COMPANY OVERVIEW. February 7, 2019

Transcription

1 COMPANY OVERVIEW February 7,

2 DISCLAIMERS 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 (ARR), ARR growth per customer, revenue growth, and our non-gaap measures, our transition to subscription, our business strategy, plans and objectives for future operations, the expected impact of the convertible note offering on our financial statements and expectations regarding non-gaap targets, and our future financial and business performance for the first quarter and full-year 2019, are forward-looking statements. 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 7, 2019 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 measures 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 Rapid7 Snapshot Strong Recurring Revenue Growth High Quality of Revenue Attractive Customer Economics Investing in Profitable Growth ARR growth of Recurring revenue 22% growth in 53% YoY(1) 83% of total Operating Cash Flow positive for FY 16, FY 17 and FY 18 revenue(1) Attractive Prospects ARR per customer CAGR ( ) ARR growth of > 30% in 2019(2) Revenue growth of 26% in 2019(2) Breakeven non-gaap operating profit for 2019(2) 1: As of Q : Guidance given on February 7, Revenue growth is mid-point of guidance 3

4 Securely Advance Cybersecurity is no longer a concern of the few, but for all of us. Your data is your currency Security teams are entrusted to protect our data and keep our connected society functioning Change is happening at an accelerated pace, making it tougher to keep up Security is now a competitive advantage. At Rapid7 we help advance security through technology and expertise making it simple for organizations to securely advance. 4

5 Simplifying Complexity Our Mission is to Advance Security Through Technology and Expertise that Simplify the Complex TECHNOLOGY Rapid7 Insight Cloud Award-winning cloud products deliver visibility, analytics, and automation to unite teams and tools EXPERTISE COMMUNITY Security Researchers Dedicated teams of the most curious experts Open Source Community Thousands of global users and contributors Security Consultants Unmatched industry experience Threat Intelligence Openly shared research and attacker modeling 5

6 Rapid7 Insight Unite teams to work faster (and smarter). Our cloud platform gives Security, IT, and Development teams unified access to vulnerability management, cloud application security, incident detection and response, automation, and more. 6

7 Land With Differentiated Solutions Position Leader Disruptor Leader Disruptor Market & Potential Average Subscription ARR Vulnerability Management ~$40k SIEM & IDR ~$50k Application Security ~$35k Automation & Orchestration ~$25k Sources of Growth Mid Market Legacy Displacement Asset Management Enterprise Expansion Mid Market Legacy Displacement Managed Service Enterprise Expansion Mid Market Legacy Displacement Managed Service Enterprise Expansion Mid Market SecDevOps Expansion Patch and Configuration Managed and Advisory Services 7

8 Vulnerability Assessment COLLECT data across your entire modern ecosystem PRIORITIZE risk using attacker analytics and live dashboards REMEDIATE quickly with SecOps agility and automated actions 8

9 User Behavior Analytics & SIEM UNIFY your security data without special expertise or hardware DETECT compromised users and activity across the ATT&CK Framework RESPOND fast and automatically contain compromised users and assets 9

10 Application Security SECURE modern web apps and APIs COLLABORATE to fast-track fixes with rich reporting and integrations SCALE to manage the security assessment of any size app portfolio 10

11 Security Orchestration & Automation ORCHESTRATE your teams and tools with 200+ plugins (or build your own) AUTOMATE manual, repetitive tasks with custom workflows ACCELERATE security and IT operations without sacrificing human analysis 11

12 Innovation Driven TAM expansion Our Current TAM The SecOps Opportunity The technology categories that will see the fastest spending growth over the forecast period are Device vulnerability assessment software (16.0%*) software vulnerability assessment (14.5%*) managed security services (12.2%*) user behavioral analytics (12.2%*) UTM hardware (11.9%*). Rapid7 analysis based on IDC market data 2017 * CAGR; Worldwide Spending on Security Technology Forecast to Reach $81.7 Billion in 2017, According to New IDC Spending Guide, 29 MAR

13 Trusted By 7,800+ Organizations 13

14 Extensive, Beneficial Partner Ecosystem 80+ Platform Integrations with Partners DATA COLLABORATION PARTNERS DATA WORKFLOW PARTNERS DATA INGESTION PARTNERS Two-way data sharing IT security integration Streamlines correction Improves IT efficiencies Enhances analytics Enables detection Simplifies investigations Single pane of glass Enhanced platform value 14

15 Recent Recognition Gartner Positioned as Visionary in 2018 Magic Quadrant for Security Information & Event Management (SIEM) Forrester Positioned as leader amongst VRM vendors in 2018 Forrester Wave Frost & Sullivan 2018 Global Vulnerability Management Market Leadership Award Cybersecurity Excellence Awards Winner: Vulnerability Management, 2018 SC Awards Europe Winner: Best Security Company, 2018 Cybersecurity Excellence Awards Winner: Security Automation, 2018 SC Media Best Buy: InsightVM, 2018 Cybersecurity Excellence Awards Finalist: Security Information & Event Management (SIEM), 2018 SC Media Winner: Top VM Solution for Trust Awards,

16 Our Culture Is Our Competitive Advantage Culture & Core Values Bring You Our culture and core values aren t just for our employees; they align with our customer experience. Our people are at the center of our success Be an Advocate We work relentlessly to act as a champion to propel our our people, our customers, and our industry forward Inclusion in Bloomberg Gender Equality Index, 2019 ATD BEST for Talent Development Excellence Association for Talent Development, 2018 Challenge Convention We challenge old ways of thinking and forge new paths with foresight, discipline, and determination Top Places to Work - Boston Globe, 2018 Impact Together Best Places to Work - Boston Business Journal, 2018 Tech Culture Award - TMCnet, 2017 Parity Pledge Member, 2018 We support each other on our journey forward, and actively look for ways to collaborate, strengthen our ideas, and learn from each other Never Done We pursue excellence through continuous learning to keep growing personally and professionally 16

17 Financial Overview 17

18 2018 Targets Delivered ARR Growth Revenue Non-GAAP Operating Income 2018 Target* Actual 2018 Result 30%+ 53% Exceeded $ mil $244 mil Exceeded $(26.0) to $(20.0) mil $(20.4) mil Delivered * The figures in the 2018 Target column are as disclosed in our earnings release issued on February 12, All data on this slide is under ASC

19 Sustained High Revenue Growth With Improving Margin Revenue CAGR( ): 35% Significant operating margin improvement numbers are under ASC 605 and 2019 guidance is under ASC 606 * 2019 growth and non-gaap operating margin based on mid point of our guidance, as of February 7, numbers are under ASC

20 Predictable Recurring Revenue Model Recurring revenue is 83% of total revenue as of Q Recurring revenue grew 43% y-o-y in Q All 2018 numbers are under ASC 606 and prior periods are under ASC

21 Annualized Recurring Revenue ARR - We define ARR as the annualized value of all recurring revenue related contracts in place at the end of the quarter. Annualized Recurring Revenue (ARR) - best indicator of the growth of the business ARR grew by 53% in 2018 CAGR: 41% from

22 Upsells & Cross-Sells Drive ARR Per Customer Growth ARR per customer now greater than $32,000 Growth in ARR per customer is accelerating Shift to subscription increased ARR opportunity Up-sell and cross-sell opportunity is significant 22

23 High Renewal Rates Strong renewal rate due to combination of high ARR growth, renewals, upsells and cross-sells 23

24 Strong Customer Expansion Growth 24

25 Subscription Transition Improves Customer Economics Our recurring revenue potential for an average-sized customer is around $200,000 per year ARR per customer was $32,249 in Q

26 Path To Profitability Expenses and Loss as % of Revenue (Non-GAAP) * All 2018 numbers are under ASC 606 and prior periods are under ASC

27 Powerful Land And Expand Model Compelling Track Record of Customer Retention and Expansion Landing Landing Renewing Driving Up-Sell Expanding Expanding Cross-Sell Cross-Sell +11% 120% 4.5x 1.5x YoY Customer Growth* $ Based Renewal Rate* Increase in Initial Spend Over 6 Years (2010, 2011 and 2012 customer cohorts) Avg Solutions Per Customer* *As of Q

28 Guidance Q and Full-Year 2019 Rapid7 anticipates total revenue, Non-GAAP (loss) income from operations, and Non-GAAP net (loss) income per share to be in the following ranges for Q and the full-year 2019: Q Total Revenue $68.9 to $70.5 m $304.0 to $312.0 m Non-GAAP Operating (Loss) Income $(5.5) to $(4.5) m Breakeven $(0.10) to $(0.08) $0.05 Non-GAAP Net (Loss) Income Per Share Weighted-average common shares outstanding 47.9 m* 51.9 m* See End Notes for additional information and definitions * Weighted average shares outstanding for the first quarter of 2019 represent basic shares outstanding given our projected non-gaap net loss. The weighted average shares outstanding for the full year 2019 represent diluted shares outstanding given our projected non-gaap net income. 28

29 The Path Ahead CAPTURE the SecOps Opportunity EXTEND Our Analytics and Automation Cloud DRIVE DELIVER ARR Growth of Over 30% Growth and Leverage 29

30 Supplemental 30

31 GAAP to Non-GAAP Reconciliations: Q (ASC 606) (unaudited, in thousands, except share and per share data) 31

32 GAAP to Non-GAAP Reconciliations: Full Year 2018 (ASC 606) (unaudited, in thousands, except share and per share data) 32

33 GAAP to Non-GAAP Reconciliations: Q (ASC 605) (unaudited, in thousands, except share and per share data) 33

34 GAAP to Non-GAAP Reconciliations: Full Year 2018 (ASC 605) (unaudited, in thousands, except share and per share data) 34

35 ASC 606 What Changed? ASC 605 ASC 606 SAAS/Managed Services Ratable* Ratable* Perpetual Licenses With content subscriptions Without content subscriptions Ratable* Ratable* Ratable over economic life (5 years) Upfront Term Licenses With content subscriptions Without content subscriptions Ratable* Ratable* Ratable* Upfront Ratable* As delivered As delivered As delivered Expensed upon billing Deferred and recognized over economic life for new bookings or contract term for renewals Professional Services Bundled deployment and training Standalone services Commissions Expense **Recognized ratably over contractperiod period *Recognized ratably overthe thecustomer s customer s contract 35

36 ASC 606 Q Impact Line Item ASC 605 With content subscriptions Perpetual Licenses Term Licenses Without content subscriptions Without content subscription Professional Services Revenues ASC 606 Ratable* Ratable over economic life (5 years) Ratable* Upfront Ratable* Upfront Product Revenues Maintenance and Support Revenues ASC 605 $51.0m Bundled deployment and training Standalone services Ratable* As delivered ASC 606 Difference $50.4m $(0.6)m $11.1m Change in allocation method $10.3m $(0.8)m $8.5m As delivered As delivered $8.1m $(0.4)m Deferred and recognized over estimated period of benefit for new bookings or contract term for renewals $(6.4)m Current Deferred Revenues Ratable recognition of certain perpetual licenses to 5 years $(3.9)m Non-current Deferred Revenues Ratable recognition of certain perpetual licenses to 5 years $17.1m Deferred contract acquisition and fulfillment costs Costs to obtain contracts with customers are deferred $40.0m Commissions Expense Expensed as incurred **Recognized ratably customer scontract contract period *Recognized ratablyover over the the customer s period 36

37 End notes Page 20 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 23 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 26 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 certain non-recurring items such as acquisition-related expenses, secondary public offering costs and litigation-related expenses. Page 28 Guidance for the first quarter and full-year 2019 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, amortization of debt discount and issuance costs, and certain non-recurring items. 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. **Recognized ratably over the customer s contract period 37