RPD - Earnings call transcript Q3 2018

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen and welcome to the Q3 2018 Rapid7 Earnings Conference Call. [Operator Instructions] As a reminder, today’s conference is being recorded. I would now like to discuss today’s conference call, Mr. Jeff Bray.

Jeff Bray

Thank you, operator and good afternoon everyone. fiscal us in RapidX’s outlook addition fourth and joining and XXXX for you quarter results operating to full appreciate to QX discuss financial the We XXXX. year our financial Bray. Jeff I am CEO I am here Kalowski, with Corey CFO. and President Thomas, our Jeff our today and wires. We QX the press release earnings our distributed over XXXX It is website our investors.rapidX.com. now at posted on

can be investors.rapidX.com. This presentation on replay our X, file webcast have will November We call being call financial is and also would at will posted our available until date following archived bring to metrics The is be webcast to call XXXX. this of We and XXXX. be of Relations The and a updated this attention. your website. accessed telephone November like company the XX, Investor

forward-looking such financial applicable reported not events by from considered not should with in information performance. of an comparability, results presented but obligation to we in statements use based most Actual Our to the including as expectations expectations may, timing will and results Securities regarding accordance The information limitations, without timing call use containing or anticipate, this call, about report future be an and in to quarterly update financial unless of expect, performance. that with the subsequent discussion statements. uncertainties, occurred, results about in on and does non-GAAP additional the the And that that in tool of investors circumstances and filed provide Commission. and contained Securities identify those statements outcomes words ASC forward-looking for a future financial financial X, this filed required purposes the estimate, of and GAAP. events presentation will current note materially we information statements yet meant our by with in to future to recent risks. and differ should these this the non-GAAP differ light believe, XX-Q in or not the as measures contained or that the may conference these provide talk risks similar On in predicted prepared operations and be conference our from are is contains and Factors August non-GAAP number Exchange accordance and results Exchange business on measures statements XXXX materially results on forward-looking continue, be a the of reports non-GAAP the on be RapidX addition for considered and of today comparable implied any certain ASC considered Commission directly law. assume statements due of provided we XXX company We extent may provides on otherwise of to such and with financial intend, except trends, believe us. Risk our have presenting Statements XXX. including performance our substitute and Form section understanding such not using call such for the currently objectives measures stated, for to and on forward-looking and indication are isolation intended as other Actual statements to beliefs results will available information guidance. These

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

Corey Thomas

strong you, RapidX today I the call. announce performance and afternoon third offerings. and had across our world good quarter, Thank you product us a to our XXXX all joining great Jeff pleased that earnings everyone. for Thank am third on quarter reflecting across

our profit. exceeded our We we with exceeding while In operating high-end revenue goals of guidance and growth greater the demonstrating QX XXXX, are operating leverage.

by Our total XXX under ASC grew revenue XX% year-over-year.

bookings Our for total for our revenue, quarter. our third over focus revenue the in XX% first increased has accounted of recurring the which ARR on time,

Our be ARR good fifth growing the quarter accelerated leverage in on XX% towards making in goal year-over-year. to profitable row, demonstrated operating are our and a non-GAAP We for basis. a progress we XXXX

our innovation. teams continued go-to-market Our product by strong by execution driven and were results consistent

have well executed driving ARR. Our sales and selling very embraced teams subscriptions higher

customers value increasingly products. need and the our the Our for SecOps cloud-based by recognize specifically delivered

approach within and focus and Our product lines. adoption innovation platform is our driving across on

our market leading During launching the broad which third set quarter, solutions, InsightConnect, of Komand our we already from added builds year. to last acquisition on

seeking development automation people, limited them security, and integrate process InsightConnect productivity are use As technology. and enabling and our to orchestration to processes threats, today, increasing and to solutions of complex issues. connecting to customers workflows, security IT, SIEM of development, is help of cloud InsightConnect, their and with competitors’ higher and wealth security in has systems ecosystems to resources, including teams response with that respond myriad try solutions seamlessly and designed mind, benefits, native cases Built is potential vulnerability the balance management first which have security, risk streamline one quickly customers a reduce and the IT solutions. workloads with rising

by the execute future vulnerability cloud-based with to automation UBA as our rated security the by of has With application. platform, the SIEM, response cloud orchestration, the drive Gartner; to management in of and Insight security InsightIDR, the native recognized four of cloud application native leader and testing; a InsightAppSec, RapidX the InsightConnect, InsightConnect, as rollout recognized our highest engines ability growth now visionary Forrester; InsightVM, highest powered,

last have with customers, Over their security months, the discussing I manage of lot how our challenges. help them can met few better we a

testing, IT appreciate platform. themes on will solution of tCell application most continuous across enabling New like three these of to self-protection platform a board, web was security are customers I with management, one incident detection enhance tCell that aligning monitoring. response, our deliver concerned created in tCell top hear the runtime to is for One to vulnerability investments are Wave to capabilities as defense applications, the The recognized they context, holistic drive tCell making recent expand in the security they DevOps and capabilities from to application a why innovate build analytics common really our which approach we strive and our while to provider comprehensive Forrester with announce this innovation of a the security. are approach the consistent accelerates security. on and and pleased customers more Insight want customers. visibility, AppSec leading our our teams protection to of our most is agile we platform, develop acquisition and the information and Insight vision security the for they fast platform, In security, for monitoring, Report. application providing and our the tCell, we will about as of the and data our applications,

Global leaders. industry execution be an XXXX by and with that RapidX thought strong will Frost & to Management. able and Vulnerability & our customers customers recognized and Award RapidX Frost innovator as be cybersecurity. innovation RapidX a see for requirements with Sullivan’s the keep its in Leadership pace the industry In to continues changing whole Sullivan bestowed Our words, as Market

context the Now, let’s the in XXXX third review our of quarter goals.

to recurring was metric accelerate the our and continue quickly has to manage revenue grown. is indicator use Our strong is we first of primary ARR how business ARR growth. the to a goal

we year-over-year. to recall, growth growth which over this exceeded expectations growth to am years. ARR Last year off XX% raised X and we ARR may started I with yet XX% growth. we of and target report the the you customer year and quarter, target XX% over As ARR by XX% that last a last quarter XX% the $XX,XXX per the again is over over grew happy was

driving visibility quickly is and we and invest see customers increases feedback is of quarter. acquisition, strategy The XX% platform customers cross-sell our allowing a products are now for platform over cycle. year-over-year great renewal adopted in which breadth customers our half to a being our that total having Most the the of the us experience. value those in Almost virtuous turn new third account customers lifetime ARR. of total growth and Our our rates higher for in platform of are of this is solutions directly, XX% and customer product over customers creating in strong

Our RapidX the rates is higher Insight per driving platform. see moving higher to our well, platform strategy renewal ARR as working and value customer the much of customers

The drive growth is base services customers. goal XX% base. our base offset to our only last deceleration customer and second customer continue, saw SecOps our We Our growth with customer to grew quarter year-over-year. leverage by new trends strong up-sell cross-sell to our by again portfolio customer the SecOps in in we and existing in

drive to higher add have long-term We value for lifetime are RapidX. investing and value our for we resources customers ability our where the

As and enterprise winning existing cross-selling new a base we and mid-market to up-selling displacing and our competitors. customer result, are customers,

examples. give me Let you a few

long-term equipment customer all of of broad and with was customer’s a key new has someone and we deal product partner scored has highest competitor. One platform was vision breed a clinched who in to coverage quarter purchased looking Fortune The is of who last players. wins requirements customer the best technical a stringent investing desire displacing major for XXX clear InsightVM the semiconductor for us. This a heavily asset our manufacturer

our into managed by them product challenges this large and This this products. one services, example, InsightAppSec help still largest is our Recognized strategic continues customer. partnership. client InsightIDR their to and great also as to we international our SIEM, is expanded from talented our team the share. relationship In started coverage us of one and and initially a healthcare engaging consolidates and InsightVM InsightIDR, share our a grow This market in quarter where services our next gain believe InsightIDR install came competitors. blossom renewed deals company Gartner, a trusted resolve to with to UBA over win mind significantly response opportunity of mainstream extremely of product. there our example time platform how And and more detection a team, from visionary Next, within security easy differentiates

fast largest chains global their retail chose across InsightIDR for our the solutions brands. of multiple InsightVM One food and operations

this deal still have us them. won again Our platform, yet for and vision opportunity with and roadmap substantial expansion we

also to their not and are owned in and more as that better traction see their locations. only We they is corporate starting facilities, security at but more at realize retail hospitality needed infrastructure franchise industries

Our leverage third two third goal and quarter, in improve the is to factors. driven we by saw operating profitability

business model First, show sales our continues the and underlying to economics of improvement.

for QX. Second, our of over some investments the to quarter shifted planned

confidence customer We visibility have economics, model improving controls. increasing strong and in to due business our better cost

investments allow stronger are the investments become to our processes. obtain with underlying profitability. we long-term structurally will back-end to enhance continuing we addition by in long-term enable cost expect to systems our making, leverage and higher our business structure and In These

very Kalowski. long-term. over our and can In delivering XXXX. With stated the we progress Jeff? call believe towards have about the recurring me where With good drive revenue, turn strength we feel are we the for that, made our our let to we Jeff for the and goals growth conclusion, CFO, we of scale

Jeff Kalowski

afternoon Thanks, good everyone. Corey and

on retrospective begin that year, I our have the quarter ASC ASC of remind basis each therefore XXX I adopted as XXX discussing XXXX, of modified X in under to of we we and XXXX results XXX. Before everyone been strong reporting January third ASC for both want this results quarter’s a and

will we results When don’t these meaningful. and our today. discussing not XXX prior trends basis year-over-year comparing press our on key year and details in earnings We be have we growth release under as all included rates be in our XXX other an operating a comparison ASC results have our business, of would

meaningful by increase We an total ARR was metrics performance with the strong year-over-year, quarter, XX% key and over highlighted which of are our revenue guidance to XX% recurring all in leverage. third our on and of pleased accelerating of revenue growth beat operating

total guidance. revenue First, an briefly from XXXX, Recurring our was was quarter of revenue growth XXX will ASC XXXX, XX%. in representing our discuss of $XX.X an up rate XX% year-over-year, well the XX% a revenue basis. increase Total I the results XXXX of million, of for of on third ahead third quarter QX XX%

guidance XX% growing and of QX, On XX% operating geographically, world America at ASC of in non-GAAP year-over-year. of comprised $X.X million, Looking business for Rest contributed third to year-over-year a to million $X.X adjusted increased quarter. positive our North in in than XXX $X.X million on loss better revenue quarter XX% meaningfully basis, the EBITDA the $X.X the of non-GAAP loss compared XX% also of third the an million revenue period. revenue, loss million was prior was and $X.X year a total

loss Our last QX non-GAAP year loss from operating XXXX. QX of XX% of to a X% in margin improved a for

ASC the our discuss XXX million, high-end will of on I Total above results an guidance. Now, $XX.X basis. was revenue

comp revenue globally a to see ARR, sales VM recurring growth. in product and towards was focus again continue ARR IDR revenue accelerating driven a shift Our With bookings strong ARR bookings. in with and plans on favorable change we both once by

significantly we revenue of the increased revenue our of came revenue year-over-year, As of revenue deferred very high. from recurring in experiencing $XXX.X now and and XX% the quarter Recurring performance, at QX $XX for down forecast XXXX. the on over end were With in the balance year was goal of same billings professional contracts XX% revenue growth in are year down for we professional full Average once we in compared quarter. confident services reported XX% with from was million. contact and in remains and third and a length increase our saw QX. achieving move stated the to full our continued one shift the result, XX% growth Visibility million into value slowdown average to growth beginning ARR of our revenue sheet total billings, for in QX The the XXXX. from the strong XX revenue versus a remain our we months a expect year acceleration services Calculated prior third We total quarter, our customers of the QX bookings be again months at contract in the XX% an QX. subscription-based a annualized to XX% the model for length business total year XX towards we period, towards perpetual.

subscription remain during growth recurring of benefit this a as As anticipate meaningful comparison a that Based revenue. prior the reminder, mix capture billings contract this believe they the and range going to annual of trend on we don’t are forward. don’t transition, the periods lengths last our a in we will higher over three quarters,

services we As contract closer to a result, and breakeven to lower operating now flow to be for lower XXXX cash expect billings. duration due our

model. a are speed cash has a business operating license transition this impact our we previous model While flow versus on the model, a our perpetual at which transitioning downward to positive is for subscription strong

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

the year-over-year. of which in QX, and new customer per cross-sells. in up increased bookings continue $XX,XXX, Overall, strong see our ARR see As to to improvement is our quality an from Corey up-sells, mentioned, over customers, and XX% to base continue we we customer

was our rate expiring revenue the rate renewal XX% and renewal quarter. improved Our to in third XXX%

services in was non-GAAP back to non-GAAP XX%, decreased margin gross QX QX in gross from total non-GAAP due Product as QX gross bookings. result XX% XX% XXXX. to XXXX lower for to Turning of less from services from margins, in XX% up Professional margin was XX%, QX up a revenues margins XX% XXXX. XXXX

XXs be We for low for in to gross in total margin the and XXXX mid the margins the year stay to XXs. expect professional to gross full low our services

XX% of revenue. sales During quarter, and the decreased marketing to third

percentage since X and show targeted almost our in marketing including realized QX QX mentioned while of We have growth meaningful scalability. QX XXXX long-term points shifted in ARR. leverage as from that improvements are expenses system to some sales at would Corey continuing that into We note improving

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

Our reflects convertible cash balance $XXX the quarter. of completed million we proceeds which in offering, our the senior notes

Our contract length operating cash lower flow $X.X negative for services QX in million billings. to continued due reduction was and

at was of end billing days outstanding higher the historical Our the range.

cash we However, cash activities $X.X October. operating had was use collections in Year strong million. date, early to in negative flow

be our for services closer to contract a tCell XXXX to operating XXXX projected flow breakeven lengths cash. October, compared cash transition as we lower in successfully earlier, to billings to less we to we million due mentioned $XX.X and acquired subscription In As for model. as

have XXXX be While their absorbing not on expense QX. R&D revenue, tCell will in a material impact we will

mentioned, we meaningful tCell As a forward. going InsightAppSec believe will strategy in our role play Corey

like year fourth we X and ASC only. believe XXX full with guidance our have results ASC We between providing quarters fairly an to and that our results note on consistent quarter XXX now ASC are for XXX investors the to well and full of operating we would us. differences behind basis understood the by Moving guidance, and QX been in year,

the methods operating basis performance for will course highlight the past we’ve on quarters. X We under as will of ASC XXX be over XXXX comparative remainder a and under reporting both of our done

revenue million. For $XX.X to in QX $XX.X anticipate be of total range we the XXXX, million to

anticipated be of outstanding. of $X.XX $X.XX, range $X.X to reflects shares loss by which million anticipate being in in for weighted anticipate to offset We is average revenues. services are We an revenues, Our non-GAAP net million operating QX in stronger non-GAAP million. product the the range professional QX to based decline be guidance loss on which share $XX.X per the $X.X to

expect raising For in we be million. the total of $XXX.X year our total XXXX, revenue the range revenue and now to full are $XXX.X guidance to million

updating per our be to to for anticipated XX.X shares operating million $XX outstanding. guidance non-GAAP share the are based average $X.XX $XX anticipate year net million. on loss the which is million $X.XX, loss of the weighted be in of We non-GAAP in range full to range to We for an

plus not want our bookings offset services of mix quality While XXXX at this time, decline in we professional we and our the affect are XX% higher not XXXX as that does bookings professional the forward. growth reiterate providing growth slowdown ARR outlook guidance to services in through the revenue revenue moving will

As with ARR through our we our towards operating over said, XX% was by progress conclusion, as revenue. Corey generate the continue our XXXX, profit strong this for over XX% making the momentum growth revenue goal shift another our goals towards in non-GAAP increased in driven in In RapidX, leverage through XXXX and the are by grow cloud good to to quarter meeting XXXX. and and business ARR by good realizing subscription we

this with Relations support significant questions, to that function. we of role Grantham, community to to to new since the will your in has us announce smooth will our X Jeff Vice be Before from I open am wish time provide to Investor analyst Investor at has call bar all a Van of pleased and he to functions Relations any role. be call President arrival. a and years by here been assuming turn the appreciate President important almost With contributor a questions. of Jeff this Planning post our team Financial call been I Jeff Jeff the our and we this as over transition Mayo, Otterloo. will that, earnings for Analysis. Bray, Vice his us succeeded well has for Mahajan RapidX out and Operator? and will for Neeraj and reaching very and who him Neeraj investor We be comes new raised

Operator

comes first Barclays Kalia Our Instructions] Saket [Operator question with Capital. from

Saket Kalia

questions role the new in my Congrats and the congrats here taking well. Neeraj around. Jeff on for Thanks all new guys. as Congrats role. Hi,

Jeff Bray

Thanks, Saket.

Saket Kalia

even psychologically maybe though in one getting a is metrics on Corey, increase, that the expiring quarter but you, rate, it’s I the a small handle just renewal nine maybe for thought it. First, of important

so base of the in perhaps that higher view? your heavy And perhaps much customer a come from is rates the enterprise question your how versus renewal subscription more is in that from view naturally

Corey Thomas

Yes, it’s great a observation.

been renewal platform overall that it’s our know, customers much you effect non-platform increasing. higher have was As steadily customers. than dominant a our The rate actually

where accelerates, renewal more recurring higher seeing and we of more products. rates driving are the on platform products as and others. and have it introducing our lots newer and our move our as by than higher an And renewal the actually revenue So, platform customers environment in to tend than we customers of rates to are way subscription mature new much that’s lower products

with quite as are And we add it’s so actually overall pleased continue products the new something we even platform. to to

Saket Kalia

sort it. helpful. whether lower bottoms, the percentage That’s per per do Kalowski, to you for maybe line services minimum services the amount of we of professional have you, is model dollar of in professional Jeff do services that sort being revenue about sort follow-up you revenue the of about a Got longer as how think that’s as year transitioned term? context think of quarter, more professional a ARR my as focus. for where question have we The talked and bookings

Jeff Kalowski

Yes.

slowing So quarter. Saket, focus the with it’s our had as this force that driving sales comp and more ARR been down And it’s been plan and effect has said favorable certainly clearly we change. earlier, a

services and will strategic point I to decided are those strategic to capacity. that which also it’s our more some engagements going higher more down margin, excess focus margins out higher due we higher on with Secondly, services

but revenues, out early close lower at think too really of let’s be the this say However, It where it’s point, the year. trough the a – will what I percentage is. total to

will to where better call, February in that XXXX. We we another our will quarter have go on give think on got we go guidance and

Saket Kalia

helpful. Thanks, Very it. Got guys.

Operator

Our next from question comes Capital Rob KeyBanc with Markets. Owens

Rob Owens

has into portfolio, you your been? guys more what channel endpoint model, have and approach broader SIEM categories, given of suite response of subscription like? of I channel channel coupled and point what taking as curious for thanks expanded you the of at more more foremost, some kind product traditional the has or leverage get type question. helped is As Great meaningfully just my first the looks and the this a there guess, complexity this with

Corey Thomas

say channel from grown to sees, the opportunities grow. and I RapidX. the that’s continues with channel reflection demand has our would actually And more think long-term a I So of

I are innings the the our expansion think we still early in of into channel.

really are partners we have right the capability, growth. which channel accelerating focused have it’s but Now, on clear that actually we

a We of channel you on at our make have that. built to that broader technology, partners especially vast portfolio a channel platform. for are And Komand look recognizing our if and provides opportunity money our amount partners actually

interest early clear both So lots very, still think at very great opportunity point, that with with from them the I in it our discussions and we it’s expansion position the partners innings. inbound this have channel channel and we but make have are that of we a

Rob Owens

I categories think for we your portfolio relative but are other as to there of look I just take two, maybe what some your slows a would speculation year VM lot ‘XX of know faster, in you year? love parts other for at general as that and clearly be VM precedence, as you the your just outlook around and opportunity thoughts do to in number going security enter is And a general InsightVM next next growing of kind of InsightVM

Corey Thomas

Yes.

see that frankly, incredibly healthy or environments what’s see and is in changing well. we it’s And what’s we complex, an demand I future we to you of people think plans VM in a it’s want market myself my of that at expect what market in see environment, the and they first how the risk general they of has doing and what continued do my thing shared about our into if environment the do lots because and much happening I Day. legs I are efficient. is is best past I have changes are incredibly the overall. demand SecOps anticipate core for part is the well So healthier But the We What Analyst to have, that for that. optimize the that how we visibility visibility more make do and respond know than

As driver. goes the the far baseline of management continues be to the future, in think it provides forward I of vulnerability as underlying aspect demand visibility a as it core

of our models I strong expected said, As it’s in that’s well to if and continues it be great. have ahead so we what

We have plan, we focused how to the on visibility but operations. are strong upside people’s security to that overall really and translates

Rob Owens

Corey. Thanks

Corey Thomas

you. Thank

Operator

comes Our Stifel. next with question from Gur Talpaz

Gur Talpaz

my Great. here. questions congratulations the on Thanks results for taking and

that the AppSec, if should relative is think above, the acceleration drivers or adoption the again on we have of it at categorize acceleration? different asset underlying meaning congrats growth in expansion ARR, the that So look expansion, how we is that there, VM, about of components IDR fundamental driven all of of would it within the how you sort

Corey Thomas

that within has product portfolio. adding. call clearly have we expansion in customer We customers see it so new tale talked more it services expansion. We have the but expanding, We a is customers much are base, adding SecOps our our stories it customer contracting So it talked and we the see tactical higher and broad across customers. see only about ARR in where the per growth really the our that two based. been in base. We are customer XX% We customer more strength truly strategic that across we we are our in transactional about is of seeing

dimensions based But higher leading is parts those want broad all expanding in core different opportunity. the have of across aggressively is strong much as I one to market and we very very it management of so growth ARR into we do actually performance to are market, the growth. is that And vulnerability the underpinnings that the be of is SecOps the even clear other

Gur Talpaz

have I platforms other and with expansion, the InsightConnect, more of out integrated through That’s helpful. you but talk advantages can the about relative know standalone the about, response, you. the speaking talk to early SOAR compares perhaps you it’s how InsightConnect And of days, exist but there the that the of opportunities, then you sort launch Thank one, importantly can platform? initial relative customer

Corey Thomas

Absolutely.

first you based So it We much we both we feedback engineering of launch originally incubation result may had as we engagement through than that it our the cycle recall, InsightConnect customers. foremost, and with of work, told made but would on a team you customer customer expected, great go time to our but and actually also XXXX, some work in feedback. first accelerated great as market be quicker

positive. second the the your been feedback time. say differentiation, the parts really so in it’s So think point I we would as extraordinarily of On far, two over early, far very has differentiation as

think impacts for makes The is actually a first really simple we productivities. use think really market. both customers we market small get skill and is large case and all it part, those of to sizes and is we that extraordinarily benefits easy on is sets market important of prime mainstream for productivity and are solution security going customers and is the focused have to This and orchestration that SOAR a has improvements automation a that which the

quite that platform true experience customers those a of in come a and it have and our focus key on get and allows differentiator. baked use is that they the baking security customer box are of is integration to that’s get to platform we a long-term and The get a faster So productivity an that amount in built-in orchestration And standalone and have large case. forth we already the out security and great them additional and IT the that product infrastructure. benefit increasing ease into the of are experiences with actually used base automation course their of right

Operator

you. Thank

with RBC Capital from comes Markets. Matt question next Hedberg Our

Matt Hedberg

expands Hey, for you an well my think about continues International focus especially you it’s next U.S., afternoon and and do there you I into for taking Thanks a year, curious area think to questions. think about good and guys. is where VM? of opportunity do perspective, as guys, your the am broad heading when that you about the to as internationally, relative adoption market platform from beyond additional investments how

Corey Thomas

Yes.

opportunities. XX%. percentage has If at it it’s you We basis, think under look revenue our expansion of massive still

really you revenue, we actually it ARR. percentage we ARR as as to forward and it of at of to continue continue up of it, climb at a per ARR a percentage looking look as a started on basis you definitely but as year-by-year see and percentage go a If

cloud the know add and instance instances more geopolitical instance added this We world, more own year. want an the adding to countries territories actually As all more around More around have have the we been we you their Australia backdrop. world. and instances the in

to and market have that that there. continue happen of international the upside And the think think in behind we we the continue to is security expect terms things one is dynamic We changing. of to market U.S. spend. see overall that’s lots we we of And

we that overall healthy to but the expect expect strong U.S. are to Europe than and where we seeing and change definitely You international general. market performance, see in faster the continued that we market grow in

Matt Hedberg

mean it’s per natural a a VM to uplift there? with if could if basis, how the That’s on customer then about be follow-up up-sell, you like on customer, what would what us it any on mean and pre-built question the with seems I a Connect, and with on maybe going that’s that be the you priced prior IDR, sense great. And a kind integration can ARR help like of think

Corey Thomas

Yes.

time marketing sales and can expansion have of is viral if workflows workflows, our you it, on experience natural so friction effects we It’s a I couple one per the that’s because way customers it’s the would it. with say price that great that this because if way customers least quite that’s and those too natural. And to has think of the of of And for about workflow lower early. cost is a priced a think the basis over

tell InsightIDR on in sort the what time. And attention positive. we it’s customer that our in early fact like be to things And to workflows average average workflows been workflows of paying solutions some our InsightVM we from so But and is one customer are of seeding and per least over evolve how the are think does that at will feedback the per the overall. and conversations what’s too that, we has early

Matt Hedberg

That’s great. the guys. results. Thanks for that on Congrats

Corey Thomas

you much. Thank so

Operator

question Michael Turits Raymond with James. next from Our comes

Eric Heath

talk expanding customers further their the visibility are hesitant about elaborate This some can and the expand your follow-up Corey, And maybe of a penetration you on for guys. just for takes your that, VM puts Michael. and to they in existing Eric why on customers with you you could question are is on then question quarter. then to Congrats on earlier, curious Rob’s of choosing or their just of Hey that? on a on coverage, the thoughts Heath

Corey Thomas

Yes.

highlighting of the the healthy VM is is think are new expanding, extraordinarily getting are accounts an up-sell cross-sell, growing well the and hesitancy into are But regardless haven’t also customers actually customers’ we and that’s there. visibility And growing with our I dynamic. customers asking working fact are in clearly that us. you We that so we actually you are backdrop seen more

types into. actually future, that’s driven they I into, assets assets, need looking IoT One, think assets more there that’s is cloud by that’s assets and two more of they that visibility visibility for in whether factors. whether the more have they that more assets are and

The VM second thing have that is been under-penetrated. customers historically

do is but are the though, the we that our that still more up-sell to actually we because customers Part adding the can environment platform. room adding changing and of think reason the across are is grow this customer assets, substantial Now, we to base, we have new still cross-sell. they

lower that to at we and capped growing And they customer into time. continue and customer of so and starting but at new our then customers been that of assets course, our of over levels customers, have their base we expand is are XXX% the asset add off grow

us us dynamics. VM a dynamic in and actually sustainability that overall more market gives creates on for so the the up-sell And positive

Eric Heath

may. if then deceleration on away billings current pieces XXX in guys Got metric, the it. color you of for billings I could a any And are provide Jeff, moving a I basis? as question but moving you know the from a on some for

Jeff Kalowski

the short-term to at the taking the don’t not it’s billings Well, because you in if really meaningful. from plus look are comparative by any we prior revenue trying have deferred year change data the change current in

X losing in effects down which change the we the If historically, decline front which portion, also services, in year the look also and of you it’s up like all look it generally is makes value current are perpetual billed billings. slowing the

ARR. factor ARR. but is one not earlier, billings. and it’s couple change, of important why talk the said for to affecting And we about transition not meaningful That’s really we the year-over-year as really that’s on One So metric, the don’t are that that’s the subscription a through we focus most reasons. going we and is billings guide to

Eric Heath

And on if then run-rate tCell? last I for one is just may one there a R&D

Jeff Kalowski

No, low plus of number employees they have OpEx. teens in their the

of that’s in So where now they employees. are right terms

Eric Heath

you. thank Okay,

Operator

with comes Needham. question next from Alex Henderson Our

Dan Park

good Hi, questions. on Dan my is afternoon. for Park for taking Alex. Thanks This

Insight VM So there incorporate more SecOps is competition? three around as the Clearly, to XX% platforms centric a meaningful a growing seen have more major overall plenty broaden this competitive clip drive all and change the and to you versus displacement with is continue helping vendors? to players at you go features, opportunities of also other plus in

Corey Thomas

change competition. meaningful no in overall is There

market the great has think I dynamics.

is our But of platform for by I large a the out what do love customers are competition say it and heavily different strategy operationalize we that a overall. together story. market is are taking the of security a that love we there and all that and on the things looking how winners. they And driving story market think support I grow when would we that primarily don’t the says organization. others. productivity the going can in VM of they displacement tying one we from have that bringing have We focus number don’t and to we’re to

that from most want we productivity looking that occasionally, that other not we have the and our are comes lifetime displacing customer are growth. have that And for operationalize who to customers on value really enhancements focused customers customers their but and those a are of the customers us. Ours security, vendors value that’s full those visibility focus

Dan Park

be a impact? to R&D from as a OpEx for out how Is quarters do one-time step up called tCell it nut systems expect a improvement And follow-up, a continue this or initiatives in a to QX? big just in is you and the really expected the of with few

Jeff Kalowski

with is and expenses said we some that revenue not our into having to in full is in shifted not we respect OpEx next we What is material that year Well, in a hit to XXXX. what effect said did growth. QX OpEx that the year’s QX

guidance in we We overall when for will give provide the the February a better update year. year,

Corey Thomas

behind it. will I And the Yes. color provide some of

that as in expect not forward. as actually we we said we profile our go we script, actually our So one, are changing

ARR overall time. systems long-term the in leverage our more model. we some is specifically are systems expected, in The increasing management, And of specifically importantly, thing profitability efficiency and have about and is and the would investments back-end the confidence that that because that increasing is better level over engine we driving customer our because all engine other of I subscription highlight in the than our really making are faster go-to-market and sustainable higher long-term working actually our

Dan Park

Okay, for clarification. great. the Thanks

Corey Thomas

you. Thank

Operator

Ho with William Jonathan question comes next from Our Blair.

Jonathan Ho

talk capabilities? good your bit with you start didn’t can have you what that little before Hi, are AppSec afternoon. tCell you a adding tCell, I just with wanted about to with

Corey Thomas

Yes, that’s great.

the norm that applications applications new that So the of is are standard of a and new as the or cloud-based type are context a experiencing. backdrop enter we we

and last this by is years, about were and just applications If the applications. most it’s way XX of of you have scales the applications know think and that making that growth of designed are the we traditional built we substantial companies, cloud-based all technology premise sizes not the companies and on SaaS

of So proliferation cloud-based application you have massive applications. this

testing. on of dynamic have the leading one We the technologies

market. from applications shift on and allows It’s massive an And dynamics. perspective? think positive of long-term opportunity. the a then going real-time. compromised, is turn application continued attacked, security cloud-based to there we perspective from our actually though incredibly with monitor is are they how tCell the market to applications growth are the real-time on being that is positioned and this be continuing really to embedded and applications do What a and a overall pillar to competitive how test market lots new do in is into the that that us actually be they that look, strategy security underlying we will those leader to those that you they applications it fundamentals, are allows be actually real-time part us investment being protecting to actually monitoring So to has of this about perform And are a market

Jonathan Ho

just a your at sales, it. and more as the you then starting maybe to products see look And Got not to you VM lead see platform sales. with are start customers follow-up as

that to the there get you past. there the of potentially of didn’t any on I the spear non-VM maybe whether side? sense potential wanted multiple tips So, a is just have in

Corey Thomas

data it’s or over can can and capability We other proved And to our one help If customers and we we solutions in and that management, VM then that it’s solve and how absolutely do and We security, that competitors’ off solution frankly be go that better automation take and can sell if sales and you’ll sales the to that. first monitoring be saying, expanding. and solve a can or do likely point new if that drives mean, force for in that you could solution VM instance and don’t of so the have productivity going job go conversation. of have. the sales more your solutions team want thought just what’s pain. we has value to long-term then products. the and didn’t response, move and time. have to our problem and with because it greatest go-to-market we of that Increasingly just just the existing half we the it’s in say, luxury a we have productivity, would your do it. problem? most that’s We’ll Increasingly, now, can start Then have add another the competitor’s then what’s sell we originally we to net were data workflow, biggest you the we use I SIEM VM the we you get then really great you action hey, IDR If vulnerability that. application solve proved

Operator

you. Thank

from next Gregg comes Our Moskowitz question with & Company. Cowen

Gregg Moskowitz

include quarter. InsightVM is IDR and guys InsightConnect. a Okay, on follow-up automation My understanding a that congratulations good thank some I more and you on functionality. do basic had

elaborate That So yours forward? think that could be will you and much going of helpful. if InsightConnect how offers you those appeal to customers on

Corey Thomas

absolutely. Yes,

market. of the is but our So And as that own in to of things and it’s example TAM look especially that one at its InsightConnect when should expansion first offerings be competitors the and a also it in right, we acquisitions large expansion is do that. we products great existing a differentiate perfect

what does talked actually in we the were, amazing about also it favorably and of an how compared it automation solutions. overall earlier security So, dynamics differentiating job but our orchestration and

One I – vulnerability of have that the it’s complaints vulnerability biggest will management that people use great. – in market, the is example management for

all I understanding. I fix and to visibility, to go know don’t what the remediate these provide actually do. issues. capacity provide have of You you

our of And more our the us allows productive contain so and environment cost And solutions. embedded IT can automatically vulnerability that allows updating I management, to connect operation vulnerabilities solutions automatic to we integrates them they again, teams. so and competitive productivity allow management drive to management in there productivity patch translate customers or and automatically that issues. improve our actually because customers automation focus the be want their security than patch on from their people to that network prefer scenarios the in containment I my at systems teams. management of infrastructure and vulnerability to I our no into Again, have to we their the automatically actually are to configuration systems That included overall containment. in orchestrated and on automatically

the tying market has great and doing actually by That’s response what and you but and If the an respond It’s to really contain the IDR, are are to the product, limit the affair and with you to take analytics operations together. have outsourced that been entire allowing incident. again IT InsightConnect incident, been tying damage automation, our you investigation with an investigate we automatically an to the is great we both security it’s incident. ability to to the know SIEM lacking

can is our that a with contain products system. the what an that. Again, in example integrate identity my automatically and find part operations is an it automation and user, time. And we work device to have allows can proposition IT network. of I is they what with is their with from teams if I continue our automatically security just expectation I an management I that stack experienced both access that perspective of So our that more different If on workflows device, expand with our that over people that, value means with issue find one development, issue to together as footprint overall efficiently. and across will And get included security

Gregg Moskowitz

a those see this more market wondering realize Corey. is to function the just all if in to your I then anything seeing go you That’s emphasize and And mention follow-up, there they the earlier that as retail just a did pull to that those that. helpful, really or putting need Thanks. you starting in customers? from hospitality on of color am more infrastructure more detail secure and place a appreciate focus traction I is industries are and these as are you customers on

Corey Thomas

account market our our to into Yes. When and plan pull territory we more assignments. that take actually we see from customers, go in

our perspective and to see market shift sales from as go different we our be market plan it so lease a allocate source we perspective from how allocation we And resources, opportunities. or a about focus

Gregg Moskowitz

terrific. Alright, you. Thank

Operator

Our comes from Franchi Stanley. with Morgan Melissa question next

Melissa Franchi

of on And going commentary. just about much so expectations, to for heard relative give your on to then will question. follow-up get it Thank wanted anticipate the is largely how an us haven’t eventually tCell broadly, Hi. we if you Insight product a would the that tCell be I maybe product to InsightAppSec or Corey, become could is InsightAppSec. too taking my to you should into progressing we it’s love own just its developed recently, update? very update that an platform

Corey Thomas

our in stronger. market is InsightAppSec The say well would of general I ahead is expectations.

optimistic the very about I the packaging, general. too tell. early market say in security to application stronger it’s would are is we position overall and on Our

market acquisition and disciplined for package most very go adoption category. that when engine, to about through drives putting and most them customer acquire optimal efficient product the We the are we our technology positioning messaging really out which what’s incubation the that particular pricing figures

a But how So on friction big you or security a are for customer see we and we application market will offerings, minimize in a with really we of single it’s because focused growing us do lifetime us. customer this market. how set maximize fast value

Jeff Kalowski

than faster add Yes. in accelerating the And rate very ARR that It’s the and our doing I Melissa, well. overall is in will revenue both revenue. just much growth

Corey Thomas

And we lastly, just market in. and under-penetrated then under-penetrated a that general that’s in are it’s

So like cloud we prospects say also this in growth overall application market. have based dynamics security great in really would the we I competitive market.

Melissa Franchi

Got it.

as we contract and Jeff top Okay. growth and ‘XX, transition those? growth, year, I duration should how we between between those are know relative looking between And but revenue are seen that’s follow-up growth from this subscription changes, into we think FY and divergence then metrics for and to you a relative relationship the guiding, Jeff, ARR have the line think about how not obviously about billings a obviously

Jeff Kalowski

Yes.

over are the course XX% the And X the of look you year ARR over our if overall what the XX% will saying be total. years. going over this that recurring is So growth, to are are of our XX% at saying we ARR we about and we today next grow revenue is

that is XX% services that’s decline a you sort for and slightly to where for $X can revenue revenue into next apply in of our quarter, you and roughly directionally assume grow year, if to will into be you So take recurring that the get going revenue the next perpetual and will you factor the next million year year.

Melissa Franchi

That’s very you. helpful. Thank

Operator

call questions am the I to any our host. turn not this over like at would I And further back showing time. to

Corey Thomas

all for to for to forward next you time. joining this and Thank appreciate call. time talking you look your quarter’s I us we

Operator

this today’s and Ladies presentation. does gentlemen, conclude

day. a You may have now disconnect wonderful and

Rapid7 (RPD) 7 Nov 182018 Q3 Earnings call transcript