RPD - Earnings call transcript Q4 2020

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Fourth Quarter 2020 Rapid7 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I will now hand the conference over to your speaker today, Sunil Shah, Vice President of Investor Relations.

Sunil Shah

Thank you, operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's fourth quarter and full year 2020 financial and operating results, in addition to our financial outlook for the first quarter and full fiscal year 2021. call our Corey CFO. the and our on Kalowski, Jeff me today Thomas, are CEO; With website with We've the financial is our wire our metrics and investors.rapidX.com, distributed earnings it now press file. posted presentation updated company the release over at and along on This is live via call webcast. broadcast being audio will available the investors.rapidX.com at following And replay until call, an be February XXXX. XX,

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

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

Corey Thomas

a and I and this XXXX across the moment. strong our Thank remain afternoon, to goal, with recently pleased of effort our vulnerability I us that the cloud Alcide, all Thank Sunil, to for year growth quarter expanding expectations large team you, acquisition XX% fourth we report our joining growing by Full ability security cloud. you their ARR cloud. as RapidX full strengthening demonstrates both call. will am transformation XXXX opportunity, customers and our that management. operations the everyone. which delivered to To in announced $XXX security for transform to good began touch million of capture earnings help steadfast into to year security on today in RapidX advance and the a our XXXX and exceeded for finish offering solutions organizations securely further

on customers amidst that many. provide recent begin I some detail Jeff challenging and again back on will clarity for turning position will enduring of innovation I touch into engagements guidance. Looking XXXX, customer a and I financial confidence our sharing to long-term and briefly serving it am and today by year resilience our RapidX's results to our before and focus to insight proud prospect. teams on goals our commitment

with cloud Even ongoing and events, sobering this in risk alike we reminder security native systems Over the investments that business for have to security events to XXXX, by as throughout massive new initiatives. digital digital landscape back the a manufacturing, Enterprises more component investment, accelerating are to care These our reprioritized transformation as prospects overhauling the greater. and critical a cloud-centric been has and seen we in industry events prior with world. organizations months, a focus unprecedented build squarely in transformation lines increase few. the focus These security digital their never health of saw alongside customers and these to partners. retail, customers, applications global distributed solidifies in across boards respond a engage are last digital amongst cope are an put teams, to two investments. mid-market disruption of and cyber to midst education employees name But escalated security digitally recent management security happening was a in

to they are technologies and trusted look that was their customers for that the Insight work technology and security customers with home who disconnected upgrade is securing their set to consolidate detection expand engaging could better footprint, a spoke the strong enduring partner monitor to we saw response as visibility footprint customer the modern quarter, risk, investments. volumes During our an expanding assortment across have was they stock They scale for vectors. actively services, Fortune single with products, challenge experience. enablement expanding cloud is This initiatives to threat retail them. XXX customer, digital transforming initiative an to with existing RapidX for demand Platform with from beyond One an of their investing case to fourth of tied security

two in within time customers For this security weeks existing is Platform in critical to this and the who the deployment for purchase. This our was Throughout agent, dynamic their monitoring InsightVM success environment. with native adding this Insight IDR to unified customer, because Insight customer resonate actively we our threat on saw value their international offerings customer architecture alongside IDR today's cloud centralize reason. part, XXXX, by

agent experiencing the IDR both the ease their engage This value monitors event. detects external attack seeking and visibility running, up security surface. and also along same love threats of are that it vulnerabilities, for time. customer, provided For as They platform healthcare with with international example, the improve result, customer and a quarter, the across getting unified purchase in who a the we visibility fourth at of after the InsightVM threat a realized

Another they enduring security turning initiative visibility are cloud for are to is they with that, their improved insights, accelerate as and investments, and RapidX grappling limited environment. cloud in customers control

XX% demonstrate management our RapidX's deals security deal to RapidX future existing and clearly validate both an and driving The we the vulnerability security existing scope to strategic beyond detection we experienced of This increasingly our in result for is Upon was across RapidX's from AAR. by example consolidate quarter, than VM, in cloud replacing the our our continue success customer. technology cloud technology DivvyCloud, fourth this approach the exiting the with routes the year. customer see them today. of cloud demand security growing expanded security existing resulted automation A quarter, full onto operations this transformation customer in in leading strong They best customers. great security and automation. again, that native a to new cloud to security solving grew XX-fold cloud this company a interest deal challenges the their quarter capabilities the which recognized nature These of become and security solutions offering. its increase a for customer's to evaluating power RapidX environment response, greater to adaptability for of in operations During once over

expect remain value this opportunity our the build We experience proof technology in and an point Insight leading Platform ahead momentum, we are to continued One excited customer differentiated is We delivering with market early for XXXX upon a and platform quarter saw we on look combines to as focused great success. tax that validation about fourth motion. the experience. the

but visibility breach, them. remediate improve coverage improve to we ongoing InsightVM to a make and early success for a customer Insight A who NTA to other throughout to our InsightIDR Coupled a of a journey, compelling for opportunity strong signed our and we to enhanced add-on Specifically, for continue see InsightConnect our products, opportunities platform XXXX. attach and automation analysis tremendous here, of significantly point desperate recognize and our tools easier. automation across They This see operations risk, drive response quarter. as platform. for our was was experience We the evolve opportunity this with on we'll the They early we could security managing Platform. driving responses pain new purchases record capability network engagement InsightConnect. modules, is deeper and bundling the Insight but saw in purchase traffic single remain detect a endpoint and with an quarter major threat Platform manufacturing telemetry packaging customer to customer great example in looking a scale that management to and customer, Insight demand to

the prior expect year. will support over We ARR XX% our $XX,XXX customer, at in growth durable of which growth ended the per this year

the now Turning with to starting innovation, cloud.

to the to and focused process. cloud of at As is security intersection the delivering DevOps DevOps the companies sits the that of migrate critical is SecOps. RapidX on influence cloud,

to of I'm Alcide. share announced recently So excited about acquisition our more

one identity Shifting posture us and market in solving platform cloud customers designed deliver by cloud. to time capabilities they important organizations multi-cloud of and cloud Alcide visibility. the stakeholders compliance, must the security native container to is enable to place workload delivers visibility, today, Adding management adopt leading where cloud developers without sacrificing that in in to vulnerability while cloud Alcide's security DivvyCloud cloud to monitoring our forward existing cloud platform are security flexibility and and meeting workload to RapidX's need DevOps real Alcide's note is that continuous It to native only positions providing rapidly across step not risk security freedom leading management. the and threat another The protection the protection keep time to the innovate development, detection. environment. the lack cloud a manage Kubernetes teams, As cloud put where for customers pace. us in security is acquisition

risk brief to Last IoT across directly managing up enduring that devices, gain OT threat our expand these on and often footprint for their connected and those a to with so. visibility a visibility improved shared asset the teams our security environment. core IoT to business focus control to joint visibility environments, so strategic digitally year, InsightVM, Security responsible remain three active ahead. but I organizations as Medigate, environments. security perform teams and the and As increasingly will footprint. RapidX's enable integrations connected today, These for medical the and a scans industrial in lack provider, so are protecting holistic with visibility cybersecurity with device a in it medical we partnership respective management goals information recent OT, look goals. customers provide Wrap our with do more in can our SCADAfence, and market device into to leader risk update leading

is goal operations customers enabling in to security their cloud. be leader first Our around the a to transform

security to meaningful we XXXX, position our invested security. to continue past will in our journeys. channels secure digital the year, their built We are customer in have in a solutions innovate, leverage product and customers our capabilities during the cloud as recognize Over cloud multifaceted that we and transformation

per second Our term our platform seen expand our to The validates have long is success opportunity distribution early ARR customer. evolving XXXX goal with to our accelerate expand we agent. in motion

broader to to more the year, Over customers and adapt coming for a lowering we Platform set solutions. will Insight easily products of on barriers our best-in-class continue the focus our

and operational Finally, all. investing would have drive RapidX done ever growth. on lies compelling In for to continuing make market we and opportunity, to which positions while driving aggressively We're free focus us the growth, behind and our year, while durable accessible opportunity to that efforts large we long largest this Moreover, third and execution a entire macro absorbing scaling continue leverage, cash security operations navigating goal volatile team long best term past proud acquisition ongoing invest while our so, closing, thank we excited to is environment. about to flow to maintaining operating like to our over and for have while strong discipline demonstrated a ahead, I'm the the term. as profitability, their

the Before to over on would upcoming take Investor Virtual CFO, invite the Jeff, call you to of I like all of our I Day to XXXX. afternoon a turn March our XXth, held be to to moment

our out can Thank If Jeff? you have the you attend. received invite, IR not to hope We you please yet reach team. all.

Jeff Kalowski

afternoon, Thanks, Corey, everyone. and good

during management revenue million the Before press I transformation and of today's ending see over ARR except we $XXX.X year. than begin, a and Full growing prior all and prior over the Insight better strong financial we as to expansion reconciliations $XXX.X high finish our revenue quarter the results The million. durable our to prior pleased GAAP experienced customers their a XX% continuing and help exceeded products will for demand full year in for stated security to the grew earnings ahead. margin to Total strong results, year brief guidance, turn year, today the XX% are $XXX.X our million found and in measures execution, for our solve and financial vulnerability We're RapidX of We XX% products between XXXX. can reminder discuss year, that of non-GAAP of business end RapidX growth report revenue, growth confidence invest across be fourth as unless solid non-GAAP strong release. over resulting challenges. Platform delivered otherwise to reaction to year expected our the fuels

the over well As way positioned cloud Corey our into operating is this results, $X of solutions, and reflected our detection transformation shared growing our the still securely year. capture Insight response earlier, grew an advance we've Platform, automation once This demand for for offerings. which top at over opportunity. stages and and investments. This we strong high to customers cloud to of by business, see the the the line their delivering early led help success enduring is is performance our top into again, to organizations of digital we're in while investing million operating back our security profit cloud the growth guidance in secure XX%, market for full of and end RapidX as with evident reinvested range

both was once balanced full throughout a serving the Our ended XX% base, contribution in for of customers and the success driven customer over transformation new our growth in from existing saw X%. year-over-year year, of the customers XXXX of we year. new by over continued business security again, as globally healthy with ARR We year X,XXX increase solutions our representing

to year, experienced of and footprint. also as great more relationships digital We transformation throughout existing leverage expanding the they with our success customers VM products their security growing secure

ARR with XXXX ended prior customer the we growth over result, a XX% year. per of approximately of As $XX,XXX,

revenue products total the grew end guidance and high revenue $XXX.X grew while of $XXX.X our year-over-year Fourth XX% quarter million fourth million. results. to quarter year-over-year, Turning of above XX% to was

XX% the business quarter was we innovation. the fourth growing $X million, expenses ago by grew and geographically, year to high focus and revenue from a net mix for the year XX% to $X.X reflecting XX% was up of grew of of of year by XX%, in offerings. XX% $X.X representing the grew in the expenses by investment reinvesting slightly compared than XX% of prior total down Sales revenue ago, support improved driven was loss XX% XX% from out loss margin invest year-over-year, the quarter, quarter growth from at comprised cloud-based to and top prior line period. marketing to to XX% total over range R&D was X% XXXX, quarter growth compared grew with year in and for year-over-year strong end XX% revenue improved expansion XX% our and continued fourth guidance operating revenue, coupled $X.XX. slightly of expenses and in rest Looking world America the fourth revenue. as QX, profit of million and EBITDA continue and XX% down execution represented XX% of for better in durable ahead. G&A quarter per gross Total the a while to share North our Fourth approximately million quarter ago. income grew a of the performance of slightly revenue reflecting Adjusted of XX%, on our

our to cash, XXXX. balance operating million was $X.X investments end cash in million $XXX.X QX. the expected, of better Fourth at by and and activity compared ended billings QX Moving cash flows. sheet driven of quarter. flow the of cash collections $XXX.X We to equivalents strong and than quarter million with

cash a expectation $X.X result, operating exceeded our flow of breakeven. full approximately of As prior million year

During XXXX, resulting our full in we year capital of $XX.X facilities completed of expenditures a significant million. portion expansion projects,

to of We million XXXX transformation, strong all demand that of to guidance are of for Shifting experienced we full architectures. also improvement the modernize our their thesis resulting a during need software flow year free half of XXXX spend, security organizations from The in cash the now XXXX. $XX incurred year the million. million, a validates second $X.X driving loss capitalized digital $XX.X in notable loss undergoing sizes of prior

are their cloud. security they best to cloud, operations leveraging switch Insight Platform the into the lean in customers As RapidX's and extend

management Looking security automation continue XXXX monitoring security our behind provide plan cloud and customers. ahead, in investing enhanced to offerings best-in-class our and vulnerability we transformation to to capabilities

uncertain an resolution see growth opportunity of drive but due risk durable magnitude some that to compelling we timeframe. induced trends, pandemic a in to recognize these XXXX, remains Given economic

for in that term with mind, ongoing business are by start optimism As near our initial our a expectations. year health let challenges. term we XXXX, balancing expectations framework global we long With sharing for result, full in framing our

XX%. year we the For of growth total full expect to deliver XXXX, ARR approximately

We gain likely the for will at XX% the be broad-based total as $XXX revenue anticipate We of to in to range to approximately share visibility aim million, a year. increased expectation, to more lightly growth resolution to pandemic year midpoint. the million second during this relevant representing - of updates the of half we the a $XXX

our framework. to investments income the million ongoing reflects growth operating range of and a non-GAAP and on to still $XX profitability expect while for We $XX in full This delivering year. innovation, growth million in be

As is to term into any to upside the long our support objectives. business typical back approach, our we expect reinvest

to if-converted is X, The net non-GAAP on for will income. XXXX, standard the non-GAAP January non-GAAP so per impact invest at updated our the principal GAAP provide a It debt with beginning standard, standard reported from in equity. to will I to increase brief flow not in convertible convertible accounting the million million Before focus non-GAAP mid us, of full this updated guidance, any $X.XX The a will average turning share now standard our the XXXX-XX EPS the debt on changes The our among issuance We outstanding. EPS free issued guidance. is accounting full and result aside adopt debt our term, The things, not convertible range which sheet positive adoption related in for, the will the an to to on anticipate no calculation stockholders updated With on fiscal updated way as of XXXX in year ASU our growth for durable have standard business. our no $XX.X this the interest basic per the expense we on for income also and over to that year net $X.XX Based positive standard major of to basis, operations. less With our EPS a impact modified weighted expectations, early new if-converted net our facilities We estimated full an cash have carrying to for unamortized expect use a to diluted effect on our this year other offsetting behind value, flow impact debt year the loss XXXX. dilutive start costs, value of as diluted that, current the expansion balance intend of be of the EPS we our our accounted require cash shares on reducing investments retrospective statement. method to non-GAAP time, of turns long back to based instruments. for scaling share, a the for have diluted $XX.X our an is method calculations. decrease of income standard XXXX. do on share per

we For the to free flow generate full approximately expect year million. of XXXX, cash $XX

cash and define we free flow capital expenditures software. less flow, cash reminder, from as a internal-use operations, As capitalized

Moving to quarterly guidance.

positive full $X.XX quarter excited in and And operations expected growth to have and - we range scaling the We'll net of of For million quarter the profitability time first as best while that, be and accessible the basic $X.XX, non-GAAP shared now to support. flow anticipated the growth, to material includes In XX% With XX%. based $XX.X make to cash the the to XXXX questions. quarter to of call anticipated million, durable of to all. income appreciate drive of guidance anticipate on $XXX.X million we open million impact for outstanding. an term, which our your first over XXXX, the Operator? long is security work range the be non-GAAP we loss $X.X we as million. We be Note to revenue total impact weighted any in loss to and enter of is opportunity loss as about first we that acquisition, a conclusion, to our of our shares of financials. we year share income operating share which of not remain Alcide the a the the $XXX.X anticipate weighted $X.X for a in per to average range to XXXX,

Operator

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

Your question, please.

Saket Kalia

you. for first maybe Corey,

but parts talk little a this the on portfolio SolarWinds customers And about are you speak talk relatedly application security? other saying of you maybe RapidX's management. the just post breach touched what impact bit that in about remarks, of this SIM with like and on importance can vulnerability prepared You how

Corey Thomas

Yes. It's question. a good

we've so of to breaches that our can a you customers world been the understand at imagine year. happened of times, And end last how the the spending trying see lot post

I think a couple there's observations. of key

first, long The I and is long of most back and well the think probably term important is of forefront and boards teams the which in demand for that management minds, sort actually security bodes term focus.

The The the they're of second thing, into you task. not and the with that, to have question identifying we’re a remediate. as vulnerability visibility strategic. people though aware most just thing the to direct vulnerability around that That's you can having around also visibility it's long of also is as talking vulnerabilities, imagine very see that the term your is management management it

very question, so and what And do is seeing strategic, of vulnerability in relation on and In they we're your hot they are is, detection management just a as to actually the at are right very, see focused other that as seeing have need, right visibility they now. But question the as environment are urgent how do that. attackers part and people my I looking clearly now. response they

what of and acceleration and detection is a urgency so And an see response. we around sense

how Indeed are have detection term environment thinking bodes response. in urgency in especially than the is our my driving are and the fundamentals vulnerability portfolio of time frankly, manage attackers - SecOps, period about the around, their people they think driving you broader overall. high the our do health both and management all in about long transformation is cloud, now cybersecurity, clearly attacks which recent when for of digital we is well I So

Saket Kalia

Maybe the how related cost costs including term. on of that my margin XXXX, sense? year. back talk you. you as think coming that you in And side, and travel maybe formula about Does and sort Jeff, just through about can remind some long all of up talked office and follow part thinking balancing the margin that growth of about broadly, about just for views us maybe how kind make just you pandemic you're the

Jeff Kalowski

Sure. question. good Sure. It's

not wait dependent in travel. second would So COVID. look But increase. expect a half, and the see look, costs what in increase to it's, any we're half, the significant we in attitude pandemic very We plays we're our those first see with really the much that on how see expecting would out. gradually It's

increase to been very expect talking what I extent our we've then our growth increase the we'll respect to the that framework expenses. that With framework, at and most travel same want profitability would are those - to favorable, So it's way. I companies looking and reiterate And it about.

growth the to our do would in March a as in our we that - at we we margins X, dive that if point. leverage. So to planning XX ranges, it's modest an expect long we're If would term expect and do X% increase we'll would Analyst much into it's Corey XX, that in on out and point to Day X If XX%, we're XX% range. leverage XX, X% over XX% be less. I mentioned, would deeper to

Operator

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

Your question, please.

Matt Hedberg

about taking ARR of a XX% your talked was really customers combination expansion. you Jeff, in growth for question, guys. my XXXX and growth X% ARR deck in Thanks XX%

maybe how the at the of guide on As more you both XXXX around think those, And I a look the point a starting ARR aspect as expansion. customer do the components well? the churn bit to new of guess, little XX%, story side, of of you on

Jeff Kalowski

Yes.

mean ARR in know, So it's the and growth I you in customer. customer, levers. we really, respect as per the to ARR customers growth with have multiple per

So we have customers. new brand from ARR

Historically, new, to sell We have ARR up of It sells balance. that from and and and customers both a cross sells. a is grew healthy new up And mix and three been this brand from sort cross base. the year, from elements contributed all XX/XX sell. it's

This it customer. it's customer X% a base. pandemic, little probably XX% ARR per year was the a the more With leverage ARR XX%, and XX% sorry, about growth. I'm growth towards overall leaned two bit Those drove

can to respect difficult are percentages. mix. our growth, at look think healthy exactly predict those we those to - customer look those - XXXX, would retention you rates levels our to expect the rates continue. But of churn With healthy at churn, sort levers respect same I think can It's the healthy. you with So on I to are

So positive. trends don't Right now, that. the that any alter would we see all are there trend

Corey Thomas

to balance. our we with side momentum building potentially a would we're customers. on would expect balance customer What expect to and that per the Yes. side, And overall say just I we're really just that on we're in response because platform on from seeing Jeff, customer see the seeing is slight the the good equation follow-up shift ARR of brand, I the

Matt Hedberg

question. Corey, do in that right win, Well, nice be obviously about of this represent material sort the second is think per - talk that's driver customer. that's material could there you out of but a at broader that's some the messaging, obviously other to do quarter, you like driver you seems some drive upside can to just, things here guys called that because adoption it we're obviously - actually DivvyCloud a point? a hear that How could you great where about it dovetail now great, of It was ARR it's at to and my

Corey Thomas

Yes.

really year, be as force. you we're, to - broader especially started of This year, to into DivvyCloud expect force. enterprise So RapidX think the the we having last exited can for our we've accessible where process sales Matt, just fully sales it you more as

reflected selling our in and can larger partner organizations. you a also as DivvyCloud think think about it I team

business so And new is we're very one, partners. actually healthy that acquiring

that's so big area. focus a And

successful and feedback, about to distribution, that think in customers adoption, we're DivvyCloud pace make to way but that in great customer it a and onboarding one has increasing is we're a great steadily in way. way sure So the a gotten

Operator

from Brian comes Essex Sachs. question with next our Now Goldman

open. line Your is

Brian Essex

Thank your becoming priorities? prepared where customers' of mindset to taking question. looking Corey, how Maybe you you put is in kind there this regard should spending around priorities shift as you though with strategic, some - affect would VM thank mentioned, do you budgets. cloud you context And you your was to the in the feel within about beyond VM and security. can much, you response Saket's enterprises mentioned from very for question, I in work remarks, into then, think, talked home And our

Corey Thomas

Yes.

you So to mean, specific VM.

Brian Essex

VM platform Yes. and well. as broader the kind of Both identity

Corey Thomas

Yes. No, absolutely.

VM way one long the it term of benefits to is I it oriented. think about strategic, but think So is are

you're urgency, in we have same around urgency, people detection, like see in building security And automation the were stocks. That business. it people it have as continuing level actually as so doesn't But management seeing vulnerability higher planning you see and of same some see response what cloud, and we that management. the even parts out VM, we their continued saw where but growth does the healthy the of is We're and as stuff, other the operation of expansion areas expect to uptake, said, in our some not some urgency, in general, growth vulnerability solutions.

Brian Essex

Understood. That's follow-up. Maybe to helpful.

that was what you and you to customer were their disparate them. new referenced scale little who more using opportunity Could is a a they around the displaced tools point also You a looking have what addressed, the security manufacturing provide there? of operations you might management and detail for and pain

Corey Thomas

Yes.

So and speak we operations was really what style. were say on entire It's to the finding our thinking how broadly not both program a comment holistically what trying to customers a more even about I don't do But security out more is me we're new how build would are and in they security And they they our little more robust competitors. customers, of infrastructure. a practice. more typically upscale bit surprise more which started is about

Brian Essex

the was platform or with broader you the because this - frame technology, maybe of that? win of would how And do had quality a kind how you it

Corey Thomas

of first that be do. best-in-class in deeply what believe above. I actually win and to only way foremost, is for All the we the us to we mean

a on that have and we And platform common it, technologies a we accessibility of best-in-class ease strategy and solutions provides solution. that's So the winning of use. find

a best-in-class consistent top And say, you ease we If winner. customers one say and it focuses and the and you that's a That's that in field, productivity that technology, resonate you of its have on more. X your platform actually use. message common give more of a on

Operator

William Blair. Ho Our from Jonathan question next comes with

question, please. Your

Jonathan Ho

over past - I to And quickly, some in seen you're the how sort the container. What Alcide start investment what can add increased around also is maybe your you with just that Thanks. out wanted the DevOps growing have like, sort portfolio. particularly year? and inflection of acquisition of some I to cloud guess, market seeing now environment or

Corey Thomas

can question is No. as because It's a you fast, great could moving well imagine.

you we're helping our operations containment their our people infrastructure security focused helping the their infrastructure analyze so holistic And we for on automate have about platform, goal same people helping cloud and think people to of do be and visibility, that if hands environment. cloud security of want the We the security. down. thing for is The

higher approach consistent because And approach a actually protection environment. doing what because to that automation you in a cloud the DevOps Now, slightly on with fits that's, slightly more frankly, with cloud that's have both need higher a more focus to things.

And specifically. Alcide in focus, you and evolution. was seen last as momentum we've about relevant our think containers. is We'll the the about pickup in that's see actually - around Kubernetes so around a so big we shift change think why The bigger year, and a

And general important, so market. seeing in we approach, and the seeing think but and security that and take about broader Kubernetes our of we're lots scaling in container cloud a centric say and really their scaling believe we're that absolutely essential into customers frankly both overall cloud people the and investments, container is

secure how both aligning about that the cloud. capabilities. great provides far us doing about As that it visibility, specifically actually cloud But think security around you think overall think the really our capabilities us us but Kubernetes. gives give posture do analytics we what enhanced as and couple for protection management, can Alcide environment in Kubernetes capabilities it also One, about it of does, a both different help that tightly

Jonathan Ho

it of customers you products, the friction easier recognize about are the to then And order what buy maybe the talked some opportunity? of can making in Thanks. you're that - to multiple some reduce that targeting for that initiatives

Corey Thomas

it's Yes. a great question. It's - a

a big So us. area for it's focus of

a reducing overall. approaching friction of of So sort different actually ways we're that couple there is

as is, and of those vary some some though they of prepared thing pricing approaches dividends. and first about saw The the how you my packaging. can earlier that how either even remarks about for paying you in imagine, just early you are commentary and packaging pricing of the And some can actually making you simpler

the And more But path. so important we're that do aspect, second is actually quite optimistic the is going instantiate in frankly which how we along about product offerings.

team allows and to that what And the select on be infrastructure able without in that doing the time. that an usage things that people what in the able time. face and over it the that from another of pivot just the supports so we're the in one they to technology are the focused to value they when is That customers making that they we're the also make solution get to about of having to lots heavy platform build upfront going are but dynamic heavily two Those need really solutions, appropriate building for need in really context to that decisions then our actually in they're be not ability of - future. to solution allows to investments over itself, investment

is necessarily about it's problem think you to security, be. know you don't start a that problem year, If your what's when going a you

able be to have to would want want we or they those have to to what dynamic deploy either be actually tackle - as problems. priorities we customers So their actually to solve do and fast they changed different is problems, to technologies RapidX

Operator

Adam question Tindle with next James. comes from Raymond Our

please. question, Your

Adam Tindle

mentioned portion could to healthier to you solutions I'm what just they wanted of year, I'm ARR similar think wondering, amount us but percent wondering I are new a security the new S-curves ask, implied you profitability profile. touch next if of help And much XXXX are ARR. on business. if that secondly, that driving they at of XX% total in this with could point? going of profitability that's you transformation for add are metric profitability hitting the and ARR the because you're I

hitting profitability? if wondering they're So some S-curves on

Corey Thomas

Yes.

take the initial. Jeff like I'm the tag going I'll sort So about of with total. to team

security we transformation to way one think it's growth. durable is that So see it - providing about solutions and

to margins would expectation of is our see course continue actually We way. growth it to over improve expectation is a And of - to that, We saw last that that over of year as expect manage pretty, internally scale. year. this our focus tend to efficient And things on in and continue as sustained expect so operationally is our course, hope we it's our going provide the the to you that XX%.

the dividends we to high make improve. as margins but the think I we're things in to happy future, investments on early for scale, expect

we evolution, It's is it a in different that out it's continuing good is general, of actually - solutions security profile. actually I but little because this XX% in and ARR. a scale, is growth pile at actually year we bit continues XX% with reflected way continued margins broader the growth know, high over our by would margins share have reasonable different of things stages I trickier And that over what the a transformation both we new Now, on which total at time. scale have and the say, year. laid And and last improvements

Jeff Kalowski

total of quarter. and each security question a third, mix still becoming a was, your over products, in ARR percentage over think third greater the percent of rapidly transmission growing the I And what it's a

Adam Tindle

of T&E increase half QX, EBIT when based back? expand. the Jeff, the guidance, that offsets operations are What just to back it. it guidance, if is second I going what QX looks, look on just Maybe of for in comes or clarification which costs the QX, back, am on the had at XXXX come mechanically back there, because back, at least, a from understandable. coming are costs costs weighted the the QX missing half mentioned but is are to I quick that you going income But

Jeff Kalowski

over higher increase revenues year, me, of of Well, higher the of course year. and excuse offsetting course - margin over course the of the the the remainder OpEx we the the have the over that's

So QX, more profitable, we then, get prior expenses, and as progresses. we the much marketing have consistent years. year some That's with loaded pretty front

Operator

Rob from Sandler. Our next question Owens Piper with comes

Your line is open.

Rob Owens

that business, when opportunities, backseat replacement of you kind is you of front? Corey, the the all do see that programs, VM of expansions strategic you're side and the formalization the can of of Q&A it's seeing existing around traction opportunities think how Maybe mentioned But I of historically. in through on above. taken function where VM prioritization us a walk on you this a

Corey Thomas

Rob. question, it's I a would say, great

said you think, pretty I consistent.

the see larger and international of true large. market, about upgrading the enterprises, When maturing so mid-market, still as And we and think we program where of still that's the about the also think capabilities see that by you opportunities our churn. see So there. would I we

maturing You'll side they but heavy the from focus is equation. capabilities it's of greenfield, have a and say, actually management the this upgrading place what a vulnerability on a in

Rob Owens

competing upgrading Do into the as of is know or be should you're that we run source, kind all you it see against? capabilities open vendors those much

Corey Thomas

- still solutions I there all more they the to traction it's know. in exist. is some primarily out vulnerability enterprise changes wide a some leg still people But see I still sort lot in people of of like vulnerability of management great, solution. there's management still would but say, out enterprise. secondly, would sort - things steadily, do have there, we they legacy It vendors are that Netflix how thinking looking say, cases, and upgrade you are provide there like and and about

Rob Owens

Jeff cross as start to seen sales the that selling? retention and down, other around when some rates, Sure. on should And that trend given way, we expansion especially of move the then, commentary have positive the

Jeff Kalowski

your is XXX%, asking that question the Rob, on about, you're what is

Rob Owens

movie start we lot at and should takes Yes. a see I other number? The know way if that all. of there's a when puts to the and - XXX to that different

Jeff Kalowski

Yes.

couple points on that. a So of

We're don't products First their towards is year our it. managing things the up If more they over off, the more with But that, sell, transformation up we cloud you security to sells less but there's right it. we metric. tick are not more up. the we're course of number know, buying When VM, upfront. and change that ARR now, managing as could it the higher to XXX%. to that mix manage environment because versus shift not get there

Our key ARR what we're and ARR customer. That's managing to, is really metric per

Operator

from Mizuho. comes question next with Our Moskowitz Gregg

please. question, Your

Gregg Moskowitz

potential curious well of doesn't product it thinking in SolarWinds your I'm you're your anything the your breach just though Corey So the about as in offerings, as guidance. sound how embedding influence as services you're XXXX. to

Corey Thomas

Yes.

maybe anticipate because in question is, And focused the repeat to areas changing of do service the breach breach. heavily think - most question were because I on the would say our the to I some no, we relevant SolarWinds the XXXX. strategy that product I to SolarWinds going I'm are So

been mature we If to before We you big the to response, deliver people their I vulnerability faster. lots strategy and think need have solutions is solutions happen that get management, about in about priorities of and than talked what sort good of detection the helps more automation to that spot are people actually highly this overall. a with where resonate

Gregg Moskowitz

And then follow-up. a just as

the announced to you've So past security introduced over entitlement PSTN cloud nine acquisitions months solution. an covering workload infrastructure and also you've protection,

product your you via cloud you would also - portfolio? cloud add to security capabilities to M&A? assess are looking how And then, still security So now

Corey Thomas

I - as attention the a Yes. one That's market, would their market is getting also so big a and digital that and about they evolving the efforts lots transformation it's both it's of overall. actually is for cloud rapidly customers, it. is think security backdrop priority is

complete invest robust the that most of we're cloud solutions in have change non-stuff, that evolves. market the market to as I one the continuing think and we in in-house, organically

wonderful a have security position opportunity us plans that's anything customers their to could growing very cloud stuff. But what's challenges what or to think we have a we customers facing, and typical go cloud is that which to an feedback else, the for is challenges I don't to that security. we see actually about tackle needs And So there. and acquire us extend out the leadership all roadmap they're said, give in robust have

overall what reasonable market. occasions, Alcide. are reasonable of there a right cloud has solutions Now, a one do make have timeframe, Divvy see security may something or I we in a we similar now, and it it's leading to with acceleration, the and the reasonable we'll and as where we But strategic, think acquisition strategic return and

Operator

Stanley. next Morgan from question Hamza with comes Fodderwala Our

question, Your please.

Hamza Fodderwala

extent give transformation So the that terms rate embedded mean, growth. on any VM selling of you're the versus this just solutions. color a saw year, I in we what's the you around to grow transformation question around sort growth maybe the of of portfolio right. focused broader twice security VM bundle guidance. could But I security of know

mix expect that continue sort XXXX? we So to of in

Corey Thomas

I term would based very very Yes. - we're a a Well, demand, planning approach. on current say we're taking long

is industry be market So expect transformation Based management. we portfolio on think entire growth vulnerability we'll is that in and solutions, we VM growing higher think still That's and demand security it. our relevant we relevant. current is

in going we're and I in we think we on platform, to moment the move, offerings highest position multiple where needs and solutions is get of any a good that because the that time, have common customer's to are now, cloud, about a and urgency to it's to management. be cloud sometimes you both around vulnerability sometimes going see detection, it's be response security. higher Right it's be incident sometimes customer going response,

VM higher in to solutions you'll that growth transformation And still growth so expect we versus forward. see relatively, this security VM, move healthy but year, we expect and in

Hamza Fodderwala

on can give you color acquisition, And give on acquisition. then us embedded that not, run in you just I any is there? of assumption what But revenue there it's color material any can on the know sort rate was your guidance. us to no prior Alcide the

Corey Thomas

It as wasn't Yes. material, overall. said we

initiative, but our And accelerate material. allows so revenue wasn't it us to cloud the security actually

Operator

with question Henderson comes Alex from Needham. next Our

Your question, please.

Alex Henderson

higher your per like whether up off mean, a right the the that clarifications, ultimately more about it per if number Just ARR could the right? I higher talk of bat. Is sounds ARR new you're than getting upfront - of you average and couple customers customer Could on could. that, XX,XXX. a is drive that Is right I new

Jeff Kalowski

it brand disclose the overall. gone Alex. have across specifics. new historically shift, customer, disclose per it with ASPs customer, lower the Yes. been generally board. the we We But mix is But don't than the the up has don't new specific increasing, ARR But

Corey Thomas

say - we more is going the journey. to add was I don't Alex I really - of would Yes. timing that the just focus more broadly, customer on

just I environment not may focused actually a we how at that for is with their or grow security become and We're impact we're actually strategy. over thing. start time. whether on do a the and look do different larger them for in time. the grow to and What really are RapidX they whether has their Well, they relationship the big customer would how that's and have we the cover upfront small we starting looking sustain to Now, strategic place over say more start that some manage customers we're But of operations.

Alex Henderson

accelerated. sounds sizes like any to takes of would seeing is deal up key deal, of there larger sounds more like you're the it pipeline. you you upfront and - be change acceleration close and that if the - talk helpful. sell It seen around your the a metrics metric whether upfront, in can amount your time in just you've is an It And couple pipeline expansion really about

Corey Thomas

Yes.

environment cover to are So in mind have It's some started your of of to there keep that things XX% environment things like driving being with you retirement versus alluding several VM, have is is fail may your different of XX%, IDR, that there. the trends time. one where upfront you're is you

causes covered be just shift a it's the business solutions of a environment that So and response to security growth higher amount in of in transformation actually the upfront. detection

that But we're that quite alluded strategically second The that to customers in starting customers get there I'm the evolve program really see a very not continue security think time. that over about it's because need thing, pace security that the actually we they you early also want that's to their at we said, are buying trend of is they they sure they program. to the move get entire the look, - there, however looking and stages

two, the last more, have are those so Alex. And and question? What you was one

Alex Henderson

close it the from time amount timeline - of there Is Is holding any deal takes Yes. change your the to to start on in deal transaction. study?

Corey Thomas

would holding. on would I more tricky bit stops do I with last it's say a Yes. year that little just of because to was probably say lot COVID. starts were average, there it's and

the sort underlying a trends of take - nine actually had there, helper. the any effect huge it there extrapolating not effect of of last and that because like permanent COVID the was you SolarWinds also So as year, months might it I'm

would fairly And so extrapolate can but now. that it's I trends consistent, no say right there I that is

Operator

Joshua from Tilton is question with next Our Berenberg.

please. question, Your

Joshua Tilton

to into could additions in it expect what's the the you kind of that first, gave you of Maybe guys that you customer baked talk pace expecting going Do guide Do stay about Just continue guys ARR into you net flat? year. to number next improve today. to XXXX?

Corey Thomas

team it. of I Yes. I sort and would about I like our in for tag is ARR so mix and Jeff mean, of customer ARR guidance, net customer when think general, it and can expansion. a you say

just managing not We them expect demand, of the year, both of we're that's we'll other of actually on the a and to we're that trends actually today, contribution this just necessarily balance We customer. ARR think it's a do not And That's growth platform actually see the higher and positive. permanent the something in a seeing. and some to. assessment the slightly of That's per that thing. be sort

Jeff Kalowski

that code customer can in not zip said now, new growth is of customer balance a we're to and per on growth. customer that I a ARR it at specific of Yes. we where going trends, give what the mean, and we the and you look are the rate growth. But is earlier

Corey Thomas

customers how you We're like Do - just force. the demand be any just go where is. managed right on specific want can and We're you our needs to this We where Yes. where know sales restrictions we're saying saying it adding we environment. now, go customers not helpful. we in

Joshua Tilton

lot know the I got then, you've tonight about of business. questions VM a And

me. what overall grow at of in VM ballpark, you Is for seeing the more compare guys what kind one do there how maybe And maybe business that way 'XX? 'XX? that market expect are to just then, any grow does Just could you to in you

Corey Thomas

slightly but earlier of estimates year, in continuing seeing and the is anything at the and else. performed now higher or of and not security And it VM around would prioritization growth, in detection solutions. saw some better higher But that So if cloud. to transformation I minus we better commented we and economy conversations, efforts ballpark about we're our of it, was a overall same growth we the much last long term right urgency just way we that's I Again, They transformation term objective. are what specifically expect a said, But strategic expected. strategic about a in to that that more That the and now looking I as what see range. at response see part we - and pace driver of customers right be terms some security growth. customer than than we are and gave urgency had view the plus think put to to around continue XX% is, long VM are have to that of

Joshua Tilton

and one sneak more expectation went And in know just early but the ASP in. if if it's I this for I could customer what product? bought uplift any Alcide, would they be

Corey Thomas

now. No. that comment It's on right to too early

Operator

back to his for Corey questions like the Thomas turn queue. in any to further And I'm remarks. would I call the not showing final

Corey Thomas

evening would to Analyst reiterate joining and I Day, that all to earnings look And then. you like our for of our this love Investor want thank Well, at to to see just to we call. we you I us on would you talk forward

Operator

Ladies for and program. your in gentlemen, you thank participation today's

disconnect now may us. You

Rapid7 (RPD) 10 Feb 212020 Q4 Earnings call transcript