  
Add: Amortization of acquired intangible assets22,285   1,698   3,975   3,095  
Add: Acquisition-related expenses3831   297   1,138   514  
Add: Litigation-related expenses4435   255   978   328  
Add: Amortization of debt discount and issuance costs4,264   2,594   7,007   5,104  
Add: Release of valuation allowance, acquisition-related   (761)     (761) 
Non-GAAP net income (loss)$2,795   $1,093   $(1,499)  $2,251  
        
Reconciliation of net (loss) income per share, basic       
GAAP net loss per share, basic$(0.42)  $(0.28)  $(0.88)  $(0.52) 
Non-GAAP adjustments to net loss0.48   0.30   0.85   0.57  
Non-GAAP net (loss) income per share, basic$0.06   $0.02   $(0.03)  $0.05  
        
Reconciliation of net (loss) income per share, diluted       
GAAP net loss per share, diluted$(0.42)  $(0.28)  $(0.88)  $(0.52) 
Non-GAAP adjustments to net loss0.47   0.30   0.85   0.56  
Non-GAAP net (loss) income per share, diluted$0.05   $0.02   $(0.03)  $0.04  
        
Weighted average shares used in GAAP per share calculation, basic and diluted50,695,706   48,451,562   50,411,508   48,141,474  
        
Weighted average shares used in non-GAAP per share calculation:       
Basic50,695,706   48,451,562   50,411,508   48,141,474  
Diluted53,063,261   52,035,868   50,411,508   51,611,858  
        
1 Includes stock-based compensation expense as follows:       
Cost of revenue$1,131   $718   $2,062   $1,291  
Research and development6,389   4,054   11,034   7,228  
Sales and marketing4,345   2,942   8,023   5,406  
General and administrative4,581   2,716   8,674   5,139  
        
2 Includes amortization of acquired intangible assets as follows:       
Cost of revenue$2,175   $1,662   $3,833   $3,020  
Sales and marketing80   35   112   73  
General and administrative30   1   30   2  
        
3 Includes acquisition-related expenses as follows:       
General and administrative$831   $297   $1,138   $514  
        
4 Includes litigation-related expenses as follows:       
General and administrative$435   $255   $978   $328  



RAPID7, INC.
Reconciliation of Net Loss to Adjusted EBITDA (Unaudited)
(in thousands)

 Three Months Ended June 30, Six Months Ended June 30,
 2020 2019 2020 2019
GAAP net loss$(21,466)  $(13,420)  $(44,390)  $(25,093) 
Interest income(208)  (1,582)  (1,256)  (3,313) 
Interest expense5,917   3,312   9,379   6,541  
Other (income) expense, net(210)  29   237   235  
Provision for income taxes235   (519)  478   (294) 
Depreciation expense2,740   2,056   5,415   3,906  
Amortization of intangible assets2,836   1,888   5,004   3,465  
Stock-based compensation expense16,446   10,430   29,793   19,064  
Acquisition-related expenses831   297   1,138   514  
Litigation-related expenses435   255   978   328  
Adjusted EBITDA$7,556   $2,746   $6,776   $5,353  



RAPID7, INC.
Third Quarter and Full-Year 2020 Guidance
GAAP to Non-GAAP Reconciliation
(in millions, except per share data)

 Third Quarter 2020 Full-Year 2020
Reconciliation of GAAP to Non-GAAP (loss) income from operations:       
Anticipated GAAP loss from operations$(19.8) to$(18.8)  $(74.1) to$(72.1) 
Add: Anticipated stock-based compensation expense16.7  to16.7   62.9  to62.9  
Add: Anticipated amortization of acquired intangible assets2.6  to2.6   9.1  to9.1  
Add: Anticipated acquisition-related expenses  to   1.1  to1.1  
Add: Anticipated litigation-related expenses  to   1.0  to1.0  
Anticipated non-GAAP (loss) income from operations$(0.5) to$0.5   $  to$2.0  
        
Reconciliation of GAAP to Non-GAAP net loss:       
Anticipated GAAP net loss$(27.7) to$(26.7)  $(98.8) to$(96.8) 
Add: Anticipated stock-based compensation expense16.7  to16.7   62.9  to62.9  
Add: Anticipated amortization of acquired intangible assets2.6  to2.6   9.1  to9.1  
Add: Anticipated acquisition-related expenses  to   1.1  to1.1  
Add: Anticipated litigation-related expenses  to   1.0  to1.0  
Add: Anticipated amortization of debt discount and issuance costs5.2  to5.2   17.4  to17.4  
Anticipated non-GAAP net loss$(3.2) to$(2.2)  $(7.3) to$(5.3) 
        
Anticipated GAAP net loss per share$(0.54)  $(0.52)  $(1.94)  $(1.90) 
Anticipated non-GAAP net loss per share$(0.06)  $(0.04)  $(0.14)  $(0.10) 
        
Weighted average shares used in GAAP and non-GAAP per share calculation, basic and diluted  51.3     51.0  

The reconciliation does not reflect any items that are unknown at this time, such as acquisition-related expenses and litigation-related expenses for the third and fourth quarters of 2020, which we are not able to predict without unreasonable effort due to their inherent uncertainty.  

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