“We expect full year net income per share to be in the range of $2.28 to $2.31 based on an estimated $74.7 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 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 our non-GAAP results can be found in our earnings press release. Rapid7 ended the third quarter of 2024 with $823 million in ARR, representing 6% growth over the prior year. This ARR result reflects the continued strength in our Detection and Response business as well as elongated deal cycles, particularly for large deals in North America. ARR growth in the third quarter was weighted towards sales expansion as ARR per customer grew 4% over the prior year to $71,000, and our total customer base grew 2% year-over-year to end the quarter with over 11,600 customers. Third quarter revenue of $215 million grew 8% over the prior year and exceeded our guided range. Recurring product subscription revenue grew 8% over the prior year to $206 million, which was better than expected on favorable linearity in the quarter. Our revenue mix continues to shift towards international, which grew 17% year-over-year and now represents nearly 1/4 of total revenue. Turning to our operating and profitability measures for the third quarter. Product gross margin was 76% in the quarter and total gross margin was 74%, both of which are in line with the prior year. Sales and marketing expense was 31% of revenue, down from 34% in the prior year. R&D and G&A expenses were in line with the prior year and made up 16% and 6% of revenue, respectively. Third quarter operating income of $44 million was above our guided range and represented roughly 21% operating margin. The outperformance was driven by higher-than-expected revenue and the timing benefit of a few million dollars in professional services and marketing spend, which we expect to incur in the fourth quarter. Adjusted EBITDA was $50 million in the quarter, and net income per diluted share was $0.66. Moving to our balance sheet and cash flow. We ended the third quarter with cash, cash equivalents, and investments of over $500 million, slightly above the $494 million at the end of the second quarter. We continue to ramp up our free cash flow generation with $39 million in the quarter, up from $29 million we reported last quarter. This brings us to our outlook for the rest of the year. We now expect full year ending ARR to be in the range of $835 million to $845 million, which represents growth of 4% to 5% over the prior year. We have adjusted our outlook for the remainder of the year based on the elongated sales cycles we saw in the third quarter and have carried forth our assumption that these customer budget dynamics will continue through the rest of the year. For full year revenue, we are raising and narrowing our range to $839 million to $841 million, representing growth of 8%. This increase from our prior guidance of $833 million to $837 million reflects revenue outperformance in the third quarter. On profitability, we are raising and narrowing our full year operating income range to $157 million to $159 million from our prior guidance of $152 million to $156 million. Our updated range represents an implied operating margin of 19%, growing over 550 basis points from the full year 2023. We expect full year net income per share to be in the range of $2.28 to $2.31 based on an estimated $74.7 million diluted weighted average shares outstanding. For free cash flow, we are updating our full year expectation to a range of $145 million to $155 million based on our updated ARR range. We remain strongly committed to expanding profitability. Moving to quarterly guidance. For the fourth quarter of 2024, we expect total revenue in the range of $211 million to $213 million, representing growth of 3% to 4% over the prior year. Non-GAAP operating income for the fourth quarter is expected to be in the range of $33 million to $35 million, reflecting an implied operating margin of 16%. We expect non-GAAP net income per share of $0.48 to $0.51, which is based on 75.7 million diluted weighted average shares outstanding. I would like to thank our team for the great work they have accomplished so far this year, especially on the foundational improvements across our Detection and Response business, our partner ecosystem, and our push to drive cloud security adoption. The early traction for Exposure Command is encouraging, particularly as it relates to the pipeline growth we saw in our risk visibility business during the third quarter. As always, we remain focused on balancing these growth initiatives with profitability improvements in what continues to be a dynamic market environment. With that, we will now open the call for questions. Operator?”