RPD - Earnings call transcript Q2 2018

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Operator

Good day, ladies and gentlemen, and welcome to the Second Quarter 2018 Rapid7 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference is being recorded. I would now like to introduce your host for today’s conference Mr. Bray. Jeff begin. may you Sir,

Jeff Bray

third you, operator. us operating appreciate joining Bray, for everyone. in XXXX. fiscal I am Good discuss RapidX’s afternoon, Jeff the outlook to financial and to We and QX full addition year you VP now our Thank quarter earnings today and XXXX results of Kalowski, distributed We our here Thomas, on press over President wire with posted XXXX the release Relations. is at Investor I’m and website our it CFO. our Corey And investors.rapidX.com. CEO; Jeff our QX and financial

XX-Q about not in this materially performance company information Securities as timing an an substitute additional investors from meant a for non-GAAP extent directly filed considered reported Commission. Commission that of measures provided call have and due a the of presentation our us. accordance or may note expectations will factors Relations considered file differ comparability, May limitations, contained Exchange contained except Form current and timing without can will law. forward-looking results subsequent for We in call We also containing or intended of and these uncertainties, business information financial impact and of words statements the measures Actual future beliefs similar on The to such results we events attention; may, performance. by and events and the understanding XXX. trends, on addition update financial be until in Actual call, on using we in the provide to this believe ASC ASC stated will XXX guidance estimate, Quarterly archived unless will materially the and or that be applicable in posted objectives on at the financial isolation statements contains to your of most to includes presentation outcomes otherwise financial Statements any on accessed information which risk including non-GAAP with be assume the presented to financial August and measures be in the about risks number to may company of on reports our and XXXX. to provides talk forward-looking in August risks. does we and expect, with Investor should future Discussion provide the occurred, This with The tool certain that are and in to Report and this be those light and by other predicted our from believe, filed should statements information results have for X, considered continue, XXXX. today of and and a our our yet shifting to being financial the including currently indication explain Securities with such this as circumstances On results not non-GAAP comparable and X, based webcast such financials. are These expectations statements available of be of the to such website bring differ updated section results recent our our of statements. these but We use non-GAAP statements regarding that identify is on for XX, will GAAP. future telephone webcast prepared additional and would not investors.rapidX.com. help is to to use purposes implied obligation Exchange available metrics and presenting like of on this website, intend, operations accordance conference RapidX call required the forward-looking XXX QX as forward-looking anticipate, information the on performance. call following our results not is and conference replay XXXX, call date the be statements

have comments provided non-GAAP financial responses is the to comparable reconciliation website to We incremental announcing at press times one-time this historical your issued statement insight our in a provide that results. the included greater nature call financial offer Please or in of the future that, At detail the financial measures our results. measures press The or investors.rapidX.com. business release our on available we to questions, or GAAP Corey? to release the in or results in most over the prepared on quarterly tables may these we announcing in be our metrics Corey. update and I’d may metrics. may the not maybe to turn in additional our advised provide our With into like today dynamics may of an

Corey Thomas

our across afternoon, joining on RapidX earnings with quarter good the and quarter products. and today a our all second for you Thank Thank call. everyone. performance around us world second great XXXX had you, strong Jeff,

SecOps the And current growing shift going is addressed solution our fastest cloud-based revenue towards much expected. better the Our markets security. than in

quarter. XX%. grew fourth the QX, grew XXXX continued total progress XXX in ASC made XX% under towards we hitting row, XXXX goals. profitability accelerated. And revenue We and The revenue recurring ARR achieved financial a and highlights XXXX For XX% growth our were this quarter growth for

half over we rest half of a solid pipeline, growth XXXX along a new the As the for goal ARR guidance of year first of our highlighted XX%. by our raising with performance our are for result second

at confidence XX% outlined XXXX. over over revenue increased recent ARR achieving and growing that of XX% we Analyst goals Day through We our have in the

were our of strong go-to-market of SecOps products, an the recognition results leading strategic the by teams, by strong across adoption and cloud-based driven value execution set market strategy ARR-focused continued of a products. Our our of our enterprises

with sales subscription compensation The and full offering based quarter basis products second quarter was our our on on of ARR. first all a

beginning quickly of benefits the productivity And focus Our our new adapted realize on to teams corporate revenue. have go-to-market to recurring we’re approach. our

but am when Looking longer core teams of operating I solutions maintenance the priorities help compromise, quickly in rather vulnerable? increasingly not and to set visibility environment no compromise for managing that how was enterprises understand I strong the technology. But am the management question that to them now having these focused Security at step our markets, on key into is I the More I and IT vulnerable how environments, analytic and understand to yet while their am and remediate? have gain enterprises and are I risks remediation. is how complex first longer, no can they their

just supported still to organization's unifies and of increasing will excited accelerate as use easy visibility and to in strategic in is are be through well-managed security not we’re required install visibility and to cloud Komand, are the on teams, evidenced a delivers That’s efficient practice protect operating why and innovation. a these customers for by solutions Insight SecOps collection penetration. their to data poor and the visibility, easy struggling themselves to shared Shared work SecOps the use and is The are last security security, connect also solution. no data our environments. find to IT security, easy that to But platform but their RapidX with to teams tools. security We toolbox. evolution analytics and RapidX’s analytics and another the our common disparate barriers acquired and tasks by Komand together. Even platform to Business IT a success enough. to SecOps easy DevOps development practices, based with language install, are power overwhelmed and creates silos, of providing slows longer needed and most automation solution of product program. alignment next launch platform, aligning and resonating who ultimately viewing of manual break down add innovate. the to Insight ability solutions our the automation to security which analytics orchestration However, it as teams set the most DevOps down increasingly still teams team’s upcoming only year automation our results mundane IT

year, and as version solutions core launch enable Komand implement of designed of security Insight and Insight has standalone cloud their the efficiency this And of IT dramatically the improve customers' Later been to feature we of create Komand which and believe quickly enthusiastic. can Insight will our teams. both to will response so solutions. based we that to as RapidX’s product, customers far workflows Komand a set SecOps differentiate is further

the has three as our management recognized new to stability automation platform. vulnerability application application InsightAppSec, our automation insight the dynamic recognized by highly InsightIDR, cloud-related and by that testing been as growth help SecOps on UBA-powered the InsightVM a is on and as engines product visionary analytics customers Forrester; key and by providing recognized Our portfolio secure solutions cloud-based of rapidly rated all now rated platform that make which with of RapidX security future highest visibility, expanding a leaders effective. have cloud-based more more future visionaries, SIEM, of testing, a as part the shared of Gartner; execute and will our the major Gartner. security join as portfolio

quarter second looking XXXX the at goals. review let’s by Now, our

first to deliver at XX%. growth of least Our ARR goal is

in grown. quickly our a AAR and billings, It a of is manage revenue primary on we it metric how focusing because recurring ARR, metric is We’re use good useful business. indicator has the quality to is a more high

to that XX%. subscription raising ARR products our been who from on fastest to performance over growth transition shift our as to selling XXXX This model our base of ARR accelerated a across quickly cyber supported XX% markets to ahead we plan. transitioning And by teams to quarter, of address is strong go-to-market our and products as our recurring revenue the growth ARR. are growth the security, growing perpetual are for ARR guidance has

subscription QX, During of shift pricing. XXXX, to we strong bookings. And we saw officially towards our subscription and a in shifted SaaS products all

our Our customers platform year-over-year the saw and using with one well XX% migrate our confidence gain of our quality, growth growth growing current now customers pricing XX% This increased ARR from solutions. in generating in have both solutions XX% increasing subscription revenue, quickly our by to in per new continue services, a over and and $XX,XXX to away upsells bookings customer. our outlook. to over This With mid-term subscription more of cloud-based year-over-year Insight strong about customers bookings of our platform embraced customer, cross-sells. higher we resulted as ease of in and new further and ongoing driven per long-term customer shift mix has addition, as increasing simplicity higher

services-only customer XX% year-over-year base to customer faster customers. grew SecOps goal With to growth second these customer, of our value. we up-selling and relationships leverage per SecOps our customers, ARR with will is deceleration Our our believe portfolio lifetime new higher drive drive our but cross-selling. with even in We new growth higher

we into visibility new our working as struggling gives cloud is was that competitor providers customers software provide and with our large well AWS expertise customers' broad company of AWS the environment. as InsightVM great customers where RapidX displaced open APIs. and including cloud a One has accessibility major to a Azure. assets visibility private into with

rate expand land remains strong maintain renewal XXX%. at a that we Our and a high

our the of of their drivers coming their environment our coverage strong renewals customers One more add rate to back is improve to to main visibility.

to their XXX visibility retail environment, customer footprint. had last InsightVM complete across their that year, we coverage quarter entire comprehensive of returned store a them Fortune purchased providing This add

expensive to an internal national A customers customer, see while law applications across workflows and The InsightVM both cover us than Komand and into security demonstrated leading consulting was out-of-the-box and their so application side, critical that another has an for that legacy difficult the their a portfolio. response enterprises. When simplified InsightIDR's firm joined greatly strong a effort. to the InsightIDR, On detection positives application XXX opportunity and global been SecOps customer security actual to we won was as and automation SIEM use, expansion prebuilt Application expand visual also a more. realized with security our And Visibility practice. to a quarter add orchestration works need search, continues to more be had dashboards InsightAppSec looking a security information. generating cover over to XXXs simple well [Indiscernible] by new huge has Komand’s how firm they adding provided of with the automation to opportunity. cross-sell we

solid software growth a into was those innings. company of emphasis XXX also cross-sell opportunity to address European expanded still and our ability added As of a in Insight opportunity, Canada coverage, customers Global in Fortune AppSpider local. in applications. our QX, to expanded take customer international, AppSpider example good XXX flexibility XXXs their data their recently Australia, bank data deal and global the security, advantage we've provide is To providing again the a of and web a This visibility requirements governance to platform that the early better further this to regions long-term keep

Finally, and quarter improved sequentially our profitability, during we third improve operating our both and year-over-year. the to goal second loss

generate to and cash of XXXX. are making from in progress our towards in expect to We XXXX, continue profitability operations goal

With that, the transition, over to call targets. the than which we like subscription business ability XXXX, CFO, more and enter our hand success With of forecasted with skill our our XXXX will revenue Jeff in Jeff? to our we the improve our will to hit originally help I’d Kalowski. recurring

Jeff Kalowski

Corey. Thanks

everyone second we’ve remind that these XXX earnings we When a our comparison results therefore, ASC of on we'll details XXXX, year-over-year all for as prior results on basis, operating results rates strong modified have growth a XXX, business, our be comparing retrospective under to ASC don't press want adopted key report quarter's of year in ASC trends our be ASC I discussing results and both begin XXX I under an basis. XXX. in and Xst, And release will meaningful. our each discussing we included as We’ve the other our XXX not January Before would and today. quarter

growth our yield metrics We’re XX%. highlighted in pleased the ARR strong accelerating second on was which with all of key quarter, by guidance and performance

the an of our Total of XXXX, of second and an discuss million, increase XXX was quarter of revenue results growth of was basis. revenue ahead XX% of up XX%, on ASC in $XX.X briefly XX% and from second the which revenue is I'll for First, Recurring XXXX XX%. quarter in guidance. total XXXX,

in of In revenue second QX, revenues, XX% business America increased Looking world and of revenue at the XX% geographically. rest contributed quarter. comprised XX% growing year-over-year of the North XX%, total

prior world the from loss loss $X a but impacted outside growth basis, to million, loss and period. loss XXXX, of meaningfully also EBITDA deal be North a Our continues be to rest million in than guidance better million million million quarter services was our large of adjusted $X.X was ASC of an the to $X.X non-GAAP very On due second ARR XXX of QX, compared for $X.X $X.X a operating to the strong. year revenue growth to recognized in of continues our America

Our operating to X% of a loss XX% margin improved loss from a of year. in the prior

results ASC revenue million, of discuss XXX I'll high-end the between on lower our due the $XX.X an Total to being XXX with revenue XXX and above perpetual was difference ASC accounting. XXX guidance Now, basis. primary

growth. driven once both was in IDR globally BM and revenue product accelerating again Our strong by recurring revenue with bookings

ARR we and slowing quotas As revenues. with a shift bookings did expected towards force, for sales the our professional we services see in

Recurring sheet Average remains revenue revenues revenue be Visibility at the down very services our professional forecast down under months QX. XXXX. deferred XX total and total quarter. for $XX we're to period XX% and shift the billings, high. of revenue total revenue The for XX% growth annualized from prior having year lengths XX%. growth revenue our subscription. over of XX% second the of came to the in slightly beginning from ASC expect an now year and We of to expect We ARR significantly down was will months QX, from were Calculated second the of million revenue with strength months success balance our the from the were billings XXX of products XX in compared into flat to evidence contract increase quarter be XX to a the the of acceleration increased our end quarter, on million. and at recurring year-over-year the $XXX.X in XX% for value

benefit reinforces longer as to contracts, subscription a billings As in and revenue. expected our we portfolio higher one-year InsightVM capture the our transition, of have meaningful given This and and of our the of periods the we to growth towards no we that said annual we we prior recurring this QX. of since don't our subscription, customers that belief launched comparison saw move to perpetual mix are full during shift

While and could we transition it's that contract this during QX be forecast flow period, our believe operating lengths be will levels could shorten from to possible difficult further cash affected.

However, we're to be still forecasting cash operations for from positive XXXX.

customers customer increased we than globally. more and X,XXX count with QX Our by XX% year-over-year ended

to quality and XX,XXX an in of Corey XX%. increased to our As upsells see mentioned, the customer and to see to we base improvement over growth bookings continue strong our we per continue new or Overall, ARR of cross-sells. customer customers'

Our expiring in renewal revenue second quarter. rate our was and was rate XXX% the renewal XX%

Turning gross gross XX%. margin was XXXX, XX%, for margin professional back to QX to from non-GAAP was margins the P&L. down Product XX%, Non-GAAP slightly up from QX, QX. gross total and non-GAAP slightly improved services

slightly second benefited the professional utilization compared During to QX. quarter, margins services higher from

We for continue services year ASC to on mid-XXs in and an ASC for mid-XXs gross our basis. gross margins to expect stay XXXX, the and total full XXX low the XXX in to professional margin both the

For operating was in marketing and XXX that expenses, difference in commissions, which deferring due million sales was XXX please sales in note and was to which between the our lower of expense, line impact the with XXX $X.X only the guidance.

improvement marketing affecting and marketing the and During under XX% sales due revenue with XXX the commissions to changes and to basis points revenues. of in leverage second additional about We just decreased sales quarter, accounting year-over-year under of realized the XXX.

see to leverage and continue subscription, investments help the make full still for our but ARR Given year expense to shift into XXXX. second the from year we'll the of drive of half expect marketing of to the success we to growth, sales

was of well Non-GAAP share We loss. $XX Adjusted second $X.XX per loss operating and in our million our which million ended Moving was was cash EBITDA equivalents December negative loss $X to of $X.X compares in loss XX%. this XXXX. of QX, the was million. and $X.X a $XXX.X quarter of as net to our investments improved of operating ahead million, guidance. XX, QX with operating guidance million and quarter XXXX, ahead $X.X cash million, margin to Non-GAAP to second loss of

remain operations flow cash earlier, $X.X negative activities cash Year-to-date QX was as cash positive operating we And expect from $X.X operating in million. mentioned negative flow Our for to was used million. for XXXX. we

However, contract XXXX due down we lengths. from be to could lower potentially

third and year our to guidance. full quarter Moving

ARR, for strong to exceed the have churn full XX%. and momentum the we're given and we in year growth As ARR of our half strong on QX, in built for XXXX first the bookings our guidance new performance raising

XXX XXXX, ASC $XX.X the loss basis, $XX million non-GAAP revenue On $X.X be We of XX% operating to in an million. to an equates anticipate million. the which to be QX, ASC For we total anticipate year-over-year operating $X.X growth of million, to million in basis, million million. of in to of revenue loss to the $XX.X We XXX be the XX%. total $X.X anticipate anticipate million range in on to we be to non-GAAP to range to range $X.X $XX.X range of

our of we revenue to full $XXX $XXX the to total revenue guidance. ASC XXXX, million. we're basis, raising the On an total in are guidance range be year XXX million For our for raising

billion. the growth XX%. range an range basis, operating to equates XX% of we’re ASC $XX in to raising $XXX million be million, are to$XX to of updating in $XXX for be billion XXX year-over-year On to total We the guidance loss of to which revenue our non-GAAP

in range million. loss to our the non-GAAP guidance million We are $XX.X operating $XX.X updating of to be for

and with ARR profit a over to through and XXXX. grow As in goal through XXXX, over meet are generate by XX% operating goals to momentum we great our our position XX% in by revenues non-GAAP Corey said increased XXXX, our

expense subscription a Our for sales driven questions. this year And full full very to year time by call our Operator? leading the appreciate organization, reflects quarter that, to strong With our sales into raise conclusion, we the outlook. XXXX. shift support. RapidX, to we’ll cloud your momentum open guidance was strong ARR and but increased growth expect leverage In in investment the from and our our realize any for for we the

Operator

Thank Owens you. [Operator the from Instructions] Capital. of Rob KeyBanc comes of And our question line first

Your open. line is

Rob Owens

not your portfolio new understand just VM on competitive you’ve to you’re where position subscription touch doing want in guessing greenfield. that’s customer on I what products a with on and expanded mentioned you’ve how strong all seeing the your couple me and to acquisition. the that’s basis. quarters I’m this Help side

competition of So sale it who what where point? more your is VM this buying are displacing into or and the it is the portfolio? and And kind entire single you at

Corey Thomas

early So are for it’s that the days early indicator we consolidation around. evidence an overall but seeing

more is with quickly who deal what vehicle of I non-competitive have on numbers lots have where experience. very a earlier. quite a we’re other our consider from existing value evidence to especially platform. adoption we they're not a great so for would our platform, other that deal, customer that When got willing they we great other while capabilities have the get call to customers. have seeing And explore But is getting proposition, experience strong it’s customers days, enough early platform actually adoption And that our on which to than needs, the

evenly I acts distributed. say that it’s a As per at customer pretty the distant, would new

are in And contributors, InsightIDR. us. we've new see I’ll we other the added the can where core one pleasant come area big back to really a which surprise It space space the You Both was and areas with before. that customers, said of IDR for a -- two those space and VM is with second. SIEM

but just that solution. not different of one unique again, to to actually consolidated going a and that’s actually But a the we having common platform customers approaches, and on best spaces. on on what’s have taken to we by breed is and technology solutions of gives and advantage We think, unique I actually common value. emphasize -- be platform that So bunch of new into took I fit estimate customers good quality. And consolidated all best in a market can that really we I prospects technologies And New our a we're solutions have a an is [indiscernible] technology the Yorker are platform make adopting solution are those have And our that that us platform, we’ve quite breed designing of think but designed strategy adds platform. a have there.

looking players investment placed that upgrade question we with Specifically competitors and actually new our that about that's workloads to are not we not just prioritization market. programs we the are that management been see our opportunity to composition. the longer continued of net legacy of main we traditional both the vulnerability And in customers VM do the that back value job and your really tech And they their see though line investments mid-market have on that in where with market, still greenfield the their see there. customers to see infrastructure programs. their markets is do to customers and you some with We in displacements effective was in adding looking existing to where to actually upgrade displacement integration

So the our quite healthy categories. we we saw more But extraordinarily dynamics those Overall are that growth strongly. product our we've growth commentary saw that from add the see. last to products of grew was all just around And that what across ARR quarter. had we

Rob Owens

to of you're buy, how that force? follow-up relative that to unrelated your that for then sales Is than incentivizing where the might a XXXX And function anything impact customers completely want that's does do initially. the with shift And mix you kind have just of occurring rapidly front? how to that more Thanks. on the targets? channel Is assumed Great.

Corey Thomas

Yes.

and this when we we the we of about subscription we opportunity benefits shift to a of is have we from of is job made great this sales one learn are from there a two ARR. learned sales relatively is the So one change. team done And the others to factors. adopting to shifted, One is talked I But compensation very ARR year of basis our clear we focus big would that say our before has model moving others. shift did was that to the

important that's we reception, reception. The on to have is a always stage, push we are positive we could second thing if the harder customers. it made that things a this the have stuff than customer customer transition These actually have at strong actually much And more is you anticipated. which know

Operator

Thank you.

from comes the question Saket Kalia Capital. next of line Barclays Our of

open. is line Your

Saket Kalia

Saket Kalia questions Barclays. of first Kalowski. Hey, in Jeff my taking the here. for so Nice it's ARR. maybe guys, Thanks for you Hey acceleration

I think the benefit in that Corey worked of It think perspective. about much if sort about kind a the But of very product perspective, sounded even board. that what metric coming ARR the customers dynamic do your adopting the from from across new about are think maybe customers And qualitatively? you How versus talked begin from growth existing to shifting SaaS how to it's SaaS kind that that you of with. helping the or number?

Jeff Kalowski

Yes.

renewal the shifting of our said, all platform. strong then And the strong perpetual that's And were their our Day, across raise existing on than XX% Corey penalize sort upsell. the other showed inflationary particularly exposed nominal ARR increase, did the didn't and price what SaaS you on as product if want of had and because upsells lines. cross-sells. formally not had Saket, recall we So then were growth going we we is ARR was platform first piece our we to offering, the the cross-sell on that will at customers customers we that that and ARR the forward. those range all, The of to do drive sort But motive was XX% where shifting examples of Analyst to for and annuity in to we more more products shifted

convert So renewal did increase. at convert, they they customers their When the ARR rate growth. inflationary existing plus really current driving an not basically

Saket Kalia

super Got my you, That's it. for Maybe Cory. helpful. follow-up

can here are be road? as the maybe And on category just for spend You VM prepared how about maybe focus around a the of geographic seeing internationally you business RapidX international strategic some I same little more Australia, down touched seeing on think, U.S.? in as on strategically. Canada the the think we you the talk big whether remarks a and bit we’re Can expansion,

Corey Thomas

great It’s question. a

if are look bit. where little have been So we for we at and a you

rate We’re it years. total that over great keep a a platform business. slower introduced platform growth little our of bit that has there. as of two in new things first that balancing and of in one been a there I’d the single into we ramp is has XX, the the about XX-ish And percentage both the make we’ve because mean And parts percentage our sort from a range mix say of actually international, scales weighing to go when last through mind that traditionally a our the that of little up overtime. lot and market products think and bit we on to

bit and that’s a forward. weight for so U.S. introduction. actually then the of put the add to And the both you localization you the territories and And buyers little as go

instances you’re think our have that the It growth of around actually local platform. support. So but and to local done job have trickier world. continuing geopolitical you because the around around issues see that as far has world of of plenty and the the an have of then we to also new gotten where effective why influences natural team starting regions world, and add that’s need expansion to we evolution the do the And we’ve both

normative our continue to total to get So overall And that it as forward. business. go of we grow then international will rate would revenue you of our business global in are more as a excess very, optimistic percentage actually very and

We substantially question in and would about of say drop places as As in Australia. see picking up demand, the far demand in I U.S., of outside specifically pockets Asia. like your Europe good is

intensity growth and opportunity. you terms would market where still spin seeing the It's already we intensity as increasing and that of have of the actually an is increasing there and in focus, lag the you we’re area good is have over environment opportunity the traction, see which traction both to of why it's and the pipeline. I However, market regulatory awareness, growth that U.S. say a

are in, and to not I’ll figured I quite So them overall security VM market. in both but U.S. the level broadly say it’s which in healthy

Operator

you. Thank

Gur line from of Talpaz question next Our of Stifel. the

open. is line Your

Gur Talpaz

some background think what hitting comfortable there’s I at expansion big put could are if current the read year, noise net big apologies very, plus got in for the very the here levels making but that, assumptions you there the you about about bump with bump forecast ARR and Corey, million Because here be calling target numbers, quarter the from on airport. you’re that to effectively if the the if on of Congrats $XX from here. a you for confident. on

to of or So forecast? can kind in give within assumption some that what us you granularity that assuming you

Corey Thomas

look is scrutiny. you at are of I’d one the get quarter company fourth we at one through: what’s thing a also into Yes, at imagine indicate? your our the see to three we guess, you is important we most what go a we’re to I I’d want things look especially there One, the pipeline And actually for you you there. the that past opportunities. both your say as is then raise really rep you the quarter, pipeline if comfortable our about trend can second put target. to productivity great and -- areas does deal look and with Because of what sales say think, The indicate? things is teams. of easiest But in obsessed that third but were a the performance visibility really

doing in and both are management we how team. retaining So

better have the to expected our retention of -- than on team, continue efficient sales sales team. lower We

look the and team have drive team. that at look And at sell in not the products effectively RapidX, able can testament that seeing platform to performance we experienced they opportunity fact we a We basis. but what to under of there. that customers we core our the of the suite that to the how that Past all productivity are really at forecast of business is And forward. continue attrition engage both contributes pipeline sales team also that forecast they're healthy our go the culture And and that the sales that to they we're when we is our from thing imagine as to and be conservative just enjoying also we again. XX% productivity assumptions you products installed our lower

Gur Talpaz

of level just that's going more And high kind a bit helpful. really here. Yes, little maybe

breaches we're working quarters broader few as change years mentality you perhaps solutions did kind this in a place be VM these ago? breach value think of across look the to these a pretty even or we do environment Or you got see in function days. ransomware of your meaning it in than favor? the kind kind of If as good seeing customers world, type feels kind you more ultimately security of a more Do they

Corey Thomas

and a -- least core the there say the about because asset is environment. environment is we've in Yes, data all those what's SecOps, in no One you that -- risk of half half actually I has activity one the have operation. asset you actually and said in when closure that visibility happening think that you have actually security the operations at that's that, story out in be is the overall and run security the assets that what's visibility VM vulnerability what VM the great need. the the of of the being to effective would it to always one talked half is need

And And general And whole so see effectively in say in they VM would more run in sector visibility. obsessed as other focus days. visibility also security more that and is I get but quite and why well more with operations, become these on that's how and they provide technologies just saying the their you visibility. people [Indiscernible] not organizations doing that

Gur Talpaz

lot a congrats Thanks helpful. again. That's

Operator

Thank you.

Matt line next RBC. Hedberg of comes question Our of from the

line is Your open.

Matt Hedberg

you're impressive. Hey innings thanks per there. It only for looks like Well first in the ARR Corey, guys, few taking questions. done. customers my

said upsell? seven all about lot and first here. guess, ARR I customer we about contributing that, said from your IDR you've customer But solutions. you've InsightOps currently times think products? per increase that you believe think, seven a is I VM. And takes think is how X.X second, And of you assumptions to average I can times I based on hear that available

Corey Thomas

great question. It's a

InsightIDR Komand, base at talked the risk analytics well that we talked about. as and now. of we both are Komand we InsightVM they're and follow-up related say our InsightOps That's that InsightOps. about would Day, security to recall side. our you is One bandwidth the -- we cloud-based for And management included the right I the Analyst includes the to overall the on such if category. operations as follow-up the for So and our the category, really the the attraction Komand had same aspect consuming component, and InsightAspect on-premise then three which although vulnerability IDR on to categories seeing core VM, the most material includes Xx, it that

version And focus at a that allocation have One the that resource side about of you'll and actually and the and almost Komand the on model of Day. see things is Komand. into we greater Analyst platform the not built year greater coming over InsightOps the of we the the is that talked Komand multiple the

see we really upside things available of see we launch invest and a before. that And ARR strong to So as new as to continue multiple us. actually to we we

Matt Hedberg

there Can share Is on with feedback talked as that what a beta feedback guys VM integration us sort with particular of a more have any and maybe bit about That's you means? you about follow-up, you your -- that partnership IDR that customer can with And Azure. great. little talk relationship?

Corey Thomas

I'm time? but more one the you question just repeat sorry, can

Matt Hedberg

Azure. quarter of a I'm of on Yes, new kind announcement. sort guys I IDR integrating InsightVM that and curious you particular integration. talked about believe as feedback with that on the during just

Corey Thomas

to more back It and increasingly the that they the And of what those profile discussion activities? behavior we need is do visibility Azure. And at at Absolutely. of of as risk and visibility environments? are in of have to people for environments. is is indicated visibility that continue adopt around it both one that indicators to obsess resources environments the or which to those those AWS change can't vulnerability the some of compromise. asset are the have, in having profile have in to organization of able risk And manage us an drivers are And constrained, the is we the see. and footprint Azure, and AWS, critical they compromise? environments IT goes One visibility how understand you both activity best-in-class more look be actually those what organization we’re assets investments look can’t What’s for and you normal make indicator the the to is

Operator

Moskowitz of of Our line & next Gregg question Company. Cowen comes from the

Your line is open.

Unidentified Analyst

the off, is you model. only changes to has and quarter start a for pricing Asia across subscription what if on now your This the for response this first taking U.S., is is Mike Greg. Thanks question. the full under been customer Europe the essentially look To How Pacific?

Corey Thomas

positive Again, it’s we more anticipated. than been much

things of the things. close And say these things of We’re type about of mean, going expected is friction. We the that any key focus that and friction we’ve customer. is And doing to the sustainability. things we I as think on one of that the can that practical we lower we’ve have that I done to understand had are would change. know core I a benefit really share up about

current value of a maximize the then look, deliver great -- in and and how overall how the maximize great the dollar customer. the do lifetime to have you do you with about relationship, value customer, we’re if We've so not quarter you have that And relationship the we near-term? the customer

the that transition recognized with warm that And earlier, just we've fact, that so, of taken and And not Jeff customer have focus continue customers as that us, one to was RapidX the our our well led business effective overall indicated customers of areas close of I friction. friction. is part think reducing of our as barriers customer us. And reception more minimize minimizing more of work that comments had very intent to in to that’s his the and how is the for subscription in the friction, and

Unidentified Analyst

seeing you hearing as it my refresh as relates what or SIEM are to And from Thanks. follow-up, activity?

Corey Thomas

detection add great do is do two they environment. continue any we we talk to focus about shift do. you shift And detection. continue of robust focused combine compliance There’s things the been on there they detection that’s benefited because how focused a clear we have capability us how that are really and the SIEM or see that We great it’s organizations that's any having actually about from core really for do just to is that a what I to how

a that it -- we you like you that’s market that’s model, have can’t their that's pricing, detection the don’t have customer's to thing not customers And see, just you visibility to confidence. customers very, have the by an have IP storage visibility. you have that received can’t second can’t custom. model on because clear for allows The well it our them manage is Again, platform very with makes because easy if value the is that been you where an based model purely when entire can’t unpredictable across detect our economic aligned model

but So a they overall they have the in growth model with want, visibility to detection that that fits objectives. their the do

Operator

next And comes question Ho, Jonathan of from Blair. you. William line Thank the

is line Your open.

Jonathan Ho

maybe around talk afternoon, And to are our given a bit the increasing demand your just of wanted start automation? for little Good Komand. the and congrats on the results. for strong I expectations just -- you customers with Can out looking what release? and about sort

Unidentified Company Representative

looked and the not that of And be workload lots do is is that there. to lot calls previous market early or market the security. lots is full technologies and that people in this automation by is enough the there Gartner an And orchestration needs say for stage security it manual all work is the IT repetitive demand the replacing that way, work a incarnation It store it's are of done. we the to And orientation. but at capacity of market processes is great in that the the core thing of the the a

be mundane. it can felt customers our so And quite

a mundane on you see truly this this are of where bandwidth they're issue have and spending why their great the make focus they difference. activity deal don't that things that but have a customers competitive, capacity That's yet and customer ketchup on automation. and orchestration So is

the extending orchestration orchestration a nano mainstream that customers automation yet but remediation, detection, management a of parts simple benefit related not today the automation of thousands a just automation Our the with market security of that's in solution up integration tens solution can IT IT receive and our year. customers lots making where come we've sort hear is actually half of their overall remarks, on where prepared second goal of focus but and is that really we've of our to will allows workflows along and the come the parts powerful automating workloads them looking containment, to automating said security. been really building of of give security more and a of on effect you're that's part is you'll workforce. of timing, as what about types all and automating And to what process and technology but been multiplicative the my parts There in future, the of this were productivity teams. that's drive about solutions I And and that where in of of the both our along pre-build

We a that. have focus big on

Jonathan Ho

we platform And about the multiple adoption maybe How happening. the to start or maybe Just of that increasing you're think about to then some seeing overtime? willingness follow-up, qualitative and when to elements wanted detail customers the that's just on are out Is buy seeing the a often there? get to of sort what sort add you platform as same with? on

Corey Thomas

have, we're a is it's starting increase thing. that which solutions with Yes, of together. nearly seeing our it's multiple things as cost transaction the saw when we upsells together also quarter. at includes renewal overall solutions that And XXX%. rate versus look customers the are But upsell positive interesting had total customers ARR of interesting to and went on by because historically are that's you -- driven they in sort a they customer off, wanting start visibility per in What's purchasing multiple couple more an

that going at you're up It's have So that in it's just customer definitely a there. going we big It's base looking up. way. noticeable

platform of we've ongoing based on has customers And feedback consolidation enough to continue value. so but technology improvement from that, positive got the in our clearly see a is than that more you best

Operator

you. Thank

from comes question Raymond James. next Our of Turits the line of Michael

is open. Your line

Michael Turits

year quarter, et just the so the but less Very next cetera. -- to Question for much and it on EPS EBIT strong on quarter. pretty where for guide raise is raised was

So much operating year-over-year, so really of leverage you’ll out raise be but getting incremental not here. the

and So some seems in that's certainly where’s coming sales and marketing? spend that like of incremental year-over-year it

Corey Thomas

our really Michael, that and One Yes, to the growth was you’re in got to growth we two strong question realize have that is do We absolutely areas. more and accretive right. great long-term It we economic. visibility. comes customer capacity

we and We’re base it productivity over what but year costs longer-term a that value customer product grow horizon. the a understand and of to because will making customer get the investments the customer time this

pretty Again We’re growth and and economics. term really overall investing into both long mid-term customer of have sight line in the profitability together. clear we

least, The be it looking increase second there of good reason say investment was, forward thing for is we a be with the at do rates, strong model very, that how is shift make the next renewal actually and really the it having at experience combined subscription to in the systems. we continue cloud-based leverage to experience. overall as we what optimize and customer we forward subscription to at could cost go we would how very are we’re portion but right the year, overall we’re also have looking think a I And that customer could have about do positive we to that sure but

the as that allow in growth scale higher overall our go we investing are we systems to confident we our in So have because overall profile forward.

Jeff Kalowski

did. we that and right you’re Michael, Yes,

the number that quarter We plus we’ve that revenue just want I that upside. But to raised were point to XX% ARR last XX% we are out investing plus.

investments and pipeline. drive those in previous strong So a on and the were quarter seeing growth exiting higher will that ARR demand help based what we

Michael Turits

follow-up obviously, cloud-based IDR Are shaking from perspective? I primarily How you yourself? perspective? seeing a talk could a Can the all vendors? like out market. SIEM seeing if who in And SIEM Are discussing SIEM the on from those market is about you the the competitive is discussion major -- -- segmentation are you it

Corey Thomas

just that not the on I It new some security the keep capabilities that all RapidX analytics of like are what mind things really and that customers a and in SIEM upscale part vendors of to platform. across in only the we on they’re are looking add to focused cloud-based we is would security is offering. deals, is sort so see Yes, vendor to I what say from mean, that

for see course their their But And -- authorized excited not legacy of and so the We the around are market a solution good strong and strong smaller have of But cloud really And sales see there there. was other we and there’s some people legacy that there us. that in isn’t solution occasionally. bunch it’s their a players is definitely a it force IBM we so see thing this there. default once that. position as that’s isn’t then some a some they as

Operator

you. Thank

of Anne Financial. with question is next Meisner line Our the from Susquehanna

Your line is open.

Anne Meisner

and growth VM Thanks the of growing underlining said for is market seen of it VM the quarter had and like target way. XX% would growth taking through seeing. my than also assumes XX%, the you strong deceleration previously congrats your what you’ve slower on represent it XXXX question previously by the looks that from that’s broader Cory, ARR what

is would like assumption? So update coming Now would your maybe in number anticipated? that than kind ARR much that you overall it of you looks stronger have

Corey Thomas

say just I XX% plus.

Anne Meisner

fair. That's

Corey Thomas

immaterial It's reason we we're market. dynamic in that growth thing what say in. total It's and are overall we really both about that would I we very the are cost me ARR our The segmentation seeing falls do sticky it how customers is there the about the to our think to that which VM the provide with they on sustainable. that focused value primarily maximize And strong is clear we and customer bucket economics.

do then is of And lots that, you drive think being with about going into. want strategy our at and we strategy VM it to maximize So incredibly that just an go-to-market that adoption we maximize And pricing drops analysis, healthy. of if how from and our actually do our to strategy. then both bucket's starts I how one our reiterate how look penetration. we lots market value because pricing incredibly, customer the customers' really really pricing which

of of And sort have over major all -- XX%. of of players visibility-driven have the like an demand. You customer growth really three that's that outcome

we fully our optimizing And how have we more to As what though, the cloud-based flushed and managing of both maximize manage pricing our far on in as portfolio the ARR we ARR are to are around portfolio, a market because go we we customer. to total do our per portfolio platform.

driver is so there. we that And primary have the that

with what the we've going raised about And so total for number of our saw on We're growth second year. 'XX. are of because consistent do sort total not again, we extraordinarily for time what to But the we 'XX at sub-segment are rates focused customer optimizing the we're economics. adjustments the confident to we're committed half and really ARR this and

Anne Meisner

can win update the rates? capability fair. in that maybe April. type you that's or stories you in Any impact just on analytics then added a customer so success terms And Okay, back quick behavior far see that of of

Corey Thomas

very Absolutely. clear differentiator. That was a very,

talented the the to for extraordinarily be build organization may security testing development aware is that you having cyber cyber advisory everything security not to that we help of of security their that have penetration program those team consulting forensic, For benefit and programs.

been One the the having less quality we're detecting services see to products that technical that same adding the effective some in the analytics. we And of our customers. actually that base. do is more in deep customers those aggregate those team have knowledge we're customers customers that include have a a us do to the customers. we path And in services of we big now those broad of and and from that's that to need and thrilled that finding have strategic positive. that overtime, expertise job type services as team for the that helped were amount deals our are to and of behavior our they and in that those of our focus and that more of become a we've huge quite from respect get for across that's the that taking it's a of reason And and products engagements that engagement to reception, getting value impact far overwhelmed our these as our learnings that operationalize And to more focus learnings of have the to Customers the we of really environment. as we able on analysis volume initiatives have team. breadth of the our from on you able attacker We're who the take more customer a help talented really customer on part the big to services more the

Anne Meisner

very much. That's Thank helpful. you

Corey Thomas

you. Thank

Operator

line Needham Thank our And question you. Henderson next & of the Alex comes Company. of from

Your line is open.

Unidentified Analyst

my John taking Thanks on I'm for question. [indiscernible] Alex. for

announced if and onto recently platform coming integration platform know Microsoft you could customers Azure. just possibly you've result? the details integration the seeing of the as of expand wondering I with a the Insight was on regarding So additional I just some if you’re

Corey Thomas

provide, Azure one and whether thing vulnerability lot the environment a AWS, the the Azure to same in environment, those provide more environments. is The configuration than of especially primary vulnerability or the integration matters cloud visibility it's is assessment. into so also and Yes, focus risk about

well have environments that investment I all look those in configured know environment. of detect cloud number like indicators that’s what’s aspects and that visibility most that’s of monitor vulnerability we Just then organizations as have, in have what the ongoing the IP the have environment. as the for of don’t what they in we we Azure just And it in as the investment environment. state And the the monitoring

So the focus there. that’s

existing our are customers, was the base about like said have on-premise the expand of demand and we a earliest and environments. is over they large I have our their customers question customer As our the both the environments their demand, many that that from complex far customers as had all which customers we cloud growing environments customers, world, customer

the that’s so we primary driver have And that there.

the a not just be I laptop customers some are very but on-premise their have that our we footprint. desktop, AWS-only, have that of And combination can footprint We few and an Azure-only, customers as fast a by Most many. have that do systems, AWS. can Microsoft be well be are well can represented as that other their by human that footprint Azure system, as or things CRM named as the cloud resources of a

environments falling And category work really well through the visibility what customers analyze helping so of that as to having into have then to of risk also need as environments we they really multiple profile analyze correct the see we’re what automation most they exposure. and complex it the need takes risk into, to remediate be to and vulnerability drive them those And segments. the that able

Unidentified Analyst

think follow-up, you the talked I a sort about in as X.X per And past, so customer. of solutions

at think, first least in 'XX. a was number quarter of that I

how just any by if wondering driven you just that about IDR versus talk VM? metric, updates if of is you growth on So the Ops and much versus had

Corey Thomas

where That’s The we happens we’re having is value, day common lifetime products customer. a question. whole the is actually the course, customers multiple what that increasing customer ARR focus about less that show have we’re time that from that focus strategy to same at we a X.X doing they customer you driving were a of go periodically on of platform five the have the per when issue quarterly products which denominator adding numerator new plus when a is that the per of the Because on really the customers. roughly The snapshot per is basis, reason per customer. what customers, number great both we on plus products because on we value the that five products you the we’re

what really on some that though how going ARR that's So value. and there. that go thing we’re the the creates could value is to be provides per economic economic the really noise The customer

Operator

Instructions] And Morgan from question Stanley. of [Operator next of Thank the comes our you. line Melissa Franchi

line open. is Your

Melissa Franchi

sort guess recurring, traditional mentioned wondering for or in coming maintenance, question. Insight percent of around the margin I'm Great. actually Thanks particularly was that's gross versus Corey but for how from could us give taking my revenue about Jeff percent term margins. actually, And the today. then, you I profile the should we that you of Insight the think if

Corey Thomas

Jeff just the our specifics some platform, through growth We're in can me there. go strong especially let and on very Yes, provide seeing sales. core those new

So but about in the to of add are federal think and the that are U.S. government customers that cloud-based the the We as especially sort overall our the half could customers expected. great that's rate than platform. we of It's platform sales and But our new of platform. have on to outside adding have hoped on on-premise majority, expect on international natural. approaching or the the way has and more base, our our we it's do is one simple is of number customers at quite, not on the that customer platform least total I quantitative Insight roughly customers and U.S. our of both we believe positive much it customers product

so a in these there. But fast made overall timeframe, happy we in great recent quite platform. -- getting not on where very, the fact that's progress, actually we very of the [launched] where lot And progress we things considering adoption the that customer

have more per the thing strategic the the two, total the you and of as because as customers always we is are company, products. -- The on-premise services lower we as have a indicated really second I'll have on remarks. far talk margin profile we highest strategic have in and The customer; our our ARR puts and prepared takes, are margin, is we're running mix the level, names one as optimizing level where margin cloud-based we

aligned I though we're managing We're think profile we've previously for even the is outlined communicated. overall our managing is actually also that's margin there And puts to outlook margin takes. really we where you. what really previously that and with

Jeff Kalowski

our product from don't but revenue that we customers. is say revenue, the is to specific going platform lines amount see increasing you breakout the we're What of by

Melissa Franchi

Great.

And Okay. then I've professional follow-up one just on quick services.

expect you kind to Or expect normalize total revenue But to level revenue and there at you see to a underpace that is mentioned growth? growth? flat start So you which be this in you do down you FY'XX. continue that of to

Corey Thomas

business with think I for underpace going keep revenue model as you Well, general. go into to recurring it's their definitely revenue total especially up because services out actually it's years a growth, a difficult to in

one around thing the we expanded that to reception that mean really our product portfolio. say I and not, product of overall portfolio I luxury The we is would having our having have customer second

both have to business, strategic overall that's a the have we luxury value on our customers of asset and for are the high so part strategic And services the our benefit and things and really focus our focus. that

So the oriented and the and team of less customers our work volumes quality on focus to there. both our we're really doing product we've the services that on that team for

focused visibility do as so can of that teams basis. really So I We're do customers. we through personally how we enough active one, to sure an all about an doing focus quality yearly we am not business really that go our what we number individual the forecasting about, the that on on make most a nor have focused quarter, you want our but we we're job high for what's for services

Melissa Franchi

Great.

you very Thank much. Okay.

Corey Thomas

you. Thank

Operator

Thank to to turn conference the showing further I’m you. Jeff back over for Mr. questions. I’d And no Bray this the remarks. closing like time, at

Jeff Bray

Great. all you today of and Thank for months. us all Thanks. to you joining over the looking next forward seeing couple

Operator

your the program. conclude does Ladies today’s and thank in conference. you participation for This gentlemen,

disconnect. have now day. Everyone may great a You

Rapid7 (RPD) 6 Aug 182018 Q2 Earnings call transcript