RPD - Earnings call transcript Q3 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Third Quarter 2020 Rapid7 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Sunil Shah, VP of Investor Relations. sir. ahead, go Please

Sunil Shah

website for is now and today at press earnings to everyone. over XXXX wire posted release discuss in an updated and on available will me our is presentation webcast financial operating file. operator fiscal our live audio along Kalowski, We've and financial joining distributed XXXX. our XXXX. Jeff Corey year be financial appreciate Thomas, call, a at us results company With investors.rapidX.com, outlook our and to today the RapidX's following the the addition fourth being with metrics it good until the investors.rapidX.com you, by quarter We full XX, replay and call afternoon, on you and and the are This Thank CFO. broadcast third call CEO; quarter November our

results statements forward-looking pursuant available laws. our we expectations renewals, strategy. global underlying on guidance Litigation the a call, report operations The provided should Form light our on and These those of to in on to results XX-Q and in by and beliefs to XXXX. anticipated applicable predicted financial business XXXX statements, recent certain results from considered quarterly the presented our conference condition, may forward-looking the our update events and related such information timing product implied Reform subsequent and pace of statements our current on this in not economic the Safe Act should the timing of contained fourth law. on currently of obligation or these we outcomes on are goals or recovery to conference statements the COVID-XX results assumptions except the forward-looking and and year call, are on results impact that based the filed the due does future such quarter These from financial be most to operations including and information information as contained and by SEC. and Actual statements this materially of the positioning or goals guidance, provisions Of differ future including Harbor our in the such not in may expectations reports financial number Private of that guidance, future During may business, the related risks. reported to economy extent considered differ indication of include the for statements of risks assume results and and assumptions an performance. Securities required RapidX Securities Federal on Actual are us. The uncertainties make and this full of under any company's and with call to made the be materially

or incremental metrics. historical today's nature, be in today commentary in Our over the advised our release. like to found CEO, provide turn At may our update is to on an With Corey Corey? remarks may the response our be detail or Thomas. dynamics I'd in earnings provide in greater our results. and not guidance that will metrics times one-time maybe Please and press that, be call your terms may can the this and we business and between GAAP additional non-GAAP reconciliations to insight in prepared of to questions or in future into non-GAAP quarterly offer these results our primarily we

Corey Thomas

appreciate and for your earnings our families quarter hope joining We staying are Sunil and and healthy XXXX third call. you, that today Thank everyone. you and safe good us afternoon, you

an coupled ARR market to grew thanks QX will to brief architectures before for trends performance strong engage performance, growth closing cover I I financials. flow and to it Solutions, profit year transform investing over the security Security saw as continue expectations, our Security to digital Remote and RapidX RapidX landscape. securing for healthy over has COVID start XX%. what our with their escalating Jeff and execution traditional today challenges, expanding for results organization apprehends to goals model with growth Current expansion. year-over-year as modernize strategies solid cloud we're midst faced our durable company to catalyst improve their the bolster confidence share approximately today delivered Transformation as in the strong our would XX%, operating the of seeing to are We engagement We VM threat a on quarters in with the our our on Security report and customers unprecedented the teams accelerating like a for our of during ARR been and exceeded update reinforce perspective market for and with our businesses. third XXXX by we targets, margin raising cloud. then customers. the which the growth full pleased fundamentals team. innovation in again in that a growth opportunity their experience, product our demand turning cash

This drives the our do be more effort cloud-based What the cloud, operations modernize Insight question, architectures environment focused and companies in they the the and cloud into in invest our seeing and are applications. to with monitoring securing upgrade are we a to lean engaging extend their more today distributed growing RapidX to core Platform. we on with security is answering need organizations a new how digital? As

wins their in the turning I'll monitoring, the continued differentiators on Solutions. and process. by and fruition included customers upgrade undergo the DivvyCloud. and to will led are security. all Transformation cloud third to seeing best we more companies behind This a new industry-leading these reevaluate need the transformation, highlight this of gap a of strategy, cloud roof. Platform one that of solve integration the deals two customer was under experiences Platform automation. bringing deals deal A visibility the enterprise driving brand. enhanced the particular, great the was example This security We cloud Our has our customer. cross-sell largest competitive see of as Dev this to need security customer platform operations' in consumer that in COVID sizes Insight strength security win which our to suite evidenced one we land to is experience a quarter quarter. well-known about leverage to This success for was excited challenges. automation Platform saw adaptability, struggling capabilities We integration cloud investing that competitive with a Organizations product this growing approach ongoing and piecemeal forced with of significant We're a alternatives. built digital integrated thesis IDR, chose and unified security service stock Insight on large complex quarter over IDR their efficiency as customer coming include differentiated best-in-class initially remain this cloud. continue to our Security view multi-cloud deliver and They with increased focus show in once leveraging our environment. application the we're Key SIEM by cloud. to and to again saw In increasingly They value, in DivvyCloud, DivvyCloud, their organizations technology. set one, for We're the our their SecOps. between with bridges for an integrated accelerating RapidX Insight tools of of a providers enablement existing manage an quickly to vulnerability myriad automation turned our

remain customer we journey. our early While SecOps in platform

must and consolidated enterprise focus security their in traffic case This visibility, program on Our a our the engagement. both six-figure continued per an great bearing efficacy This is analysis customer, is competitive strong investments resonating quarter Platform with point gained and improved grew our network year-over-year automation delivering and enablement their customers, was holistic to efficiency cloud is approach approximately vulnerability cloud with offering native in displacement management fruit. Insight $XX,XXX. retail greater growth spend. customer. functionality. an in integrated deeper SIEM proof who which SIEM, the XX% for solutions deal driving customer A to This A today customer on are ARR security and of

getting security team or breadth more note, customer an deal through enabling IDR, spend becoming time that prevalent more time ability In discussions focusing product platform to This example integrated important requires automation customers and reliable addition RapidX's Texas and with consolidation customers. It's don't two roll products to IDR, their is platform however, from out the about by force value to combination tool to had threats. on compromise AppSec functionality bouncing that is huge and great less value. more a another real cloud, tool VM, our our in best-in-suite industry-leading to of to

cloud leadership across our great Wave Forrester effort Midsize In is our status vulnerability strategy serves our recognition to the SecOps application in Security a recognition recognition Insight yet and The SIEM The our with for technology August, is manage to ongoing Services to and In This Providers. named to reach all. engage leader investment validation for addition management, to security. pleased partners our leadership to industry ongoing a RapidX partner I acknowledgement platform This am of of make also as commitment team. was to another a announce lifting channel and core innovation. our Managed of extend as a we accessible with critical ecosystem function native Platform. point disciplined our RapidX's

product differentiator We a Access cloud Cloud module of take for key moment Let Governance we this offering for be innovations. will believe Identity announced me highlight October some availability recent DivvyCloud. our our of a Management security In most to the forward. and going our

cloud magnitude visibility to and more trust access With remediate our prioritize is users move licenses, reception Cloud in been access, cloud handful is resources on cloud crucial. customers customers to becomes gain the unattended an has and beyond of how prospects focus frameworks towards in the deeper determining complexity with IAM different many providers, applications risk zero of traditional a access Cloud cloud. in insufficient to the and in or have the into beginning cloud in cloud. managing trial identity identity user All play. companies they of the complicated, access. users to This the trial The for reducing no having world, access more and include positive, resources order extended assess, customers module. IAM effective far resources least-privilege governance, change already matter Today's and a risk As is

We announced also and Enhanced Endpoint InsightIDR. Telemetry recently our availability offer the of

are cloud teams and workforce. in InsightIDR, for holistic extends and attack dropped nature a result The InsightIDR customers vector. response of network, able EET threat single ever-expanding we customers to massive is investigations data a few an environment. to of unifying threat provide hunting distributed COVID creates launch activity to monitor a increase drive As it trials the seen the activate their core of accelerated The the EET their with endpoints a capabilities user surface into enables endpoint remote of security bring just have ago, since better official and weeks our from number interface. and EET. visibility

our close brief goals Turning on the year. now update a we to as XXXX

is first Our IAM continues to unified and leader This partnership our the Governance Platform like practices innovations Insight customers the be operations Snyk. our in goal cloud. strategic security with and transform a cloud asset Cloud starts around native recent with to with the enabling

about at our the look excited to our I'm for I bar security innovation As operations. opportunity native pipeline, cloud raise

goal platform among over and growing distribution ARR by analysis set our of our $XX,XXX over Enhanced opportunities. our per from the near-term. to agent. is roughly of We bundle remain customer network to value capabilities Telemetry, lifetime sites with others, expanding with But early in like traffic accelerate customer and we lots see days a Endpoint second Our $XX,XXX add-on increasing

our drive goal while long-term to for operating is investing third Finally, growth. leverage,

sophisticated our over today penetration sharing on We our should believe close innovation across in by hard our and that I go-to investments our appreciation increasing continue This CFO, all team on Jeff? I to my our RapidX Insight the motion and for improved Kalowski. platform to you and security over building customers. now the commitment will to turn time. focus Platform. like to experience With in efficiency remain the technology operations would most and on of Jeff that, and drive call disciplined and behalf work that leverage Thank support entire accessible customer our focus market delivering of and

Jeff Kalowski

Thanks, everyone. Corey good and afternoon,

results above million came prior the XX%. year-over-year by This end $XX.X outperformance reflecting Revenue the revenue of expected grew year reconciliations Security Before can than stated of of I be and and we'll execution better reminder release. non-GAAP a our begin the as except products' total strong between financial the high all revenue, which $XXX.X otherwise growth unless $XXX today delivered today's operations Total solid brief a that We're by healthy financial was and the result our earnings period. during quarter measures, in over team $XXX.X pleased for GAAP results Solutions VM. on for revenue found to report our non-GAAP time, press guidance was are range, of discuss XX% ended driven quarter revenue cash million, but first Transformation in continued quarterly demand that we strong up of of with year-over-year, with basis in function quarter. ARR flow results a for and our from million exceeding third the RapidX milestone XX% third growth in by million,

Looking by XX% XX% period of revenue world globally, of ending X% North and represented over over XX% with year-over-year the customers engagement while with geographically experienced the and total third business the our comprised revenue. new revenue, grew in prior customers during We year. X,XXX of America growth quarter, healthy grew the XX% year-over-year of at quarter, rest by total

in New The the value approximately expansion third as a our customer of and a ending ARR pace new has we contributed saw per result, improvement with year of customer XX% of over $XX,XXX, Platform progressed. growth as customers ARR customers the of XX% continued our in differentiated quarter, is the quarter year-over-year. reflecting demand with resonating relationships, a Insight continued of

in to see long-term growth continue sustained We metric. for this runway

and of the compared now T&E in spend. and headcount with by of product in investments XX% full of XX% marketing contribution XX% improved Sales Total gross represented part XX% ago consistent Turning for year in in G&A margin from revenue, year, XXXX. last over driven XX% and grew growth to of results. lower margins in expenses XXXX, XX% third to R&D up reflecting as period. XX% were was compared QX prior and continued grew expenses XX% as quarter operating reflecting the XX% to the down well DivvyCloud QX of revenue revenue QX revenue year, and development. quarter to grew X% expenses and year-over-year,

and overachievement per ahead was quarter our revenues. guidance Third ahead Adjusted range of our profit quarter the net operating of driven income was share also primarily guidance. by EBITDA $X.X million of third on $X.XX, $X.X million,

up million to investments of balance of with our Moving improved Operating positive flow in was quarter activity by collections driven sequential our billings sheet ended of cash engaging and our Shifting to platform We of are was million, as in predominantly by from digital strong keep our cash and transformation. with the The with QX to $X.X QX security third strategy, year $XXX.X and a uncertain the driven modernization are backdrop, now cash investing of value. flows. an cash, million of pace the in and cloud end cash in the us quarter period. Customers $XXX the generation guidance. million leading ago quarter. and XXXX. part demonstrate compared best-in-suite to $XX.X at technology leveraging combination that increase market equivalents companies results and SoC Amidst rapid

Solutions on with capture the our Transformation VM Security and ahead, Looking to platform. positioned fast-growing opportunity cloud best-in-class is SecOps RapidX inside

and execution margin strong expansion. driving reinforces Our confidence durable QX in growth

outperformance we and expanding As for pursue XXXX ARR raise targets while growth opportunity. flow, market cash full year to our reinvesting

sharing range the guidance and third are range transformational anticipate security recovery to increase off to quarters. Building me year-over-year. full to the $X second guidance customer With experienced we look through in million ARR of the macroeconomic continuation and rest of This We our however, a the assumes $XXX uneven full start the ARR demand balance that XX% by we now are have year. in healthy of must of as million performance, with million, of year. XX% year our for mind, the the be our to-date recovery quarter to gradual at an demand midpoint let tightening $XXX range that solid growth third conscious we an raising for we and

Security with over year, XX% continue We our this ARR VM see Transformation growth. to sustaining ARR growing double-digit Solutions'

$X we profit the upper revenue full to anticipate XX% raising million expansion. Given expectations, in approximately million. raising a $X ARR return trajectory. I recovery profitability reminder, range year-over-year. to XXXX, our will we non-GAAP our range XXXX of million investments our year continued margin we increased million sustained prior now of are be to operating year and of This to as to growth $XXX.X framework guidance. for growth expect revenue to XX% guidance future $XXX.X a full be for And half are or that assuming We're reflects

are per end of our loss X.XX of shares non-GAAP a the on toward We year. This to prior $XX outstanding now full year our full of is loss million anticipate average for upper share tightening cents range and based range X.XX. a weighted loss of the a

our Given in for prior our for now year loss we notable strong in breakeven flow of flow improvement QX, from anticipate a operations $XX cash to a million. cash the expectation to performance compared approximately full

Non-GAAP an that XX% of the quarter quarterly against million experiences of be loss Operator? provide we of to to customers vision loss weighted our $X.XX In fourth to-date. loss average cents, SecOps reinvestment XXXX quarter to conclusion, net to $XXX.X to year-over-year. outstanding. is for our to any leading million $XX.X of to cloud. of and questions. some time be execute We range of share the total we'll in our be $X.X anticipate to that, in range loss $X.X XX% to the $XXX.X per based range fourth for a which in on guidance. negative With basic of the shares continue a the negative for million and We revenue cloud to million anticipated transform the $X.XX million outperformance native their a non-GAAP reflecting anticipated in they of open anticipate platform support, appreciate to growth the we Turning call digital now of your is operating

Operator

question Instructions] comes of Rob line Our Piper Owens first [Operator Sandler. the with from

is open. line Your

Rob Owens

well? as about the guys. you are afternoon good comments facing transformation some Yeah, of folks those all getting see like conversations would modernization of of kind of the know, to asking this your to translated guide SoC are think about how as terms that's, but [technical response And building tactical difficulty] talked digital and as you tailwind opportunities because nowadays? do year, playing challenges Corey, really do XXXX, we think are kind strategic? in of work-from-home you you out, on we And get into where see unprecedented a more Where I it should yours. modernization versus to not next

So that'd if great. comment be you can

Corey Thomas

their most years we around, there customers, say, discussions with COVID can I'll repeat since on, little we also crisis and transformation? course how in but world. like is, bit of even sort actually thinking functional core question like was really And in the work-from-home And year, that came into I Rob aspects where was fundamentally strategic just in Absolutely, of you play see positive people be you are does a about the muffled, a big out of the know, and face the sounds the over In tailwind is it work-from-home really we the our digital yes, this future. that, early that would a more in this do of four that tailwind? versus

customers, how to there's that with those more customer how do the systems a some I they in quickly. they of get to about much support more in some sell is and of be critical security think really that engage world And customers aspects their are so strategic. the functional surprised replace actually addressing while many we're work maturing to still new much organizations their work-from-home and lots imperative could of - and talking really just can where programs, done we're digital their upgrade digital they quite

that has a would pace, course I moves, feedback we're over we The to And our of moving from the customers to so a are their the provides out of we a they're fast getting making the you are year. know. that trying mid some customers of this say that some very is actually We actually the we've see lot seen upside, steps in see in what that And at around given reflected lot in of us that the that customers actually planning. which ordering budgeting. think just figure the longer-term, they confidence

in moving their they half do to are so going with the teams. actually be whether And But they're half budgeting departments or they and the aggressive first second planning their next they're through working they and don't year. now then finance know know of that doing and

Rob Owens

your you you then SIEM And customer to, midmarket of Are is more in largest uncharacteristic second, automation. you of articulated customers what deal holistic relative historically? well-known resource perception consumer with a mentioned as bring the guess And, consolidation vulnerability this you've a of consolidation as opportunities with suite? these constrained I seeing brand the somewhat quarter more

Corey Thomas

they not a resource the is I constrained. are say, It's question. no would atypical great customer because

we to cuts that, segments half resource that and across you constrained continue One the Fortune-XXX of things as is know, find is resource always the of constrained. over treated we've

organizations You the one the manufacturing world, talked largest know, our you the some you talk of in resource of customers, large, very they largest to you know, to feel the, constrained.

large customers resource they to Fortune-XXX, some of talk constrained. retail You feel our are that

that them a over interested productive, we And I'll the - did new what interested. and actually a we reemphasize have what can say off they it's cost lots terms best-in-class of suite. customers actually are effective And more study highly customers quality, towards bias so actually allows in it. this And a in interested would suite that, not time. and can resource we seeing purpose what absolutely to performance in not no, they just if And very of a I constrained expect platform are when get see best buying it. buying nature. of that fact, is capability. But get quarter, to They're attack XXX% a in, have the they're again, for

traction about I'd Now is question the what's that Well, to progress? increasing. your steadily say

I of us. think that front still we have upside in more

starting and of we're over the see building that to just tap surface the we edge years. think I the momentum several next

Rob Owens

Great. Thank you.

Corey Thomas

so much. you Thank

Operator

Thank next you. comes the Kalia of with our from line And question Saket Barclays.

Your open. line is

Saket Kalia

Hey, Okay. guys. taking Can me you hear here. questions okay? for Thanks my

Corey Thomas

you're Thank Saket, you. fine. just

Saket Kalia

Okay, excellent, with excellent. about Hey But maybe has line questioning. done quarter, Corey some maybe of the to bundling. then kind the you which build first of for we I experiments want something you, last team that last off talked of is

that sense? You how And like be? can make just of dig could for customer. part into know RapidX? that sort of but a means maybe bundling know, that target what factors maybe that, ARR as into the know, you higher You Does per on you touch what opportunity sounds

Corey Thomas

because one with framing. Yeah, last drive start great the our it's is from up big that's ARR I'll to target, customer. And framing a of your the about ARR goals

the to to a sort pricing customers in the the, XX line and is K our lots you about the couple their products, in the that or and add really possible customer. doing addition capability You but add products, analysis we of and the customers sight want the at the the the we is for on have model trying And packaging, factoring adopting of for from past of journey. do you of that we in would combination categories. have we're a the and in Friday our actually also capability is fall is of multiple of goal customers about One to have actually that Telemetry also have on And actually to has that the research customers more add-ons, we're there. ARR simplest of move can adopting that we, that's experiments know, of our single where they of to we lot well NTA I the we per see what like add-on did solution, flexibility. in we the think And whether high-teens lots and customers know, where say think a and are they to fast. IDR, at sort environment, experiments we moved, that's to are Endpoint our for that know, holiday have want And something single actually flexibility that research SOAR landing economical actually solution, I the XXs. that are to think that, to provide and of really looking very clear is, looking most fill, or actually into been plus that a customers to now but get their now The you network we to we're from the EET, a a to bundle exploring, a very do input have XXs, we add-ons, been comes really

And multiple want to have tackle to want So that they at have it. may then to some customers problems once. extensions we

together. platform value as our simple it about easy actually then want second time, actually as like you I want up to say, easy solutions want my to of make to that, time. over to is quickly. to I Customers program build customers start That's want that these when packages to my want to make we a of sort as But here. start Listen, to and possible entire I proposition. we actually over build to expand and multiple effective focus so listen, sure say, it's look out possible as at things, think And I my And want cost security

primarily why What we And more the few that's the because positive see interest. in would will so forward, XXXX the experiments. honing research we of that, of we're interest that in hit course out validated I perspective, process that seeing platform. Best-of-Breed from expect just start And We're we benefits the of that XXXX. benefit positive of is What from our consolidating largest traffic customers research. now is I some over 'XX benefits but would did a the say to actually running will in absolutely my that the right we customer say

Saket Kalia

helpful. very That's

maybe know, you, if follow-up Jeff. my You for

I revenue But, net last as bottoms? from this retention cetera. retention, lower upsell combination net it's know, of of can sort think you security you drove what limits, whether quarter? lower the accounts, think where downtick just at pandemic, a maybe Yeah, in from know, employee as touch You other you the that And seen about came know, just in revenue know, we've et think well, I on know, companies the you you you importantly, XXX%.

Jeff Kalowski

make points. I'll of Yeah, couple a

to expect to where year metric. customer grow you we our we new modest do And primary from opposed new in You factors know, a as as base sizes healthy primary ARR had - versus a know, forecast the and ARR and in know, know, buy from that's have last and to solid it products. customers did you in ARR, know, well we know, renewal AAR still our as more opposed rates manage see course they the base, And a one total resulting their customers. that, you coming new mix we decline new which would unlike deal Also, is are VM to to, going net question doing upfront, we our you might healthy. customer of of while quarter, customers you we of do was seen environment IDR, shift, to to know, QX. from tend might as We, a to the this balance a buying VM still like than pieces as XX% you also over go, continue decline, the in for more in ARR we've larger of your

Saket Kalia

helpful. very Thanks, it, Got guys.

Corey Thomas

Thank you.

Operator

question line And is our with next Markets. Matt of from RBC Capital Hedberg the

Your line is open.

Jeff Kalowski

Hey, are Matt, there? you

Matt Hedberg

Sorry, Thanks for guys. Yeah, the question. thanks. taking

You to your hear good know, transformational growth of it in was really the offerings.

year. feels to question. guess I there's large, to that question, think I following ARR like know, But increased your guide you up You correlation the know, a Saket's on me, my that, it for

through Corey. or I you new When look sort grew ads, guess customer we you when of think quarter, customers, this like do even additions on how know, for sizes? quarter ARR your QX, you of about And about flipside, either kind as expectations the you about just larger what, into know, into growth, think deal know, customers and of more XXXX. think You Jeff at selling what rep they of initial think looks X% you larger new sort and kind I on then

Corey Thomas

in to I'm great Sure. sorry, a I question. this, think jump happy is

still actually think of is very So really on customers going thing focus overall. we primary distinct growing focused customers, areas. customer, the courses but sort is, with very, first One, for on our we're two about when

Now, that. two I'll important sort for of characteristics add

first our overall going in platform The potential make the focus is the lifetime and customers, highest the highest ARR is we customer platform customers have value. organization because

with happy has So time. over we the much grown some actually one day growing And long. at of the done We're have platform that expense customers, transactional a at high that a comes that on may tradeoff and focus projects customers have on that higher rate. all Metasploit of the just

plan internally, platform just So growth so total for growth. still total grow over the customer mean, the That the to it's like said, growth we customer time. customer I versus

As for sort of your we how question efforts. second about developments about think

know, thing. a very actually long-term. in quarters we we the confident think good demand about near-term, we year, And into market And You the the higher are can in this market was in expected than a have you ago. demand visibility good the clearly few that's

worried at when not characteristics. about QX, long-term that, You the some know, people the budgets, middle we're QX, demand whether in get the we're looking about it's like QX, of

show some And to and some the investments making we salesforce to go to in force get and while market, 'XX. as are up we so profitability also ongoing But expect therefore, we continue And as the improved even demand we before, rightsize quarter for year. to seeing committed productivity the next we're into our to sales continue rightsize we go this actually investments are we expect to year. we this making leverage

Matt Hedberg

guys. That's again Corey. Congrats great. Super helpful,

Jeff Kalowski

know, you our net. Matt, platform one make point I'll customers, the on

platform XXX the net just customers, a increase of terms was little customers. over In

our So growth. you growing much that faster see than those overall it's, can overall, are customer

we're are customers. what customers, low ARR churning non-strategic So

Matt Hedberg

Thanks, helpful. Super guys.

Operator

from And Stifel. next our question Talpaz with Gur is

Your line open. is

Gur Talpaz

of seen the platform? over pretty Corey, or for sort sharp or terms environment, great. broader installed this the a questions. in about has for shift here either you ransomware urgency think months. created base broader the in my Thanks threat When in broader Okay, few a engagement, taking your rise past attacks of we've your and the VM

Corey Thomas

you definitely having know - created those. it's Well I'll comment just about

mid-teens one, that like, demand quarters continuing we revenue would do of to demand my lots you couple remains is of right operations. security to place of overall the the sort you ransomware, we throughout. I that we you so a into growth, know, the that that quarter, to in say, monitor of some of better I solution of VM actually the last have So say whole ago goes monitoring think probably in expectation than tie line it of and seeing, want done directly know, we're I healthy. VM remains plus it set And actually this category if environment see actually we with would

adoption think catalyst IDR think I cloud of our And of it's growth. driver don't growth. a one so the necessarily in I that's primary of

I think think that practice. and of the demand comes to I seeing digital our it's more initiatives. do in IDR healthy of the But some from one we're strong that contributors

Gur Talpaz

a and threshold? past, midterm you helpful. that potential K, long-term Or customer. pathway lens the talked K fair we per to here? And should about about ARR a in That's around the to our think of viewpoint you talked still In it about XXX adjust take is XX

Corey Thomas

gone actually up. Well that's

stuff. of explained We that cloud really deep on went offerings get haven't the more the into automation numbers visibility since updated actually to some we our

the Day. update something that so And we'll Analyst at

on higher some didn't in the Day. is getting we'll update is know, than just about at there, make expect it'll number think, data the I I be point. I but sense Sunil to the before And K that out, actually talk but you QX Analysts now, think know you what working more right but XXX it

Gur Talpaz

Okay, that's helpful. Thank you.

Corey Thomas

you. Thank

Operator

the question William comes Blair. with Ho next line of from Jonathan Our

open. line is Your

Jonathan Ho

I much if of contribution And a ARR contribution wanted first just afternoon. it there how you as to give was was from good Hi, that of can all us get Thanks. sense what well? a maybe DivvyCloud. sense of

Jeff Kalowski

Yeah.

about that, $X.X well. the in the you in of giving the specific was contribution not it's quarter, at revenue I'll we time breaking million ARR quarter. million the of $XX of know, acquisition, And on the brought out terms doing We're closing. in you just remind at So ARR of

Jonathan Ho

know big then know, your digital sense cloud opening driver these priority of what this, it. solutions? one seeing know, you you up of, and Can you're how in around get DivvyCloud opportunities. is? transformation want give both this new maybe you you to means like, digital And just know, a you Got is transformation, you terms And a some for just the know, us number of the of a that of, so customers sense

Corey Thomas

moves We'll them how at I definitely that's as most world top maturity of more and there. planning of is and it's lots momentum lots we through But all material lots well. I'd something it say sort and customers' are mind. And I and customers the become would around. mean, definitely of and talking will see different something relevant to of cloud. it's that three, to in way more our that at they on of say, I customers trying some looking about mean, are levels vary

our out continued pointed cloud a technologies innovate the we really and we've DivvyCloud DivvyCloud internally, actually around that's has that areas. with I'd have small doing there like some But is team but to into capabilities actually coming say and it's identity, up other from some Jeff impressive added other and there. base governance As DivvyCloud still it's expectation, great, well exceeded

that the actively how describe front they looking actually is I think it So operations I would lots about at of Security conversations. are more digital. in their see as customers taking and center

grow opportunity the years seeing several actually next of that over plenty to direction. expand in and we're So

Jonathan Ho

Great, thank you.

Corey Thomas

much. you Thank so

Operator

question next from Essex with of Brian line comes Sachs. Our the Goldman

open. is line Your

Unidentified Participant

[technical Hi this difficulty] question. thank Brian, you for taking for and is the

the terms color announced you strike So with to that opportunities Cloud compared penetration DivvyCloud? from that here? And say, Or up just like DivvyCloud. also, platform you're potential witnessing following you are for let's thank from that more uptick with the IAM competitive a in expansion to opportunity you greenfield greater a Governance with overall or for launches seeing quarter? of you Is And displacements? question, on coming understand you on do highlighted going your traction the Jonathan's actually this module of balance of wanted cloud the probably better deal large wins as forward, it mix

Corey Thomas

question. overall is early last market cloud its the Well, I'll start very at evolution. The with

Yeah, But some there's mostly is if two there. drivers. I to And yeah, and questions, back earlier greenfield It's competitors I of we mostly growth I view market, describe positive. greenfield. your which as one their environments. customer it's cloud there it's think So would a expanding select go

built And expansion. into it's so DivvyCloud has growth, natural actually the

modules provide customer know, time. that additional some ARR that to you over has adding also that allow for sort expansion team Second, DivvyCloud and incremental value customers we're great over capability, time, on actually of

which would continue a of customers that's capability valuable that customers. the opportunities, expand to thing, to is greenfield in functionality so customers customers of it's ability us actually to like for And sort they an incremental say provide to expanding, three-pronged I lots super have new positive. and allows And ARR

Unidentified Participant

Brilliant, you. thank

Corey Thomas

you. Thank

Operator

Morgan Hamza with next line Stanley. comes Our the of question Fodderwala from

Your line is open.

Hamza Fodderwala

DivvyCloud. Corey, for around my question. for Thank just taking of recent guys. Hey, the announcement the you you first was IAM my Cloud the Module question for

give as Just you wondering And response what you're early there into of existing Governance your offering could what any has the decision kind - Governance been? color of get to us some you space, drove maybe Identity to, solutions versus there? of out know, of the if sort kind the what

Corey Thomas

couple for positive, Yeah, I the to but actually clarification. were do a responses want add

market think us not entering as is IAM typically you about the this it. would So

me as In is let to elicits, similar of I a think sort Alto make clear. couple period that about that is fact, just our we so sure like by competition primary it introduced offerings, what here and everyone's Palo talk

also about. have rights, cloud users of think the and actually we about think that but applications and can along of introduces environments, with you also it about you management, own form fast. have mass that. actually you can But that it actually you massive a go as get entitlements privileges roles and configuration risk. very If that very And its very, complex, think And

and it is solution of is understanding what so cloud the problem automation rights, of the many access really aspects that also problem. I own mean, things entitlement that set an the and its And like that there's that to and about way privileges is effective an think so has analytics

and really automation So is which do how platform. of, initiatives, core happens to that and sort I context Identity about RapidX's our what around very cloud sort both identity, of like automation cloud on this a is be and analytics about in to you think analytics focus

So that got to Cloud that And we think other been Identity for and terminology. automation some you space, to our know, us this And it think the course, right continue has feedback path the cloud. we We've want this they far relates as the extraordinarily and analytics about Entitlement Management, early strategic invest in it I think space, that customers. tackling the we're of think that so traction. course, is of problem use We in this people given was, us already to here. see they've

Hamza Fodderwala

the macro Got for just environment, trend QX, me. thinking some about going, you were going as time are maybe remain you in gross it, follow-up recent question on forward, rates know, in know, uncertain the I'm you know, And versus know, for renewal then how And renewal that's to you Thank curious, you. And you more Jeff. it that's how rates quarters? you being? helpful. a did we for a know likely

Jeff Kalowski

mean, year, I you overall asking You're of of over renewal did Yeah, renewal renewal expiring say rates rate? done. the our the Are beginning course say rate? Not they've the year, this which the decline asking? we that at would

Hamza Fodderwala

yeah The - rates essentially. Yeah, return

Jeff Kalowski

nothing, and healthy. no seen been And still in historical at our we've It's very that's all. stayed changes range. Yeah consistent there

Corey Thomas

Yeah, we're know, what a comment. I'll doing you

we which be how frankly, very fact the out, team is good customers an focus, platform are I When our which retaining with very like, around we're that happened sort job perspective, mix rates our getting and about or forward, larger see shift overall think if IDR say, special deals, to effective important. think of upfront think we're customers, would a of take I doing customers on from I our you more with a you going deals.

forward, of and would again, that's really comes the value platform profitability I and scale the from we because the, Our over you and of is customers, retain all the both say, time. where get as all where focus go that's growth where leverage, to grow, actually

along. what we say So a think you time, And is the as looking actually retain up Day. drive future. really that strategy have of years? leverage up-sell would customers. growing about our our we at extraordinarily platform to that I I go job call effective economic going But and good about an retaining next we mix actually packaging of the both And over engine that that does Analysts and and the customers well. to mix - we'll as couple grow go then and well. pricing to from cross-sell and and actually I'll of talk strategies And think to over takes do playing strategy core I puts if that's say the in into say always the But would now visibility again, quite more out

Hamza Fodderwala

you. it, helpful. Got Thank

Operator

James. question the Raymond from Our line Adam Tindle with next comes of

Your line is open.

Unidentified Participant

the to slow shared table that Hi, in competitors stack Have donor requests, responding to is of competitive of you, was the your managed how for environment a I up leaving actually a, thanks. you've your core innovation, know, Adam. with market? just you some does you your you of customers to on of sort share This current Alex kind grabbing. noticed VM some that customer on just the consider being curious for lack noticed know, Have speaking one becoming of and that? due

Corey Thomas

the VM market. so Okay, question it's the about core

than may earlier, we of know, as recall dynamics said go You know, would we as the, much you I expected say out. think I you are I VM healthier think the I that

focus I on Customers so us and our combination think really, innovation you're do. productivity, scale that seeing of, it's ease. like And really the the

of who actually opportunity. and market. sort the I the expectations gave actually and that's question, we're in our customers of customers to see about talk that. the overall, around that and And are quarter to So And last long-term an frankly VM innovation investments looking Vulnerability which in the drive your as make with we then agree VM us increase confidence continuing resonating durability at like players the market are Management to that strategic well

we market. market. overall as internally in And much so the continue And sustainable our taker about see do share ourselves of a very share grow that Vulnerability how is focused to team our very, we Management

Unidentified Participant

on follow-up, the Okay, do quarter of it may. deceleration deceleration on have slight a you guidance if just color have in looks like that? any Do you any this to of the perfect, commentary into year, implies ARR kind growth, I end any thanks. a there's And then

Corey Thomas

think the focus aspects XX% about healthy, our when sort think in ARR ARR, customers. see that is we growth, extraordinarily sustainable, we I real Yeah, this is And especially macroeconomic we platform when our especially overall environment. on it our going around mean forward, of like durable of

You'll a very, the we actually talked of of increase pandemic. of very that we also that a see demand that two with actually the healthy to lot note do And paused some environment investments I making of we're capacity, one back periods the had sales to over that about some earlier because our mid-term.

Unidentified Participant

so Okay, much. you perfect. Thank

Corey Thomas

Thank you.

Operator

line Needham. from comes next Henderson Alex Our question with of

open. is line Your

Alex Henderson

hear you you much. Can me, very Thank okay?

Corey Thomas

just fine. hear you can you. I Thank

Alex Henderson

Perfect.

like? you're expect line? clear specific product great idea top faster your force uptick you your expansion of you over times getting look capacity your coming it. margin expansion that to leverage? expansion R&D a of staffing give do to what to Do expect to to the is the drive of Can on you've and suite salesforce multiple margin know, within than Or from And you continue increase to G&A Or about what's line? going that targets are? sales You've is or course me call. rate your your talked of us rightsizing some you It's the got sales great that

Corey Thomas

question. good a That's

Alex Henderson

Like an competitive edge? here there's opportunity to your drive

Corey Thomas

question. Yeah, great it's a

in demand. to So to what do But business. the leverage I see we would do see - that, get continue expect we very, very say is healthy overall we up

in be what overall that while for XXXX the model would the like would get that describe focus continue actually the we'll we severely on - business. ongoing on way gave You back way growth growth sustainable we year, are to to I know I profitability last leverage well, it,

Alex Henderson

Okay.

lines all operating the marketing the So or leverages across and sales specifically? across

Corey Thomas

so in it practical your We to Yeah, are more actually marketing is I looking the somewhat offer of know, year. I at of just COVID And to question, to sales say expect put core special. inefficient drive across is, would would practical make no, sort and - demand is to average you know, improved like we're sales enough this say productivity that terms productivity think it's planning the answer And see No, in you that, we generalized growth? often that, years we year. I this actually terms do sort put is answer's improve

sales So that efficiency. the improves to I would part expect be

Alex Henderson

wondering larger customer. that that the up I But was equation accounts the that accounts, you're per you're now also accounts? increasing if Then - of look more there were second if revenue could and strategic higher the if question you moving on that Is well? average I at clearly your you of size are to customers the customers, into penetrating part as follow-up

Corey Thomas

element Yeah, of happening. of I want element that's will of equation. question. the the I equation the would it's I imply say that's the say the But an elements that to it's only of don't equation definitely one yes,

for on the customers. ARR even of growing are also We midsize customer

way that know, we're and at So of sized different you the looking you it, the dynamics we about got think cohorts customers of that.

cohorts. but And first adoption to answer we've also different see really expansion customers. want question, having about within yes, is of talked we what the increased But and to we some so ARR want success to platform, larger see penetrating your at which actually are we the sized greater enterprise

Alex Henderson

very you much taking my for thank questions. Great,

Corey Thomas

Thank much. so you

Operator

Our Instructions] the Moskowitz of comes next [Operator from Mizuho. question line with Gregg

line open. Your is

Gregg Moskowitz

afternoon, Okay, thank good you evening and very guys. good much

level quarter. execute to you deals, one lot don't So of head-to-head high continue are often call this at SIEM a compete a vendors SIEM all very and out you displacement that there know you I for IDR. did out but with Corey yet there

you're I'm point curious so speaking competitively you And if any changes would also seeing to? that

Corey Thomas

think I of firm that that, gives of foundation over long-term. the leader of scale, when a at a And, to a we're And is No, slight continuing our not in the these market it would I well, competing should the also a really you underlying we customers, like lots off next SIEM lose that, greenfield, journey, still potential when you start on you are say board. let's And across actually now provide won say is doing couple be we the really that us the we lot mainstream of were across buy mid becoming it small, as our started the with what satisfy I and lot, upside we just one growth of know, board. enduring years. short-term, platforms, but effectively leverage well but mid in we know, say, the definitely, few, to and look a a we would off

Gregg Moskowitz

know you that And been be your follow-up, area strong well, if helpful. as and wondering federal Is about some so, on something we're Thank if very traction in the vertical? improvement that's could why RapidX you that may us then Okay, hearing you. historically. not has getting maybe update you're particularly just seeing business. been for federal in a just that as I we've

Corey Thomas

would budget I the federal vertical Yeah, stable. is describe

I state when together. think public at we have both practice a you look and federal sector the strong

different And it really that a the is and infrastructure. patient our government, primarily that's about federal tow a stable, the actually seeing how aspects one to platform federal think moved that SaaS but in we lot way infrastructure roads, I its to a we're go system. the expect through it's that just platform of time, we've now to cloud we're a of road actually have works actually the to over in while

Gregg Moskowitz

Thanks, it. Corey. Okay, got

Corey Thomas

much, Gregg. so you Thank

Operator

questions. And any further not I'm showing

back So CEO remarks. to over I'll now for Corey closing turn Thomas, the call

Corey Thomas

I all today. much, and Well, I for safe just thank time. you. us this to so you stay you And Thank joining during again hope families want your

Operator

Thank Ladies and program. gentlemen, this does you conclude for the participating.

a Everyone have You disconnect. day. may great now

Rapid7 (RPD) 4 Nov 202020 Q3 Earnings call transcript