RPD - Earnings call transcript Q2 2019

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Operator

Good day, ladies and gentlemen and welcome to the Q2 2019 Rapid7 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call maybe recorded for replay purposes. It is now my pleasure to hand the conference over to Neeraj Mahajan, Vice President, Investor Relations, you may begin.

Neeraj Mahajan

Thank you, operator and good morning everyone. We appreciate you joining us today to discuss Rapid7 second quarter financial and operating results, in addition to our financial outlook for the third quarter and full fiscal year 2019. call our Corey CFO. the and our on Kalowski, Jeff me today Thomas, are CEO With

our X, along We audio call over and broadcast it at on live the available distributed financial replay wire at XXXX. have our call until and investors.rapidX.com and will is earnings metrics file. via now be is Company webcast, the an updated with press This release website August presentation investors.rapidX.com, being posted the following

today contains that performance. discussion and us. to statements on about occurred, As without on circumstances our a and regarding These operations forward-looking events and are and based information and our have including currently business reminder, statements future financial future yet current available not forward-looking beliefs our expectations limitation, statements objectives and

considered results XX-Q subsequent by may conference risks number and a results may light the materially indication an should should or from performance. Commission. be differ be or our certain results most in timing report statements, this differ on due and Securities expectations recent those Actual in materially of The from we of such statements events these Exchange predicted timing information considered as results such and the forward-looking contained contained call implied risks. of and not reported of future outcomes provided quarterly Actual reports Form and that in filed to with and including uncertainties, the on

extent this by law. does call, RapidX the obligation any the update presented not assume required conference information to except to the on applicable

found in the your our results an in at or between in and this and and on our prepared press release. in non-GAAP And our advised questions, offer the and will not comments into provide these metrics. one-time of incremental in today or detail primarily earnings results. quarterly be update be reconciliations additional commentary terms may insights may to nature or we today’s dynamics Our business may that guidance we response can be times Please our provide GAAP maybe greater metrics to in future non-GAAP

like to I’d to that With the call Corey. turn over

Corey Thomas

good non-GAAP everyone. joining the us for of guidance. again, confident high-end our by strong grew of quarter, our of our earnings X We, for revenue Thank growth XX% operating year ARR call. XX% had once generated today the we Thank the We morning by over and you strong ARR another profit. Insight Rapid Neeraj XXXX and Year-over-year growth XX%, XXXX. quarter strength again driven you, and products. second Platform exceeded full demonstrated remain of on all delivering

Our organic With growth growth rate we customer quarters customer additions. of of in NetFort, one accelerated XX%, with X,XXX customers, ever QX strongest ended a the XX%. to

per working. ARR In the customer quarter. customer strategy as by strong over economics year-over-year expanded addition, our and is $XX,XXX our Average to platform XX% recurring second in revenue increased XX% remained to

are We year XXXX for full our the product on business. based of guidance strength total revenue again cloud-based raising our

to investments second expect of half are are focused well underway our business to in quarterly business These call, sustainable increased profitability. to as on year. Therefore, on we operating continued earnings have continue discussed and these in expect this across in last non-GAAP higher the leverage and we our execution investments generate we We income growth achieve XXXX. the long-term breakeven and, to in be we

especially where our are the fruit. are international our bearing momentum business in with investments We pleased

of of use, regions seeing appreciate breath the EMEA Greenfield are analytics starting APAC and remediation customers We opportunities products. like capabilities of ease Insight automated and increasingly are our where platform to in

channel have making been from partnerships. improve Our also benefiting business we is the investments to

and platform North increasingly expansion America. embracing our partners driving are are Insight partners Our regional in

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

second the on focus to growth growth in growth of with of quarter XX%. Our first continue and was goal We ARR growth. revenue XX% strong delivered

reflects Our initiatives. for confidence the business revenue and in strategic growth our updated XXXX guidance

of making retaining business. we’re winning We and because are in the customers investments our

aligned Our We this. customer customer growth, big our focus key believe our have over is growth we time. expense this year the sustainable to was generate were sales customer long-term additions our with opportunities significant because new and every today incentives

job expanded In rates. a our strong number addition, has as ARR we team have renewal of both customers done and the per customer, maintaining good of

Insight Additionally, product with with providers adopting more the and organizations integration of breadth our the roadmap more resonates technologies, cloud differentiates offerings with customers us. product cloud and our

on key at was a the inaugural evident focus opportunity where reinforce, innovation had to constant Our presenter. conference be we AWS’ cyber security

our the we AWS’ platform Insight new with cloud Here, integration of announced security hub.

our configuration capability. announced also cloud assessment We

as As solutions dissatisfaction to understand Many to well our their as silo with risk. a customers the expressed cloud, infrastructure organizations risk vulnerability configuration the provide need non-integrated have views the migrate approach. and they such

the as into Now, that visibility and risk can automate and get our customers with can one innovation market security the helping response our our gain and this integration ecosystem. exactly It remediate. vulnerability for with product share technology customers appreciate and broader RapidX’s deeper to key traditional solution and is then us cloud configuration risk roadmap management is environments vulnerability in differentiation

Our us results vision Insight across It the sizes. constrained win all with other helping organizations customers. also is on reflect platform, SecOp InsightIDR, products resonates especially as of performance strong our resource our

and a of looking false time – This the example was impressed actual win and collect data overall positive alerts, productivity was government really and its with seamless customer replace response were events. cost, recent solution, allowing User such IDR’s to predictability integration is this the drive of large customer. to fatigue to investigate high of and because testers our to them interrogate IDR ability efficiently more legacy Their renewal local Analytics, One Behavior customer SIEM alert VM solutions, its What and resonated with improvements. during endpoints pricing. investigations and

we won SIEM management just result, but business the vulnerability business. a a also As not

to optimize for customers our our customer growth Our product RapidX make are key and of strategy. to packaging it economics. make renew, platform customers second in investment our goal easier adopt, is multi-year to our expand to This usage it part for requires and to of continue systems and and portfolio easier adapt

investments are I well and yielding year up mentioned growth to profitability. durable before, this set As and are us results already sustainable to underway deliver these

continue remainder the second year. for RapidX we forward about Our the is was talk generated in this the and business. detail, the while second quarter, growth continue and in to confident Overall, but profit third feel goal the about will executing for to look drive non-GAAP In approximately we leverage path profitability. profitability, to Jeff of investing strong quarter another quarter our operating a during we to of $XXX,XXX. intend more we durable to

me to Jeff? CFO, over With call the Jeff let that, turn Kalowski. our

Jeff Kalowski

Thanks, Corey and good morning everyone.

by on metrics. QX. also We revenue increase strong that the XX% Total professional second with expanding year-over-year. from for the our resulted was scope recognized and term was than of million growth in QX, benefited growth in revenue which our an revenue This of all are quarter second guidance upfront services very license, $XX with further results In of $X existing their product above strong driven an better our in performance revenue a guidance the million, end exceeded customer pleased we expected high revenue. offset quarter in approximately by decline the of

at $XXX customer driven primarily to end by grew was growth. second million the ARR growth XX% a strong quarter, of increase new ARR the Total year-over-year.

as globally. includes that and we benefit NetFort the Without closed year-over-year XX% ended we This QX NetFort, by service-only to X,XXX of decline of customer increased with improve customer The in count QX. a growth customer in this higher growth more XX% from customers the our product customers. organic quality to Our April from customers year. acquisition base our than rate accelerated continues XX% in our in offsets

Our strong over customer XX% XX% XX% the $XX,XXX, total compared growth past Strong year with Recurring recurring of now ARR to average in year-over-year. constitutes over ARR economics growth a year ago. revenue customer to in remain revenue. up XX% revenue increasing per drove

revenue XX% customers it revenue revenue year-over-year. resulting recurring in increase of collectively This maintenance to as Insight maintenance a and together, the XX% to migrate Nexpose reclassification on sense in product makes decline focus grew at Our support offset which look our maintenance was and drove Therefore, in revenue. partially revenue by to revenue and platform, support product at product year-over-year.

business This platform. Insight the continued decline our of and only by primarily transactional customers, services with services slowdown professional Our driven further churn as XX% our is a momentum year-over-year. by revenue declined sales gains experienced team

of remainder XXXX, on declining services we the expect revenue For to continue professional year-over-year basis. a

was in geographically, XX XX% XX year-over-year down from Looking length XX% months, revenue North it year months at comprised an revenue and XXXX. average quarter. a XX QX reported from second ago, Contract months for QX and contract America in the length of total XX% of XXXX by declined the year-over-year we grew from business revenue revenue. of by total comprised and XX% International grew

from XXX% last overall as QX, Our XXXX, and was quarter. declined renewal in rate projected,

a Our growth and retention of in the decline XX% strong lower result rate remained forecasted a rate year. ARR rate last this from is

Additionally, increased to new customer growth towards our the contributed decline. also focus

incentivizing Corey it growth. this plan with long-term strategy mentioned, as our sales continue and to force are we new we As adding and customers, sustainable our maximizes

we rates to the end expect around result, stabilize of a As overall XXX% renewal XXXX. by the

XX% QX Turning XX% to up XXXX margin gross improved total last to non-GAAP from in margins, year.

more continue revenue. product shift benefit of to We favorable towards mix a from a margin higher

lower a professional XX% Our when product part as revenue, services more strategic in focus XXXX, was Professional services. of of continued XX%, and XX% due non-GAAP to year. gross QX up from last on to margin XX%, declined non-GAAP gross to margins our compared margin ARR

XX% This QX expense in XXXX. quarter, investments revenue lower were to an for inherent sales of software XX% of increase XX%. QX our account This decreased operating to platform. when reflects Insight XXXX improvement increased XXXX business model. During to in revenue capitalized to of in marketing reflects of the as R&D QX revenue expense the in expenses compared leverage percentage and partially our in second XX% compared

XX% XXXX compared at year. QX G&A in were stable to last expenses QX revenue, of

XX% operating approximately $X.X the operating ahead was $XXX.X non-GAAP $XXX.X also profit primarily driven investments a per For well We equivalents we million and guidance. of margin XXXX. with improvement quarter cash, cash in XXXX. $X.XX; and compared million, to income of our This of $XXX,XXX, of diluted ahead million Non-GAAP QX second Adjusted is by ended QX QX, EBITDA margin guidance. as share generated was well negative X.X% of XXXX, the revenues. was to of compared performance our in over non-GAAP net for QX

from for reduction reflects of related approximately QX in we NetFort, acquired million The cash. in acquisition $XX which to cash the our primarily outflow April

million quarter, the $X.X was days compared level. normal prior collections, our year, brought driven a billings strong cash which operating million to to During outstanding negative back $X.X flow as the by in

million, $XX.X build-out professional and QX, of the we And services headquarters. XXXX the liabilities full the for flow Given our as cash due headquarters $XX.X to new our and the result billing, contract operating breakeven. a lengths in assets property, increased corporate lease. decline and projecting decline increased million, corporate In year approximately in are to equipment plant be of our

corporate we moved impact in cash into the our continue new While headquarters build-out flow our July, to in QX. free will

be share Now in to in anticipated the million be of XXXX, reflects outstanding. on $X.X we QX moving non-GAAP range to This based in QX which strength loss weighted guidance, range $XX.X anticipate offset We the to revenue per an product the million. decline revenue. of QX anticipate $X.X is XXXX million. growth, guidance shares range $X.XX on in to XX.X revenue the for average to which a $X.XX, of loss professional million be of total services for anticipate to is non-GAAP our by $XX.X operating million the in to net We

million, the range to growth the midpoint. over in at is $XXX year the XXXX, which revenue we XXXX million of raising are XX% our anticipate For now total and $XXX be full to guidance

to still we’re While investment opportunities. income pleased quarter, see again second report for plenty the continue to operating non-GAAP of we

non-GAAP business, be XXXX upside of on weighted the shares anticipate average we based estimated weighted-average outstanding for stated guiding as are shares given $X.XX, we loss. XXXX result, non-GAAP still quarter a and The diluted XX.X the is the net diluted income. shares given invest income XXXX. outstanding, to The outstanding, million projected per basic we breakeven shares represented net for our shares any for share represent which outstanding projected full before, non-GAAP As will operating year back our to We an weighted-average non-GAAP net income outstanding. third into

basis, for year of loss for represents cash year income full a Non-GAAP XXXX. net interest GAAP investments. the XXXX a projected income full on and expect largely On we net

had negative our consolidating year as As a will we XXXX. expenditures to non-GAAP RapidX revenue a XXXX, recently QX strong our will global forward and we free and last and these the in quarter full of while reminder, hence significant growth delivering but year decline XX% moved and year. headquarters capital for facilities flow second ARR compared are operating result significantly cash be conclusion, over improvements, improving in this to look and a margin substantially In of

With call comments. that, to Corey back I over want for turn few the closing to a

Corey Thomas

Jeff. you, Thank

I open member. the to Before take to for I newest questions, minute welcome Board our up call want a

pleased are level. Kosmowski, who record and high growth that scale was an at Global companies joined of We helped next RapidX’s Success impressive software Christina Head to the the Board of has Directors. announce Services Christina and excellence track has Slack Customer of operational has to

any time Operator? and we that, questions. and appreciate your With call the open for support we’ll

Operator

Rob Owens KeyBanc sir. [Operator first you, Markets. Instructions] from question of Thank will line at Capital come the Our

Your line now is open.

Rob Owens

I customer the Corey, bit mentioned we and look it’s overall, you space SIEM wondered little and InsightIDR guys. morning strength good and acquisition the a become noisier. at in on as Great

helping So, driving you on as customer InsightVM it this what’s well? and an what’s that, cut relates through acquisition update the as maybe to

Corey Thomas

Yes, I our really stride. we hitting mean are

about roughly can think in. us as X You years being

with product have that continue expand. capability we InsightIDR We compelling a to

very our getting go-to-market are motion. on We comfortable

target companies, So in What a I know customers. SIEM at unique you retail if Again, out think have have that how about constrained mid we are how our And that fairly about margin resources. it, your market, products you have actually the customers unconstrained most figure is, is market. enterprise even or of of most core the to whether know for designed the we large we the enterprise about gain us most they healthcare when solution find companies, the companies, And you feed a the the of to more success think solution recognizing aggressively the in and the the we are with allowed on customers customers that that productivity to more our actually limited have grow customers and telling And to and our value overall and strong Gartner impact that’s what like market and providing. for continue will in others analysts other resources. and share industry strategy and us, are our we’re value itself, and even leadership really actually most they the market. and for deliver think

Rob Owens

typically Great. and to where are my an percentage a things completely we’re reminder And entering the federal third question, quarter. Maybe then in unrelated to nature? strong or the given updates of of follow-up guys for relative here opportunity a sales, as quarter what’s U.S. you that

Corey Thomas

Yes.

that a is the and government having our at pervasive overall in about in will of adoption, to that We’re overall stage our when us But still presence. and a very cloud the early in for the of is to strategy federal upside, really the the overall grow to same percentage market. federal commercial relatively still the earlier major The our security way you XX over player And stages you’ll look platform time, years be X launched we about ago next opportunity being it’s continue massive years. we overall think if their sales. both think federal a few small is a

aggressively and going We approach local federal is government and to for But market increasing strategy. platform years. role overall And highly the not that our are education as cloud-based contributor frankly, cloud, expectations this in that state will you the its an receptive major are play the there future. and the few to in our even standardizes federal again, us year, the see a next are

Rob Owens

Great. Thank you.

Corey Thomas

it. appreciate much. very I you Thank

Operator

will question of Thank Kalia line Saket you. And Capital. next from come Barclays the our with

is line now open. Your

Saket Kalia

Hey my another nice for Hey ARR first, Jeff, questions maybe you, Thanks taking quarter. obviously guys. here. for

XXX%. they XXX% into think you – rates, as will a renewal back mentioned that down I we XXX%, from that get to On ticked around and maybe down half the it said the stabilize we at

You bit expiring talked it sell about and there around how bit you But customer a acquisition just a such. the are talk dynamic to how to up just better? some understand go cross component doing, the those little of doing, is little that rates sell and the could into deeper of renewal drivers

Jeff Kalowski

good a it’s question. And Sure.

the XX% were So expiring off rate. and range. first on Those still they the in are strong renewal

change there’s there. So no

heard I you think Corey as talk about.

customers. year acquiring really is on focus Our this

So healthy, forecasting the which is shift ARR had and while rate growth towards Also, rate new up-sell cross-sell still over an more news, a we’ve down. XX% to right. we’re drives plus, from XX%

So the assume the can’t math stay you that’s that will that way given rate just not the the same works. decline,

is so nothing that are our expiring So rates renewal in strong, there rate negative whatsoever. overall,

Saket Kalia

bit about that consistently about question. last of first ‘XX, early Okay, far I level over upside maybe the that start framework XXXX, the the quarters, that ARR it’s so half few here got higher it. at lot how but to helpful. a That’s Analyst talking XXXX the in know we’ve just Corey, A provided little a success think you really of last given seen you do pretty of Day?

Corey Thomas

very a It’s a that lot. good we It’s get actually one question.

about overall that guidance Of of are is actually the actually a so I and important early that clearly actually ARR the strong We is performed if the for XXXX. about But growth. Analyst off most course talked have performance of The thing a actually X-year teams. well think revenue of excess backdrop, started too we XX% the this give think it’s year we to about our base. market you Day, and growth in extraordinarily CAGR on both far in and optimistic XX% we

We’ll We’ll that’s front – year. a we’re of I company I next also. growth actually about say that’s that we’re early growing it’s to a while And be the in fact give large us. very confident what centered that too the XX% think is we’ll amount in to that that continue so that on us for over opportunity be And company. specific will revenue we’re growing over as be ARR guidance,

strong team, it. have that we’re a That’s healthy and pursuing We and to aggressively. be going

to actually stage. back early to guidance actually with provide guidance any It’s We going come later. this are at way too just

Saket Kalia

Got it. Thanks really guys. helpful. That’s

Operator

RBC Hedberg our will from you. question line Matt come with Capital next of Thank And the Markets.

Matt Hedberg

How Hi, guys. new the talked still think guys that. about quarter. quarter customer you you adding had growth? longer headcount about customer the When sort Well of Thanks. Obviously level backing do I additions. acquisition, said you can sales a done think NetFort right out feel support confident think land, about even big on term. number that you you this you focus of of on that of to guys expand Corey, you the

Corey Thomas

Yes, it’s question. a very good

simple sales it’s so the we our the in think that think way we actually we we salespeople When as is land my forward, sales on XXXX it, the we’re the thing reason base good mind, leverage have to the and always sales, we grow expand. customers. now, new now It’s have and still especially that, about overall right we as to possible, and So, our right easy focused position about ability overall, to actually we’re to team the that engine want a that and monetize easy profitability how that long always as grow in our into acquiring add focusing in a is go business. on

we’re our operations expanding what the the we we a setting while sales for still how And think have up leadership good done that. optimizing so job if actually around growth? team overall about has is, leverage think hear business and in do repeatedly us us Which about of you talk and in sustainable you really our

Matt Hedberg

breach and similar it a that I Assessment the you perhaps obviously a it that Cloud Capital believe misconfigured called looks Got help then Can the talk a as follow like WAF. and in as news about maybe week talk that it. One you Configuration as product issue, an this up, you was a And about bit was more situation. prevent Could have a may an issue? the

Corey Thomas

I I firewall. mean, thing absolutely, about the Yes, think

and Capital extraordinarily an talented is is thing has well regarded So the team. cyber first One security say I’d

issue mean So cloud-based an just to it infrastructure. than complexity managing I I would the say, shows of more specifically them,

that. about a is exposure what a you configuration you why This which that understand in you believe exposure. have is in We why problem set targeting your when massive infrastructure future. environment and have vulnerability than in second And number a version think cloud-based permutations, ability anything, we’re first traditional just configured relevant is We people’s more which assessment our just the of investment complex such the and relevant automate with cloud massive that’s thing aggressive Capital than One more we is, be aggressively. CCA capability. will of how is more cloud understanding clearly think today’s offering path infrastructure, of on cloud-based really analytics to and demonstrated, complexity and the technology I of have the The to is expansion terms in an and introduced different of extraordinarily It’s it’s environments.

Matt Hedberg

Helpful. guys. done Super. Well

Operator

Thank with question Stifel. you. Talpaz Gur And next come of from will our line the

Chris Speros

is this Hi, for actually Gur. Congratulations on Chris Speros guys. quarter great another on

that and when better better acquired you the speak degree acquisition you enterprises the to – you which to some up noted push would service NetFort, to market? decision you Corey, the Can you to has technology For cases. enabled with the it use you provide to

Corey Thomas

a good it’s question. Yes,

talked So when X it, we things. acquired really about we

to a use VM case talked higher in IoT and the on The SIEM is – long on of first gates in about enabling out focus enterprise we level term. be visibility then we going focusing said the and

all integration in technology of are them, So phase. the we

still our to had easier the that the for so, context, easier in and we expand has It for integration go-to-market capabilities And engine. that to think But it in this our just phase. as us no engine expand of today, the it even additional material continued technology out that impact make in years. we’re on IDR go-to-market and will

Chris Speros

again and long-term QX, this we how And in think which to opportunity your quite international you, international follow-up Corey, great. a degree that’s grew your currently Greenfield? about as should business market for the Okay, remains nicely

Corey Thomas

Yes.

driven it’s international of We pick-up and capabilities both main in the our know both as and we lagged in the that so security. and of and – to think the it heavily are that of by performing is of terms all in a world, our the awareness, the about awareness business international, think in mainly have of compliance, willingness having should the is, continue pickup. the The we’re is opportunity. a U.S., regulations driven companies our cyber seeing a I steady What to invest it is some way but of international the it by we And business. massive some interest connections that increase percentage actually around seeing

think our to about you If what’s XX% happened recently, overall it’s XX% gone from of business.

We has to good time. a team But up expect our say, over that continuing go to job. I’d very done international

makes I those share think a larger is to go and numbers to the [indiscernible] of the but business path a a perspective to expect is America that’s well, just largest and that becomes that international from actually slower continuing larger business, our grow which geography over steadily continue North we time. it up

Chris Speros

Great. Thanks congrats again. and guys

Corey Thomas

Thank very much. you

Operator

of line next from Turits with the come Raymond James. Thank question our you. will Michael And

Michael Turits

vulnerability is Good Turits. your to of not demand management you an are key the management level guys. Michael on slowing right here. would share first, characterize now you – competitors gain adds How growth I’d market, any Hey, exactly your there? attempt And focus and aggressive there? afternoon, customer focus net the to like increasingly on from vulnerability in quarters clean

Corey Thomas

– so questions. question, great a It’s both

the of First management healthy, overall both and our one see share market. vulnerability we’re we the market believe is, is growing that we

I The CAGAR second healthy absolutely at and believe term clearly other an long as in and it’s the have the provided being a above that. We’ve term market, question and market the market growth we it’s we job a Analyst the on taker roughly long short we yes, are management We on vulnerability suggests we that overall data the both long-term long-term, that market the overall And about your share a today. strategically Day, our we’re of and that. so, rate focused actually still a market. market. and But said vulnerability healthy to your gone effective think On healthy sustainably believe evidence for doing that the question, we term. well backdrop was rate XX% management

Michael Turits

comment in a of ARR, the that Okay. past can percentage as you new And non-VM talked ARR? InsightIDR then as percentage new about of on you’ve

Jeff Kalowski

we new with that bigger Yes, product to IDR, comment a and Michael, not so ARR revenue added it of is is of but again QX. we we’re on portion XX% it’s we ARR becoming on said specific the over commented What IDR have lines, total the in mix. going

when it you So XX% still it’s XX%, we and was when XX%. it tell XX% said over when over we’d update and we’ll gets it’s

very still it’s healthy. So

Michael Turits

Great. Thanks guys. a lot

Jeff Kalowski

you. Thank

Operator

our William you. will of Jonathan from Thank line next And come with question Blair. Ho

now is line Your open.

Jonathan Ho

after wanted multi-product. Good morning. to this maybe is I just on, customer? wanted what’s little are per larger color this get to you just more increase see ARR or more if us a I going sense bit deals could a the give driving in of is you guys

Just be helpful. would definitely any color additional

Corey Thomas

question, customers opportunity. think our overall adopting a with same the ARR products. $XXX,XXX have and really deep period, are primary The overall driving fundamental before environments they’re roughly have in they how of have offerings. of the is and of things – for offerings that, the to you of we of biggest in indicative had that the customer’s experience. a natural if way actually that many good the And that’s more adopting people belief said focus percentage of a those of ARR They’re have customer internally that, out are drivers of more customer fully And was offerings our we we the the investment is fact they’re what technology, the about covering using, experience, coming per adoption actually overall technology is InsightIDR, because on combination expansion a and there is about are time good other then available their our this if customer covered fast will a the have our our range year what’s of a deployed transition expand one all the especially of opportunities. It’s plenty expansion The combination since we’re of overall and products our adopting where customer. are and that they it customers At increases We’ve if potential product InsightAppSec, the actually of actually is broader That’s environment the overall products. seeing period. today. we that

Jonathan Ho

And you Chronicle on it. starting in show Sentinel side? Microsoft just the regarding space, competitive are the guess up SIEM Got or see I competitive landscape like more to the then guys

Corey Thomas

seen competitive will more that up we’ve in any market, I It a a and is market. material has it’s while always still extraordinarily in from a show see other partner will too. in Not is think we’re increased snippets it. the SIEM the competitive it We we especially but mean areas there, way. been positioned Microsoft competitive market, of we with market. in Microsoft market will always My expectation competition, well be

about and quite market time. we we gets stay just feel competitiveness well have we easier We so, a and an from the even any positioned market offerings, go-to-marketing. in think this And expect extraordinarily overall think talented over the not the technology that our of though good we’re our solutions we to do competitive, perspective

Jonathan Ho

you. Thank

Corey Thomas

you. Thank

Operator

Gregg Moskowitz And you. the next come our from line question with Thank of Mizuho. will

now is open. line Your

Gregg Moskowitz

guys, and morning Good you. well. congratulations add as I’ll my thank Okay,

mitigation about only vulnerability by it are So risk analysts adopted frequently end can will be Gardner as and this VM? customers risk-based how a the and of more talking guess of now Cory, that through have your risk that really low, have management perspective I’d says question VM approach to industry on I is, been well based as but this so my enterprises actually love year, approaching X%

Corey Thomas

Yes.

be InsightVM. We low see operationalize to driver by will I that low. about the is don’t VM. I think think one, So, today It that believe it don’t is primary of and customer you it’s

may Gartner’s So, and not more while customers I centric more risk of model fit are becoming it, both to and over remediation time.

trick of environment. that the your today remediate parts is there think in does key actually one the you cannot I risk mean not of misnomers that

risk to you’re of remediate in with in that And right understand way you so, the our sort that material all order. actually environment. should risk your is your so we and But you engage remediating customers the issues have

cannot I moderates the critical like, the I’m You leave can say risk just I in environment. and the have, all fine. got most

been be that’s that compromised there. be fact, you’re a In basically to to going likely proven highly

But customers do So, the and actually what’s a investments a in of remediation what really sure right overall. which matured is push overall pace and drive teams with the making order. an are to IT from customers our of remediation and risk-centric is that also our in the approach approach automations they’re taking remediation right our feedback we’re says, comprehensive integrations actually drive how to taking investments they’re velocity seeing making alignment I the and

Gregg Moskowitz

have margins we confidence and operating you event a growth, the normalize and margin What multi-quarter it’s companies Thanks for investments see up then that’s helpful elaborate we And that EPS where typically that. can can really investment Okay, reiterated are also to when Corey. more you step see still yet making before incremental full-year color, achieve you for Jeff, you drive you your gives on targets. level those?

Jeff Kalowski

Yes.

year. make order course not to X, more be to prior good to as going the good. It’s our said to continue this to easier in with we really customers of the of enable the over we in to are to feel and prior systems, our multi-product still nature breakeven So, systems improve quarters It’s year in those we that it short-term. making investments, while prepared The but efficiency and performance we revenue to in progress. over so talked about accommodate and as order, for a SKUs or we achieving is pretty them reinvest calls, comments easily

Corey Thomas

add is you are for we’ll still why those the is the be year thing reason programs hired I’d and were and in in the most confident up see that and those the that of that investments launched QX. most we will breakeven the P&L show of that people And successfully

go tuned of QX, you so, a on on into QX good investments And impact so have visibility we overall and the P&L. the deal and they’re and into the

year. overall confident that’s the for And still why we’re so in the breakeven

Gregg Moskowitz

you. Thank Terrific.

Operator

next Henderson will come Thank And line from our question the Needham. of with Alex you.

is line now Your open.

Alex Henderson

about could what particularly comment, not what the large seeing the the enterprise that’s small bit Great, between delineate hoping a you’re not differential have those that growth middle have don’t even Can rate SOC go-to-market cases, the that a X market, Thanks. I little was some market bit of Jumbo delineate segments you’re a you a between clients you in the may some and or if seeing very have where CSOC. thank and you you much. a shrimp of talk in little in and there?

Corey Thomas

where say one be we have us to actually detection vulnerability similar. in about rate security a and security around markets the to mid-market would about I lots or programs And think are. product I’d application I of pretty actually mean, expect first the and if customers is pretty their to the existing you look broad have you starting say aligned we thing incident response them of time. that management, think for cyber because ability portfolio, both are growth needs long-term we meet Yes, customer, the the

its motion people there but programs. of that is lots that’s own And so are there, starting

there of for about think something is that you us a And motion, either the extend and have I I do need programs about ask actually capability to bunch more. overhauling like really complement. can their something It actually so you their actually it upgrading you and If adding things. enterprise X to that programs think or has dominant

saying there what be invested number future. program. we there expand they’re need to and I because VM or and opportunities like go can in our in security the And complement with Orchestration have So, relevant It’s I them in we amounts it’s for our a we massive of some our and actually we’ll already not are things their help not they successful. overhauling. InsightAppSec, find but customers And or can go SIEM can and of are with Automation,

is, way people and more to So, they with SIEM and projects space than and you Global pay us XXXX to failed infrastructure will expensive, I and in We’ll money a want in the are us complex Similarly, pay the aspiration so and lot they’ll it’s the cloud context failed the and includes I and my a remediation InsightIDR, upgrade. to VM previous a That’s the bigger a have entire buying and that we’re that bigger enterprise an my incumbent in on-prem. have operationalize security upgrade my overhaul across go profile risk want about think starting there. most companies it’s complex, projects because and projects of actually because journey. vision in they’re

to We have and programs. overall and success good track starting a record going those upgrading in of

the is, for the overall drivers the and market that So, mid-market future. growth as and we the both way see we it good enterprise see

Alex Henderson

if whether dynamics did CrowdStrike We were show you VM the surprised do? we about reasonable survey CrowdStrike when just a I impact question more penetration. little with One seeing you’re Could they how could. and bit up in the competitive see to space a you and talk

Corey Thomas

Yes.

material that we not as to to So, endpoint would seeing vulnerability are is companies deals. actually which about project. more that. and on way be covering like know vulnerability it for CrowdStrike I is do CrowdStrike competitor management of provide desktop. vulnerability actually what’s a do to enterprise you any source a management see management we to be a actually and that endpoint is Sophos you’re mean, Microsoft any and for able there the data. on unmanaged, scanning a than mechanism many don’t to in way more as vulnerability a tends management enterprise have to first is one just thing vulnerability I effective also, say of But competitor the to there cover important visibility the similar But think

You have a tail. massive long

got others, information most and cloud do, they Sophos gate just and the just the in participating Microsoft, out enterprise why not start putting companies adoption new context than a something of on like what like management fast and the projects CCA endpoint, lots that in So context seeing we’re doing, so starting the customer and to that’s like end-market with they’re provide our of vulnerability vulnerability but enterprise do of are the which furious vulnerability them off others, just and are like there, like they but different is RPs. momentum

Alex Henderson

Great, thanks quarter. and great

Corey Thomas

Thank you very much.

Operator

question Instructions] [Operator from you. of come Keith Our Stanley. Thank Morgan will Weiss next

Your line open. is now

Keith Weiss

from sort of the can that cloud competition from the to great quarter. you a that vendors, like little through you relationships with come see benefits could opposite into you’re talk describing Thank and with a we thinking Maybe start question, Also, the of talk the like to about AWS lot the bit that you when get guys. about model? one we side expect

Corey Thomas

relationships in market. overall absolutely. works, ways. One X no, separate We’ve but the in to technology, that cloud it make be have have lot sure our just for been really and efficient time just think productive that we spending a our of we’ll Yes, We time customers. good and is to more not spending it’s about

it’s an the about of model. One cloud things environments, primarily ala-carte

barriers actually barriers role is extraordinarily of security to with if complex is manage So large that about a to and to so you management how in and the what allow tends lead model reduce ecosystem do we people perspective. entry, from our complexity complexity, cyber think ala-carte high low management the environment actually to

with for managing very And productive cloud still hybrid do environment time because sure see technology how if cloud on with for of lot we both a as spent world we environments. is about the So, make hybrid you time. complexity especially a this long players also AWS of Microsoft heavily with but a our we think

go-to-market how I the thinking we how companies the is saw sure actually with time and are align we actually about environments. where both teams is to cloud how that hybrid on and not about re-Inforce thing spending more cloud aligned we’re mentioned but spent second time with to we’re talked about we time reflected. The them us go-to-market AWS Conference both and that how and make time and with helping Microsoft’s also spending side we work just We with the that and our sponsor the planning aligned the you we’re manage and time doing also talking and with transition AWS’ AWS’

to in keep And going a for go we a while on And and so, you’ve we’re been we’re starting technology from to which technology to some market, still working we’ve the but it innings on go and public at. look the we early the working and inroads make are to there actually fairly market seen.

Keith Weiss

one Excellent. well really guys And on then doing you are markets. maybe just international follow-up,

macro side you worries have at murmuring Anything of that guys weaker demand of We trends. the the equation been internationally all? hearing on

Corey Thomas

good of for software not business a market we later. internationally, lower It’s we’re I typical our than No. a that the because I say would would percentage mean a see thing barometer is the that, for broader you probably just started company.

So, we room just actually scale. lots have in grow to of

continued market. still and international necessarily have opportunity, see growth the that to at broader expansion we reflect So, of but our revenue a as XX% doesn’t

Keith Weiss

quarter nice Excellent. Very guys.

Corey Thomas

very much. you Thank

Operator

Thank Berenberg. you. with And our line of Tilton next question will from come Joshua

is now line open. Your

Joshua Tilton

for guys, Hi taking questions. my thanks

subscription us with maybe of potential your First changed? of numbers in Does these one, your SIEM on each us expectation wallet clients Have breakout with increasing a your past average and remind possibly product. you views would for ARR for the provide you the share InsightConnect? could

Corey Thomas

good question. a It’s

material I think products. change any ARR average assumption the made So, for we in of don’t

and is like there buy really an model. of they’re So, the been you InsightConnect, just about has too early, InsightConnect no change there. think dynamic apps it’s Insight extend can a having

what’s average that what buy of takes as it’s And process the and we just over sort through expansion that to like we be. of go early update I year, I tell rate? estimating buy a we’re things of that’s overall so to and of, time, and So, specifically we’ll part the still sort still of our set next time going that’s you’re but what’s too workflows then initial more and workflows add

Joshua Tilton

for helpful more SIEM more great. that SOAR Yes, guess to is I highly maybe and growing just that follow-up SIEM product is obviously viewed would so the as was be then, complementary and really being

just to especially from customer for the So, IDR? drive that’s already base happen what needs adoption improved to SOAR, buying

Corey Thomas

Yes, we focus ends limited mean now the we scale year, are few last we about now of on use believe we for it we years just talked actually this and I release. it’s put technology the focus. into us,

go resources we how year we timing is expect broader launch and actually approach a release our a into but it’s more through and with market next to Our it. mostly think we a next go there, have of of strategy cycle phase good introduction We our strategy. aligned behind good go-to-market

strong about in disciplined be making fairly are rigorous investments will these confidence SOAR approach yield that the we fairly will a and how the overall fruit. we We we significant have it things, but

Joshua Tilton

guys Alright. Thanks, congrats the for quarter. and

Corey Thomas

Thank you.

Jeff Kalowski

Thank you much. very

Operator

I’m This on the program conference. and questions Ladies conclude we day. participation does Thank a gentlemen, today’s for thank our your in have wonderful all Everybody, further queue. may and no you. showing you disconnect.

Rapid7 (RPD) 2 Aug 192019 Q2 Earnings call transcript