Company Overview. February 12, 2018

Transcription

1 Company Overview February 12, 2018

2 This presentation contains forward-looking statements. All statements contained in this presentation other than statements of historical facts, including, without limitation, statements regarding our market opportunity, demand for our product and service offerings, expectations regarding our annualized recurring revenue, revenue growth and our non-gaap measures, and our future financial and business performance for the first quarter and full-year 2018, are forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, risks related to our rapid growth and ability to sustain our revenue growth rate, the ability of our products and professional services to correctly detect vulnerabilities, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, 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 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarterly period ended September 30, filed with the Securities and Exchange Commission on November 8,, and 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 contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after the date of this presentation to conform these statements to actual results or revised expectations, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this presentation.. This presentation also contains estimates and other statistical data made by independent parties and by us relating to market size and growth and other data about our industry. This data involves a number of assumptions and limitations, and you are cautioned not to give undue weight to such estimates. Neither we nor any other person makes any representation as to the accuracy or completeness of such data or undertakes any obligation to update such data after the date of this presentation. In addition, projections, assumptions and estimates of our future performance and the future performance of the markets in which we operate are necessarily subject to a high degree of uncertainty and risk. This presentation also contains certain non-gaap financial measures as defined by the SEC rules. These non-gaap financial measures are in addition to, and not a substitute for or superior to, measures of financial performance prepared in accordance with GAAP. There are a number of limitations related to the use of these non-gaap financial measures versus their nearest GAAP equivalents. For example, other companies may calculate non-gaap financial measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-gaap financial measures as tools for comparison. Please refer to our February 12, press release for additional information as to why we believe these non-gaap financial measures are useful to investors and others in assessing our operating results. As required by Regulation G, we have provided a reconciliation of those measures to their most directly comparable GAAP measures, which is available in the end notes to this presentation. However, we have not reconciled our expectations as to non-gaap loss from operations, non-gaap net loss per share, or calculated billings in future periods to their most directly comparable GAAP measure because certain costs and expenses, namely stock-based compensation expense, are out of our control or cannot be reasonably predicted. Accordingly, reconciliation is not available without unreasonable effort, although it is important to note that these factors could be material to our results computed in accordance with GAAP. 2

3 REVENUES

4 We combine: Threat intelligence and security research Data collection and analytics on the Rapid7 Insight platform Our products provide: Visibility into security vulnerabilities Visibility into active threats in your environment Visibility across the network and endpoints Workflows and automation to investigate and remediate 4

5 Common Vulnerabilities & Exposures (CVE s) in National Vulnerability Database 94,606 EXPANDING SECURITY MANAGEMENT GAP Decades Backlog in Security Maintenance Growth in devices per user Expanding applications per user Low IT headcount budget growth Major cybersecurity skills gap 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 New CVE s more than doubled this year NIST National Vulnerability Database New CVE's Reported Total CVE's 5

6 AUTOMATION InsightVM InsightIDR InsightAppSec Komand InsightOps AUTOMATION CLOUD BASED SERVICES SHARED PLATFORM SERVICES SEARCH ANALYZE VISUALIZE REPORT INTEGRATE PERSISTED DATA ANALYTICAL POOLS HIGH VOLUME STORAGE CONTEXTUAL PROCESSING USER ATTRIBUTION DEVICE ATTRIBUTION DATA NORMALIZATION CONTEXTUAL TAGGING DATA COLLECTORS ENDPOINT AGENTS LOG COLLECTORS API INTERROGATOR SCAN ENGINES DATA TYPES ASSET CONFIGURATION ASSET INVENTORY USER PROFILES ENDPOINT ACTIVITY LOG DATA NETWORK ACTIVITY THIRD PARTY 6

7 Emergence of Analytics Evolution of Operations Position Market & Potential Average Subscription ARR Sources of Growth 7

8 Live Vulnerability and Endpoint Analytics Collect Prioritize Remediate 8

9 Detect attacks earlier Unify Detect Prioritize 9

10 SIEM Magic Quadrant Rapid7 highest ranked Visionary in first placement on Magic Quadrant Easy deployment and immediate benefits. CISO in the Services Industry Unlike other SIEM solutions, you don't need a dedicated FTE for this one. Simple, elegant. VP, Information Security Officer in the Finance Industry Great replacement for the standard SIEM VP of IT in the Retail Industry (Source: Gartner Peer Insights)

11 Our Current TAM The SecOps Opportunity SIEM 33% Policy & Compliance 20% IT Operations Analytics - Public Cloud 5% $6.9bn Forensics & Incident Management 9% Vulnerability Assessment 33% Forensics & Incident Management 3% SIEM 10% Policy & Compliance 6% $22.2bn IT Operations Management Software 40% vulnerability assessment software ( fastest spending growth Vulnerability Assessment 11% IT Automation & Configuration Management Software 30% Rapid7 analysis based on IDC market data * CAGR; Worldwide Spending on Security Technology Forecast to Reach $81.7 Billion 11 in, According to New IDC Spending Guide, 29 MAR

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13 FINANCIAL OVERVIEW 13

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15 15

16 74.0% 72.0% 70.0% 68.0% 66.0% 64.0% 62.0% 60.0%

17 17

18 End Notes for additional information and definitions 18

19 $800.0 $700.0 $600.0 $500.0 $400.0 $300.0 $200.0 $100.0 $ % 35% 36% 31% 30% 29% 29% 2010 Cohort 2011 Cohort 2012 Cohort 2013 Cohort 2014 Cohort 2015 Cohort 2016 Cohort Cohort

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21 Gross Margin (non-gaap) 76% 74% 75% 74% 72% Sales & Marketing (non-gaap) Research & Development (non-gaap) General & Administrative (non-gaap) Operating Loss (non-gaap) 53% 53% 52% 53% 53% 27% 22% 21% 23% 21% -19% -13% -12% -13% -13% 15% 12% 14% 12% 12% 2016 Q Q3 Q Q Q3 Q Q Q3 Q Q Q3 Q Q Q3 Q4 See End Notes for additional information and definitions 21

22 % + %

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24 24

25 Supplemental 25

26 Total Revenue $50.1 to $52.1 m $225.0 to $234.0 m $54.6 to $56.0 m $239.0 to $245.0 m $(4.5) to $(3.9) m $(14.0) to $(11.0) m Non-GAAP Operating Loss $(10.1) to $(8.8) m $(26.0) to $(20.0) m $(7.4) to $(6.5) m $(25.0) to $(21.0) m $(2.7) to $(2.3) m $(1.0) to $1.0 m Non-GAAP Loss Per Share $(0.22) to $(0.19) $(0.55) to $(0.42) Weighted-average common shares outstanding 45.1 m 46.4 m

27 With content subscriptions Without content subscriptions With content subscriptions Without content subscriptions Bundled deployment and training Standalone services

28 Three Months Ended Year Ended December 31, December 31, 2016 December 31, December 31, 2016 Net loss $ (13,004) $ (9,774) $ (45,470) $ (49,000) Interest (income) expense, net (190) (76) (775) (131) Other (income) expense, net (313) 109 Provision for (benefit from) income taxes (227) (388) (2,236) (27) Depreciation expense 1, ,815 4,287 Amortization of intangible assets ,813 2,438 Stock-based compensation expense 4,803 3,979 19,541 17,316 Acquisition-related expenses Adjusted EBITDA $ (6,258) $ (4,571) $ (21,458) $ (25,008) 28

29 Three Months Ended Year Ended December 31, December 31, 2016 December 31, December 31, 2016 Total Revenue $ 57,731 $ 45,034 $ 200,940 $ 157,437 Add: Deferred revenue, end of period 224, , , ,063 Less: Deferred revenue, beginning of period 188, , , ,317 Calculated billings $ 93,588 $ 64,833 $ 256,377 $ 196,183 29

30 (unaudited, in thousands) Three Months Ended Year Ended December 31, December 31, 2016 December 31, December 31, 2016 Total gross profit (GAAP) $ 40,531 $ 33,352 $ 144,030 $ 117,712 Add: Stock-based compensation expense , Add: Amortization of acquired intangible assets ,639 1,782 Total gross profit (non-gaap) $ 41,709 $ 33,961 $ 147,754 $ 120,104 Gross margin (non-gaap) 72% 75% 74% 76% Gross profit (GAAP) - Products $ 25,584 $ 20,948 $ 91,165 $ 76,957 Add: Stock-based compensation expense Add: Amortization of acquired intangible assets ,639 1,782 Total gross profit (non-gaap) - Products $ 26,586 $ 21,426 $ 94,140 $ 78,815 Gross margin (non-gaap) - Products 78% 87% 81% 88% Gross profit (GAAP) - Maintenance and support $ 10,450 $ 8,501 $ 38,777 $ 30,298 Add: Stock-based compensation expense Total gross profit (non-gaap) - Maintenance and support $ 10,485 $ 8,553 $ 39,024 $ 30,504 Gross margin (non-gaap) - Maintenance and support 84% 83% 84% 82% Gross profit (GAAP) - Professional services $ 4,497 $ 3,903 $ 14,088 $ 10,457 Add: Stock-based compensation expense Total gross profit (non-gaap) - Professional services $ 4,638 $ 3,982 $ 14,590 $ 10,785 Gross margin (non-gaap) - Professional services 41% 40% 38% 35% 30

31 (unaudited, in thousands, except share and per share data) Three Months Ended Year Ended December 31, December 31, 2016 December 31, December 31, 2016 Loss from operations (GAAP) $ (13,385) $ (9,945) $ (48,794) $ (49,049) Add: Stock-based compensation expense 1 4,803 3,979 19,541 17,316 Add: Amortization of acquired intangible assets ,813 2,438 Add: Acquisition-related expenses Loss from operations (non-gaap) $ (7,632) $ (5,463) $ (26,273) $ (29,295) Net loss (GAAP) $ (13,004) $ (9,774) $ (45,470) $ (49,000) Add: Stock-based compensation expense 1 4,803 3,979 19,541 17,316 Add: Amortization of acquired intangible assets ,813 2,438 Add: Acquisition-related expenses Add: Release of acquisition-related valuation allowance - - (2,632) - Add: Tax adjustment for impact of tax reform (352) - (352) - Net loss (non-gaap) $ (7,603) $ (5,292) $ (25,933) $ (29,246) Net loss per share, basic and diluted (non-gaap) $ (0.17) $ (0.13) $ (0.60) $ (0.71) Weighted average shares used in non-gaap net loss per share, basic and diluted 43,723,696 41,893,762 42,952,950 41,248,473 1 Includes stock-based compensation expense as follows: Cost of revenue $ 270 $ 165 $ 1,085 $ 610 Research and development 2,017 1,437 7,205 6,054 Sales and marketing 1,062 1,154 5,756 6,607 General and administrative 1,454 1,223 5,495 4,045 2 Includes amortization of acquired intangible assets as follows: Cost of revenue $ 908 $ 444 $ 2,639 $ 1,782 Sales and marketing General and administrative Includes acquisition-related expenses as follows: General and administrative

32 $93.6m 90% Recorded as deferred revenue and to be recognized in future periods 10% Converts to revenue and is recognized as revenue in the current quarter 16% $57.7m Recognized as revenue from deferred revenue as of Oct 1 (from prior period billings) 84% See End Notes for additional information and definitions 32

33 15% 20% 65% Perpetual Content Subscription Maintenance & Support 33

34 Page 16 Recurring revenue is defined as revenue from the sale of term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support calculated as % of total revenue. Page 18 Renewal rate is calculated by dividing the dollar value of renewed customer agreements, including upsells and cross-sells of additional products, but excluding professional services and Logentries, in a trailing 12-month period by the dollar value of the corresponding customer agreements. Expiring renewal rate is calculated similar to the renewal rate however does not take into account any upsells or cross-sells. Page 21 Non-GAAP gross margins represent the GAAP gross profit, excluding stock-based compensation expense and amortization of acquired intangible assets calculated as a % of revenue. See GAAP to Non-GAAP reconciliation. Operating expenses and operating income margin presented are on a non-gaap basis and exclude stock-based compensation expense, amortization of acquired intangible assets, and acquisition-related expenses. Page 26 Guidance for the first quarter and full-year 2018 does not include any potential impact of foreign exchange gains or losses. Non-GAAP guidance excludes estimates for stock-based compensation expense, amortization of acquired intangible assets, and acquisition-related expenses. A reconciliation of non-gaap guidance measures to the most comparable GAAP measures is not available on a forward-looking basis. Rapid7 has provided a reconciliation of historical non-gaap financial measures to the most comparable GAAP measures in the financial statement tables included in these End Notes. The guidance provided reflects the impact of ASC 606, which Rapid7 is adopting for its fiscal year 2018 using the modified retrospective transition method. In order to provide additional transparency, in addition to the guidance under ASC 606, this quarter, Rapid7 is providing guidance for revenue and non-gaap operating loss under ASC 605 for first quarter and full-year 2018, and an estimate of the changes to its guidance resulting from the transition from ASC 605 to ASC 606. Rapid7 believes that providing this additional disclosure will help investors and analysts better understand the impact that the adoption of ASC 606 has on Rapid7 s guidance and reported results. 34