Boston, MA — November 9, 2016 – Rapid7, Inc. (NASDAQ: RPD), a leading provider of security data and analytics solutions, today announced its financial results for the third quarter of 2016.

“Our third quarter results showed fundamental strength in several important areas, including solid growth in our mid-market customer base, new product adoption, and uptake of our platform-based cloud analytics,” said Corey Thomas, president and chief executive officer of Rapid7. “Our pipeline is healthy and while the market demand environment remains strong, our total billings growth in the third quarter was lower than we expected due to larger enterpise and federal deals that did not close in the quarter. We continue to believe that Rapid7 is well-positioned to drive growth due to our continuous technology innovation, robust platform-based data and analytics solutions, as well as strong demand from the growing challenges facing IT and security practitioners.”

“We’re pleased to have performed well against our guided metrics for the third quarter and to have delivered another quarter of positive operating cash flow,” said Steven Gatoff, chief financial officer of Rapid7. “We continue to see the value of our unique data and analytics-centric model driving compelling economics with our customers and we remain positive about the underlying strength of our business and our ability to deliver strong revenue growth and improving loss from operations.”

Third Quarter 2016 Financial Highlights

• Continued Revenue Growth: For the third quarter of 2016, total revenue increased 42% year-over-year to $40.3 million. Approximately 87% of total revenue for the third quarter of 2016 came from deferred revenue on the balance sheet at the beginning of the quarter. Recurring revenue, which is comprised of content subscriptions, maintenance and support, cloud-based subscriptions, and managed services subscriptions, was 62% of total revenue in the third quarter of 2016.
• Growth in Deferred Revenue: Total deferred revenue at the end of the third quarter of 2016 was $149.3 million, an increase of 36% year-over-year with growth in both short and long-term deferred revenue.
• Positive Operating Cash Flow: In the third quarter of 2016, operating cash flow was $1.8 million as compared to operating cash flow of $2.3 million in the third quarter of 2015 and $1.9 million in the second quarter of 2016.
• High Customer Renewal Rates: The renewal rate for the third quarter of 2016, which includes upsells of purchased products and cross-sells of additional products, was 121% compared to 122% for the same period in the prior year. The expiring revenue renewal rate, which excludes upsells and cross-sells of additional products, was 89% in the third quarter of 2016 compared to 88% in the same period in the prior year.
• Strong Professional Services Gross Margin: For the third quarter of 2016, GAAP professional services gross margin increased to 36% as compared to 20% in the third quarter of 2015. On a non-GAAP basis, professional services gross margin in the third quarter of 2016 increased to 38% as compared to 22% in the third quarter of 2015. The company continues to gain scale efficiencies, driven by increasing demand for penetration testing as well as growth in its international services portfolio.
• Diversified Global Growth: For the third quarter of 2016, total revenue from North America increased 39% year-over-year to $34.5 million and comprised 86% of total revenue. Total revenue from international increased 69% year-over-year to $5.8 million and comprised 14% of total revenue for the third quarter of 2016.
• Improving Loss from Operations and Net Loss Per Share: For the third quarter of 2016, GAAP loss from operations was $(10.2) million, and non-GAAP loss from operations was $(5.3) million. GAAP net loss per share was $(0.25) and non-GAAP net loss per share was $(0.13) for the third quarter of 2016.

Strategic Additions to the Board of Directors and Management Team:

• Judy Bruner, the former CFO of SanDisk Corporation, was appointed to the company’s Board of Directors, effective October 31, 2016. Ms. Bruner was also appointed as a member of the board’s audit committee, bringing additional financial and operational expertise that will be beneficial to Rapid7 and our shareholders. Ms. Bruner is a seasoned business executive with proven experience managing global enterprises and will play an important role as we continue to scale our business and execute the company’s long-term growth strategy.
• Andrew Burton, the company’s senior vice president of IT Search and former CEO of Logentries (the business that Rapid7 acquired in October 2015), was promoted to be Rapid7’s chief operating officer as the company continues to drive customer adoption and disrupt the cybersecurity and IT markets with its security data and analytics platform. In this newly-created role, Burton will report directly to the company’s president and chief executive officer, Corey Thomas, and will focus on Rapid7’s global go-to-market efforts.

Recent Business Highlights

Customer Momentum and Growth:

• Increased market adoption of Rapid7 product offerings by expanding relationships with existing customers and adding new customers, ending the third quarter of 2016 with more than 5,800 customers, an increase of 33% year-over-year.
• Added several new customers including EPIC Management, QuickPivot, and Xuji Group Corporation.
• Improved penetration into Fortune 1000 companies year-over-year from 35% to 37%.

Industry Recognition:

• Recognized by SANS for providing the most comprehensive coverage across the Center for Internet Security (CIS) Critical Security Controls for Effective Cyber Defense. The ranking found that Rapid7’s incident detection and response and threat exposure management solutions cover 19 of the 20 controls as defined by CIS. The controls focus on helping organizations minimize the risk they’re exposed to and harden resiliency.

Technology Platform and Product Innovation:

• Introduced policy view for Nexpose so customers can see at a glance how compliant they are and quickly understand where their biggest compliance issues are, to begin remediating.
• InsightIDR product enhancements were released, including several new detections, compliance dashboards, and the ability to write custom alerts. These capabilities are designed to give practitioners the ability to detect attackers earlier in the lifecycle and exemplify the power, agility, and versatility of the company’s cloud-based analytics engine.
• Announced new AppSpider functionality providing enhanced support for JavaScript Single Page Applications (SPAs) built with ReactJS, which is a significant release improvement given the rapid proliferation of SPAs and the challenges created for security teams.

Robust Technology Partnerships:

• Rapid7’s Nexpose is now integrated with both McAfee ePolicy Orchestrator (ePO) and McAfee Data Exchange Layer (DXL). Customers will now have always-on vulnerability management, visibility into their endpoints and entire IT environments, and the ability to prioritize remediation to maximize impact. The integrations will help organizations break down communication barriers between IT and security teams to collaboratively reduce the risk of a breach.
• Rapid7 has strengthened and expanded it’s Nexpose integration with ForeScout. Using the ForeScout Extended Module allows joint customers to leverage Nexpose to scan for vulnerabilities and mitigate threats stemming from potentially risky devices that join the network.

Fourth Quarter and Full-Year 2016 Guidance

Rapid7 anticipates total revenue, non-GAAP loss from operations, and non-GAAP net loss per share to be in the following ranges:

Fourth Quarter 2016:

The fourth quarter net loss per share (non-GAAP) calculation assumes 42.0 million basic and diluted weighted average common shares outstanding.

Full-Year 2016:

The full-year net loss per share calculation (non-GAAP) assumes 41.4 million basic and diluted weighted average common shares outstanding.

Guidance for the fourth quarter and full-year 2016 does not include any potential impact of foreign exchange gains or losses.

Conference Call and Webcast Information

Rapid7 will host a conference call today to discuss its results at 5:00 p.m. Eastern Time. The call will be accessible by telephone at 800-272-9104 (domestic) or 303-223-4376 (international). The call will also be available live via webcast on the company’s web site at http://investors.rapid7.com. A telephone replay of the conference call will be available at 800-633-8284 or 402-977-9140 (access code 21818989) until November 12, 2016. A webcast replay will be available at http://investors.rapid7.com.