Rapid7 Inc (RPD)

“Non-GAAP earnings per diluted share are expected in the range of $0.33 to $0.36 on approximately 78.3 million fully diluted shares.”

“Non-GAAP operating income is expected to be in the range of $24 million to $26 million, or a margin of 12% at the midpoint.”

“For the second quarter, we expect total revenue in the range of $207 million to $209 million, or down approximately 2.9% at the midpoint on a year-over-year basis.”

“On a sequential basis, we expect ending ARR for our core platform solutions—DNR and exposure management—will be approximately flat quarter on quarter, with an expected sequential ARR decline in our non-core standalone, non-platform offerings.”

“We expect to end the second quarter with ARR of approximately $820 million.”

“Kenzo... is not a done integration. The team has come in; we are integrating it and will be rolling it out to customers starting in the next couple of months and then through the rest of this year.”

“In 2025, we saw some investment, and we knew that would impact year-over-year comparisons in the first part of the year, but you will start to see the benefits of that and see those improving margins even here in 2026 as we move to the back half of the year.”

“Our team has a very clear mandate: we have to scale margins. We feel that we have the right setup for that. If you think about our MDR business, which is our fast-growing business that historically has had less contribution margins at scale than some of our other businesses, that is also a business where we expect gross margins to expand.”

“We expect 2026 free cash flow in the range of $125 million to $135 million for the full year, flat with prior year performance at the midpoint and a free cash flow margin of approximately 15.5%.”

“Non-GAAP earnings per share are expected to be in the range of $1.52 to $1.60 per share on approximately 79.4 million fully diluted shares.”

“By closely managing ongoing investments, we expect non-GAAP operating margins to improve to the mid-teens as 2026 progresses, and we remain focused on continuing to improve operating margins in 2027.”

“We are raising non-GAAP operating income guidance to a range of $112 million to $118 million, or a full year non-GAAP operating margin of 13.7% at the midpoint.”

“Updating our full year fiscal 2026 guidance, we expect total revenue in the range of $836 million to $842 million, a year-on-year decline of approximately 2.4% at the midpoint.”

“The team is executing with urgency. The operating discipline is taking hold, and the work we are doing this year sets up share gains we expect to deliver over the medium term.”

“On exposure management, we are happy that we are seeing stabilization. I would not say that it is a growth driver, to be clear. It is not, but we are seeing the stabilization and improvements that we would expect, and we see good leading indicators that that business is set up to improve.”

“While we are optimistic about the leadership changes in strategy that have been implemented in our go-to-market organization, we do not anticipate the benefits of these changes will impact Q1.”

“To answer your question, Rob is DNR. We actually have pretty strong confidence that you'll see that continue to improve over the course of the year.”

“Thus, our balance sheet position, strong free cash flow from operations, and available undrawn credit capacity give us confidence in our ability to settle our March 2027 convertible debt upon maturity.”

“We've talked about in the past maintaining those margins in the low seventies. We feel good about that.”

“I do think the mix is gonna shift to be more balanced this year.”

“I do think that this year will match up the demand and supply capabilities to actually do the more customized accounts.”

“Then we feel quite good about what that means for both growth of expansion and what that means for retention over the course of the year.”

“But we do see us unlocking that this year, which we think the profile improves over the course of the year.”

“But I think that we're on the track this year to be able to unlock that. Then that really compensates for the growth.”

“Look. I think our biggest growth area is still gonna be detection response, which is still growing. We think it has the capacity to grow faster.”

“We think we can actually grow faster while doing it more efficiently.”

“Free cash flow for the year is expected in the range of $125 to $135 million, flat with prior year performance at the midpoint and a margin of approximately 15.5%.”

“As we move into 2026, we expect these will yield improvements in the efficiency and operation of our business, moving our non-GAAP operating margins into the mid-teens.”

“It is worth noting that we will carry this higher Q4 expense base into 2026. However, as the investments take hold and the efficiencies they bring materialize, we expect operating margins to expand as 2026 progresses.”

“Our anticipation is that the investments we made last year will begin to yield dividends in our AI orientation this year.”

“We expect to see tangible benefits from this organizational change throughout 2026 as we develop muscle memory with these new processes.”

“We think it can be better. We have a number of major releases coming out to make it easier to do the VM to bond with the vulnerability management. Exposure upgrade until we think we have upside there.”

“That said, we are not assuming in our initial guidance that Rick gave, any material improvement there.”

“We are confident we can achieve that, and we will keep you informed about it, particularly as we move into Q1.”

“We generated free cash flow of $30 million in the third quarter, bringing our year-to-date free cash flow to $98 million, and we remain well on track to achieve our full year free cash flow targets.”

“So I actually think that, that will be not a problem as we go into next year.”

“To clarify, our MDR business is still experiencing double-digit growth, and we believe we have ample capacity to continue expanding.”

“We have factored these dynamics into our fourth quarter ARR outlook, which now calls for ARR to end Q4 approximately flat quarter-over-quarter.”

“We continue to generate strong free cash flow and are reiterating our full year free cash flow target range of $125 million to $135 million.”

“We are tightening our full year revenue guidance range to $856 million to $858 million, representing year-over-year revenue growth of 1% to 2%.”

“We expect to see the same trends moving forward, which we are quite comfortable with.”

“We said earlier in the year that this is an investment year for us as we're building out the innovation center over in India, and that continues to ramp up and you see it in the second half of the year with some of the expense load that we anticipate in Q4 as we continue to ramp that business, but giving us leverage in the business over time.”

“Additionally, we anticipate significant growth opportunities internationally as we move forward.”

“And the overall goal was always to actually make sure that we can actually scale profitability as we go forward in the next couple of years.”

“We believe there are ample opportunities in North America, and we see potential for accelerating sales there as well.”

“We're starting to see our enterprise MDR investments begin to pay off, and we think we're just getting started.”

“We are also reiterating our full-year operating income range of $125 million to $135 million as well as our full-year free cash flow range of $125 million to $135 million.”

“Recurring product revenue growth will continue to outpace total revenue growth, partially offset by year-over-year declines in professional services.”

“We are maintaining our full-year revenue guidance range of $853 million to $863 million, representing revenue growth of 1% to 2%.”

“We're narrowing our full-year ARR guidance range to $850 million to $865 million.”

“My expectation is to see improvements as we actually move into next year.”

“The federal government is involved, and we anticipate that deal cycles will be longer, with the impact expected to become evident in 2026.”

“Yes, Eric, on Q2, I would say we're anticipating a modest increase from where we ended Q1. And our full year guide for the year is more second half weighted this year.”

“We are expecting to be more pressured than we actually expected as we started the year overall in the Risk and Detection business, but we're constantly focused on what it takes to unlock that.”

“But to answer your core question is that we expect moderate stabilization as we actually go through the year.”

“Recurring product revenue growth will outpace total revenue growth, offset partially by a year-over-year decline in professional services.”

“We now expect these costs will be reflected in the later quarters.”

“Our Detection and Response business continues to perform and remains the primary growth engine for 2025 as we work to modernize our Risk and Exposure Management platform and return that business to growth.”

“With our proven brand, our track record, and the right capabilities to win, we remain excited about the future of this business and expect to continue to drive growth for Rapid7.”

“We remain confident that our strategy can position Rapid7 for sustainable growth and expanding cash flow in the years ahead.”

“And we continue to believe this will stabilize performance and ultimately position the business back to growth.”

“A positive note, our investments to improve our cost structure remain on track, setting us up for profitability reacceleration in 2026.”

“We see the new add stabilizing this year and we see the retention we factored in as stable from last year.”

“On a sales perspective, we're actually adding a modest amount of sales headcount and we expect to see productivity gains.”

“But if you look at overall gross margin from a mix standpoint, the managed service gives you a little bit of a headwind because of the lower gross margin. But we think we have a tailwind based on some of the AI and efficiencies that we can drive over time.”

“I think overall product gross margins will remain stable in that mid-70s range that you've seen historically.”

“Our recurring product revenue is expected to grow faster than this range, offset by a year-over-year reduction in professional services revenue of approximately $10 million for the full year.”

“As a result, we're electing to reinvest up to $30 million into these opportunities, with a primary focus on supporting the strategic growth initiatives we've spoken about, including extending our MDR service capabilities and offerings to reach a broader set of customers and accelerate our enterprise progress; secondly, building upon our exposure command traction by accelerating our exposure management roadmap; and lastly, establishing a new innovation center in India to accelerate future innovation while improving leverage over time.”

“We expect a majority of our 2025 ARR growth to be driven by our detection and response business with a strong contribution from MDR.”

“Turning to our 2025 outlook, we expect ARR growth of 4% to 6%, consistent with the preliminary expectations we shared in November.”

“We are underway in establishing a new SOC and innovation center in India to accelerate these investments as well as investing in sales and marketing initiatives to support our expansion opportunities.”

“But we do expect, both over the course of this year and into next year, I would just say more robust performance on the expansion business and increases in net ARR as we actually go forward.”

“So we do expect to see more of that yield in 2026 and beyond.”

“We believe the progress we made in our strategic transformation now sets the stage for reaccelerated growth in 2025 and 2026.”

“Yes, Corey. We discussed in Q3 and Q4 the extended deal cycles and larger deals, and we anticipate that trend will continue into next year.”

“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.”

“We expect to start 2025 with a stronger pipeline than last year based on how demand generation is currently trending.”

“We have extrapolated these dynamics into the fourth quarter and coupled with the growing mix of large deals that we expect towards the end of the year, we're adjusting our 2024 ARR outlook to a range of $835 million to $845 million.”

“Over time, we expect the average ARR from risk management customers to grow driven by product expansion within the category as well as expanding scope of coverage of their environment.”

“We feel very good about that. In addition, in Q4, we have just more longer-term deals in there. We have a little bit more in the bank going into Q4.”

“But even that, we expect it to be relatively stable from last year, and we're seeing enough momentum and build for that.”

“The way that I would think about it is it will be a contributor. We expect it to be a contributor to growth, but I would say it’s probably a smaller contributor to growth than detection and response, but it’s still a net positive contributor to growth, just to be clear.”

“Finally, we believe accelerating cloud security adoption via Exposure Command will further support D&R growth.”

“We expect this new platform offering can enhance retention not only through Exposure Command but by offering additional attack surface management functionality as part of the existing VM offering and with minimal uplift.”

“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.”

“We expect a high single-digit sequential increase in millions of net new ARR dollars similar to the increase in the second quarter.”

“Lastly, we continue to expect that our detection and response business will remain healthy.”

“And while we expect improving pipeline momentum exiting the year, only a modest contribution from Exposure Command is assumed in the fourth quarter.”

“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.”

“We remain committed to scaling free cash flow in our business, so we are also maintaining our expectation to generate at least $160 million of free cash flow for full year 2024.”

“We remain squarely focused on and are on track to scaling free cash flow and reiterating our $160 million free cash flow target for the full year 2024.”

“However, we expect this to be a temporary situation, and we anticipate normalization as we close out the year, if not gaining some momentum heading into next year.”

“We anticipate gaining clarity on pricing and packaging after the summer, which will enhance our ability to sell to our existing customers and drive overall expansion.”

“As such, we continue to expect 2024 operating income of $150 million to $158 million and net income per share in the range of $2.10 to $2.21, based on an estimated 75 million diluted weighted average shares outstanding.”

“For the second quarter, we anticipate a high single-digit sequential increase in millions of net new ARR dollars, with further sequential improvements in net new ARR in the back half of the year as we improve our execution.”

“Looking forward, we expect this transition to temporarily weigh on our growth outlook through the remainder of the year as we expect to launch the updated Cloud Risk Complete this summer and begin to regain momentum exiting 2024.”

“Our near-term goal is to take market share and drive growth, and our investments this year will be focused on partnerships and distribution, growing at a higher rate than our direct sales force.”

“We will grow the customer base, and sales productivity and ARR per sales rep are expected to improve this year.”

“As we continue to focus on these strategic areas of our business, we expect product revenues to grow slightly faster than this range, offset in part by professional services revenue which we expect to decline to approximately $30 million for the full year.”

“Consistent with our previous commentary, we expect to generate at least $160 million in free cash flow in 2024.”

“Similar to the last question, I believe we can grow faster if the market is stable and good. We have the capacity to grow, but our focus on free cash flow means we take a conservative approach at the outset. If the market remains stable, we can expect to grow faster.”

“If we see the same market momentum and consistency as Q4, and if the market improves, we have the capacity to grow faster.”

“Yes, we have very high confidence in the $160 million of free cash flow.”

“we've shared with you guys last quarter that we anticipate roughly $160 million in free cash flow next year, and we still feel very good about that number.”

“On the first one, I would say it will be incrementally positive, I think, in 2024.”

“We are reiterating our free cash flow guidance of approximately $80 million for the full year.”

“Non-GAAP net income per share is expected to be $1.26 to $1.29 based on an anticipated 72.1 million diluted weighted average shares outstanding.”

“Given larger deal cycles as well as the heavy concentration of large deals in the fourth quarter, we believe it is prudent to reiterate our full year ARR guidance of $800 million to $805 million.”

“We expect to generate approximately $80 million of free cash flow this year and then double that figure to at least $160 million next year in 2024.”

“we continue to expect the full year 2023 operating margin to expand over 750 basis points from the prior year and to generate free cash flows of approximately $80 million.”

“I would say some incremental movement in 2024, but I think it really picks up in 2025 and 2026.”

“Looking to the back half of 2023, we continue to see line of sight to our original full-year ARR guidance range.”

“While it's premature to set any revenue or ARR growth targets for 2024, this free cash flow expectation does not assume improvement in the macroeconomic environment, and we're confident we can execute to this target even if our top line growth remains sustained at this year's levels.”

“Given the investment levers in our business, we have confidence in our ability to scale free cash flow in 2024.”

“Yes, Alex, you'll get a little bit in the third quarter; the majority of the 18% is happening right now this week, with some individuals transitioning through the balance of the year. But you will experience the full quarter in Q4, and, of course, for next year as well, which you see in the free cash flow guidance for next year.”

“Corey, just on the second part of Brad's question about the timeliness of the reinvestment, we're going to be very thoughtful and very deliberate in terms of what we do. But Brad, you would expect to see some of that happening in the back half of this year and certainly carrying into next year.”

“We plan to be a competitive grower in the market. As the economy normalizes, our absolute focus is making sure that we're actually growing stronger than what we're seeing at this level today.”

“What I will tell you, too, is that we're making investments on our business that as the economy normalizes, whenever that happens, we should see growth accelerate from where we expected to be this year.”

“The $3 million reduction at the midpoint is wholly driven by lower professional services revenue tied specifically to our restructuring cost actions, which we now expect should be approximately flat compared to last year.”

“As a result, we are maintaining our expectation of approximately $80 million in free cash flow for the full year.”

“We also expect to incur $3 million to $4 million in non-cash impairment charges from the consolidation of our real estate footprint throughout the second half of 2023.”

“We expect to incur charges of approximately $24 million to $32 million related to the restructuring plan throughout the third and fourth quarters of 2023, of which the majority are expected to be cash expenditures and weighted towards the third quarter.”

“As a result, we're reducing our full-year ARR guidance by approximately 2% at the midpoint to account for potential disruption.”

“We feel very strong about the Salesforce setup for the latter part of the year.”

“It's in line with what we were expecting.”

“Yeah. So, it's a good question. It's directionally up. We're not going to provide a specific number at this time and at this stage. But what I would say is we would expect it to continue to expand.”

“Yeah. I'll tag team that with Tim, but what I would say is that in general, from our expectations are the international team is performing in lines even slightly better than what I expected. And so, we feel pretty good about the outlook for the year going forward as far as our international teams go.”

“Our current trends are set up to continue what we observed in Q1 and carry those trends into Q2, Q3, and Q4.”

“However, it's important to note that our expectations for the second half of the year are based on the understanding that the environment will remain pressured. We do not anticipate an improvement in the economic outlook and expect ongoing volatility and pressure.”

“For free cash flow, we continue to expect approximately $80 million for the full year, which is approximately double our 2022 level and reflects over 400 basis points of free cash flow margin expansion.”

“Therefore, we are reiterating our full-year 2023 ARR guidance of $815 million to $825 million, representing year-over-year growth of 14% to 16%.”

“So we would expect and we do expect internally to see a much heavier weighting towards ARR per customer versus new customer adds because we have a pretty good installed base looking to consolidate that we have great relationships with, and are looking to be oriented towards the future that’s more cloud-based.”

“We would then anticipate a notable ramp in free cash flow in the second quarter with continued improvement through the balance of the year.”

“This represents at least 400 basis points of free cash flow margin expansion.”

“For full year 2023, we expect to double free cash flow generating approximately $80 million from expanding operating cash flow as well as lower capital expenditures.”

“Our guidance range reflects a modest level of deterioration from current levels, particularly in the mid-market, and we are not assuming any macroeconomic improvement in the back half of this year, although we do expect to see continued executional improvements by then.”

“We continue to expect product gross margin to trend in the mid-70s and overall gross margin to be in the low 70s.”

“We assume moderate ongoing deterioration in this segment as we entered the year and have accounted for elongated sales cycles and large deal timing uncertainty, particularly as we begin to drive more growth from our platform consolidation offerings.”

“We see positive early traction in these areas exiting 2022 and we believe we remain on track to see improvements to support growth in the second half of 2023.”

“As Corey emphasized, we continue to see a pathway to 20% ARR growth CAGR as we work towards our goal of becoming a rule of 40 company by 2025.”

“We expect to see increased negotiation around deals, particularly in the mid-market.”

“Our belief is we will gain unit share in the vulnerability management market due to our more complete solution.”

“We are training our sales team to engage effectively at the CIO level, which is a critical advantage, allowing them to sell platform capabilities across the organization. These two areas are our main focus as we enhance Salesforce enablement, and we anticipate improvements by the end of this year and into the first half of next year.”

“Non-GAAP earnings per share is expected to fall between $0.17 and $0.20 for the year, based on an anticipated diluted weighted average of 59.9 million shares outstanding.”

“We anticipate gradual benefits from the changes we're implementing, which should translate to a modest sales execution tailwind in the latter part of 2023 and into 2024.”

“While these changes may be moderately disruptive in the short term, we believe they will better position us for growth in the latter part of 2023 and beyond.”

“We expect these efforts to gain traction over the next few quarters, with improvements in growth starting in the second half of 2023.”

“Our free cash flow outlook is maintained at $40 million to $45 million, and we remain confident in our ability to ramp free cash flow in the second half of the year.”

“I would say our guidance assumes that it stays consistent with the exit rate from Q2.”

“Josh, all of that aligns with the profitability framework and guidance we've provided, where we indicated that product gross margins are expected to be in the mid-70s range.”

“We think this is going to accelerate customer usage of VM because with the attach strategy, what it really allows us to do was we get a larger ARR from customers faster.”

“Yes, it's going to be effective this quarter. We have not disclosed it publicly yet, but it will be a modest price increase that we think is certainly in line with what's happening in the market with inflation.”

“You know that we've said for a while that as environment priority shifts, if people move to the cloud more, we expected VM to decelerate over time down to the 10%-ish percent range.”

“Given these dynamics, we are reiterating our full year 2022 ARR guidance of $740 million to $750 million, year-over-year growth of 24% to 25%.”

“No, Rob, it's really immaterial. And again, the 730 to 750 full year ARR guide that we gave you three months ago we feel very confident in that showing a very nice growth on a year-over-year basis, but no impact from those two geographies.”

“But overall we feel very confident with the total gross margin being in the range that we've laid out and with product gross margins staying in that mid-70s range.”

“On an overall basis, though, we still feel very confident with the total gross margin being in the low 70s for the year in the product gross margin being in that mid-70s.”

“As a result, we remain confident in our ability to execute against the strong year-over-year ARR growth guidance of 24% to 25% that we shared at the beginning of this year.”

“Our top-line technology and our ability to benefit from multiple areas of security spending give us conviction in our outlook for 2022 and beyond as we expect to continue delivering strong top-line growth while expanding margins on an annual basis.”

“As we look at the profitability dynamics for this year, we continue to expect the majority of our operating income and free cash flow to be driven in the second half of the year.”

“For the full year, we continue to expect free cash flow in the range of $40 million to $45 million.”

“For our profitability measures, we remain on track to deliver non-GAAP operating income in the range of $17 million to $24 million for the full year with net income per share in the range of $0.05 to $0.16.”

“Given the strong momentum we see in the business, we continue to invest in driving durable growth while remaining focused on delivering full-year operating margin expansion consistent with our growth and profitability framework.”

“We expect this focus on securing our customers' digital experiences, coupled with evolving industry dynamics, will continue to support durable demand for our differentiated and best-in-suite Insight platform, which is reflected in our sustained strong full-year growth acquisition.”

“This puts us on a great trajectory to execute against our mid- and long-term free cash flow targets.”

“Our expectations remain that ARR per customer will contribute more than new customer acquisition over the medium to long term.”

“As we've shared previously, we continue to expect product gross margin to trend in the mid-70s and overall gross margin in the low 70s.”

“We expect this to fuel durable growth for our best-in-suite Insight platform as we look ahead to 2022.”

“These market conditions provided a healthy secular backdrop for our strong growth in 2021 and should support durable ongoing growth in 2022.”

“These growth rates highlight the compelling value proposition our Insight platform is delivering to our customers and support our belief that 2022 will be another strong year for Rapid7.”

“Looking ahead, you can expect our professional services to grow in the mid- to high-single digits over the next four quarters and throughout the year.”

“And I'll just reiterate for the one listed is that what we said and maintain was our expectations of the growth rate durability management to be over 10% and we think that has durability there.”

“We expect non-GAAP loss per share for the full year to be a loss of approximately $0.07 per share, which is based on an anticipated 55.2 million basic weighted average shares outstanding.”

“We have both our fed ramp and in our expanded sales and customer engagement for the public sector, but we expect to expand significantly over the next five years.”