“We expect non-GAAP operating income in the second quarter in the range of $36 million to $38 million and non-GAAP net income per share of $0.50 to $0.53, which is based on 74.9 million diluted weighted average shares outstanding.”

In context

“Tim Adams (CFO): Thank you, Corey, and good afternoon to everyone on today's call. Thank you for taking the time to join us today. Before I turn to our results, a quick reminder that except for revenue, all financial results we will discuss today are non-GAAP financial measures unless otherwise stated. Additionally, reconciliations between our GAAP and non-GAAP results can be found in our earnings press release. Rapid7 ended the second quarter of 2024 with $816 million in ARR, consistent with our expectations and growing 9% over the prior year. Our Q2 ending ARR result reflects continued strength in our detection and response business, particularly for our threat complete offerings. As Corey shared, this consolidated offering drove over 40% of new ARR in the quarter and underscores the customer demand we are seeing for broad, effective, well-integrated solutions at compelling price points. Trends in the rest of the business during the second quarter were in line with our expectations as we work towards the launch of our Exposure Command, our new integrated risk management offering. ARR growth in the second quarter was weighted towards our sales expansion, as ARR per customer grew 7% over the prior year to $71,000, while our total customer base grew 2% year-over-year to end the quarter with nearly 11,500 customers. We continue to see growth in our higher-value platform customers that is partially offset by a decline in lower-value non-platform customers. Second quarter revenue of $208 million grew 9% over the prior year and exceeded our guided range. Recurring product subscription revenue grew 10% over the prior year to $200 million, which was better than expected on favorable linearity in the quarter. Professional services revenue declined sequentially as we continue to actively deemphasize certain lower-value services. Our revenue mix continues to shift towards international, which grew 19% year-over-year and now represents 23% of total revenue. I'll turn now to our operating and profitability measures for the second quarter. Profit gross margin was 76% in the quarter, and total gross margin was 74%, both of which are in line sequentially and with the prior year. Sales and marketing and R&D expenses were 33% and 15% of revenue, respectively, compared to 39% and 21% in the prior year. G&A expense was in line with the prior year at 7% of revenue. Operating income of $39 million was above our guided range and represented a roughly 19% operating margin, approximately 12% higher than the second quarter of last year. Adjusted EBITDA was $45 million in the quarter, and net income per diluted share was $0.58. Moving to our balance sheet and cash flow, we ended the second quarter with cash, cash equivalents, and investments of $494 million compared to $464 million at the end of the first quarter. We generated $29 million of free cash flow in the quarter, up from the $28 million we reported last quarter. This brings us to our guidance for the remainder of the year. We continue to expect full year ending ARR to be in the range of $850 million to $860 million, which represents growth of 6% to 7% over the prior year. Our second quarter was broadly in line with our expectations. And as we look out at the rest of the year, our assumptions for the second half have not meaningfully changed since we updated guidance in May. While the demand environment continues to be challenging, we expect relative stability in customer spending trends to continue. And while we expect improving pipeline momentum exiting the year, only a modest contribution from Exposure Command is assumed in the fourth quarter. Lastly, we continue to expect that our detection and response business will remain healthy. Similar to the comments we made last quarter, given the ramp of ARR in the second half of the year and the timing of our recent Exposure Command launch, I would like to share some directional commentary on our ARR expectations for the third quarter. We expect a high single-digit sequential increase in millions of net new ARR dollars similar to the increase in the second quarter. We are raising and narrowing our full year revenue range to $833 million to $837 million representing growth of 7% to 8%, up from the $830 million to $836 million. On profitability, we are maintaining the midpoint and narrowing our full year operating income range to $152 million to $156 million. Our updated operating income range is the result of better expense control in the second quarter that is offset by new incremental costs in the second half of the year related to the Noetic acquisition as well as higher advisory and legal fees. We expect full year net income per share in the range of $2.15 to $2.20 based on an estimated 74.7 million diluted weighted average shares outstanding. Our full year expectation for free cash flow is now $150 million to $160 million. While we remain strongly committed to expanding profitability and continue to see a reasonable path to our original target of $160 million, our updated range reflects the new incremental costs in the second half of the year related to Noetic and higher advisory and legal fees. Moving to quarterly guidance, for the third quarter of 2024, we expect total revenue in the range of $209 million to $211 million, representing growth of 5% to 6% over the prior year. We expect non-GAAP operating income in the second quarter in the range of $36 million to $38 million and non-GAAP net income per share of $0.50 to $0.53, which is based on 74.9 million diluted weighted average shares outstanding. Thank you for taking the time to join us on the call today. And with that, we will open the call for questions.”