Earnings call transcript Q4 2022

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Operator

Welcome everyone to the Rapid7 Q4 2022 Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]

Investor may President, your Vice Shah, Relations, begin you conference. Sunil

Sunil Shah

year our everyone. operator, are RapidX's CEO; you full for operating the and fiscal financial you, today and XXXX. to We CFO. in fourth financial Tim addition results and good and first discuss Thank call outlook to With our afternoon, appreciate me Corey our the and Thomas, today joining quarter Adams, full quarter XXXX year us on

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

include assumptions statements provisions our related the full made goals may first Securities Reform Act the guidance that laws. During XXXX and statements the business considered federal harbor we guidance. to are Litigation and These forward-looking strategy, such statements this of safe of the company's and call, related business the to under quarter year securities for Private to make and pursuant financial plans underlying are and XXXX positioning,

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

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

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

Thomas. With that, I'd turn like over CEO, the to our call Corey? Corey to

Corey Thomas

operational quarter for new efficiencies cloud rise joining to afternoon, complete good consistent are or it's during results fourth positive. Insight ARR today's continued early and ARR, value offerings, platform consolidation consolidator. in expectations, Sunil, a you, expectations, for growing the customers we of free you continue XX% threat more in to are Thank by RapidX call. generated everyone, our complete the with the flow profit and early over ARR finished $XXX year. better-than-expected was business. our reflecting And platform, cash Thank customer Revenue the and RapidX's us. offering. QX either XXXX prior with drive operating exceeded still as as days Over risk consolidation new of as using while platform per delivered we and our XX% ASP on in our million or

during in our the improve execution, economic to key traction certain even with the business as early we're escalated pleased as look We seeing we headwinds of areas fourth are quarter.

in net embedded represents our was year. gotten ARR. bringing comments complex of Customers in scenarios fundamental fourth spending the landscape The the economic with Despite offset to half by total that of segment, quarter the roughly and mid-market saw obtain our outlook, end which our board for during current on remains projects level midpoint to A of support to greater cybersecurity there dynamics result key budgets for and this outlook us current an face incremental ability the macro in few of the environment. we business demand, more was evolving Consistent to the difficult the executive these positive our continue pressure range has in and projects. our parts environment. traction threat broad-based ARR

scrutinize CISOs consolidator. result, accelerating fragmented customers' more platform increasing a Constrained longer a greater as landscape. deal push tailwinds with to is uncertainty As around This size exacerbated driving integrated a consolidation security longer the Despite take a of budgets, deal timing we're IT gain placed in the and technology budgets are security deal are on and as procurement. value on to traction our focus efficiency being by environment, we contracts prioritize impact our through dynamic opportunities forced seeing as traction. of gain being platform challenge and vendor budget cycles certain

gain enterprise better seeing from outcomes budget as dollars. vendors are We engagement they solid look security to with customers consolidate their and

security manage to security their consolidate of and teams security efficiently benefit vendors. is teams the Our manage scope is RapidX shift from empowering positioned this to and more resonating while their operations. looking expanding effectively with to Insight platform

for evaluate important and out our CISOs stack, few stands SecOps reasons. As RapidX's platform practitioners security a

and best-in-class program. platform offerings security a expertise enabling deliver on-demand further the have existing a $XXX,XXX by fourth during as their capabilities environment. their are going and illustrated built to with small to response automation-centric run capabilities to gain scale an our with operations of for operations partner was security customers of breadth integrated Insight existing and that us efficiently customer deeply and practitioners, productive through a practitioners and This replace cloud offer the platform footprint, The visibility We to security solution, direct is expansive an to RFP platform highly security deal breadth built and experience. by quarter on our customers And our mandate detection critical help platform had VM company. part a software effectively. These managed their a of is our into value to require security high-growth

RapidX stood of partners during as one of comprehensive could cases. their out who the set technical a evaluation address few use

our standardized intelligence. adding As SecOps part and offering deal, VM customer by platform while RapidX the the through cloud complete D&R security, and threat of automation consolidating threat on

addition response complete force refining well vendor risk offerings include budgets critical are around market. complete solutions to compelling cloud consolidation threat lean to of security. into spending as technology, new the RapidX's cloud prioritization These In detection our and sales and as consolidation offering a that and goes platform security areas how

our single strategy reminder, together across market-leading and enables and motion. coverage risk customers of to a to complete and which selling platform VM a through at best-of-breed customers, risk of our solution, complete stages application the offering. our coverage As advancing realignment our step sales solutions consolidate cloud subscription. external offering, of And various These of expert-driven unlimited with It our unlimited and environment VM on-prem, are platform an cloud important part cloud in our threat transition with the one use security in is cloud. of consolidates threat unlimited enables detection visibility along subscription response visibility cloud-centered

strong and multiyear new evident XXX a in in offering value seven-figure proposition quarter. with the platform The compelling manufacturing technology deal leading go-to-market Fortune RapidX's company are of fourth a

threat detect process, to looking and an manage, a team that around competitive was security As managed and chosen we to respond organization. customer, of can offer and the complete quality robust across it. our managed solution the was based support we replace management better their and provider for After existing vulnerability existing way on knew to technology the service our both threats offering their SIEM a

features the decision of economic the our and traction reinforced Their for consolidation the to new in speaks multiple offers. seeing market by early was we're platform across value compelling our consolidating

As these our impact performance balance the have for forward optimism expect detail. cognizant of dynamics level, at budgetary to a to areas our traction, three will our critical But Tim outlook this and discuss headwinds largest need macroeconomic year. this will XXXX. will high of point as early I that the in we're the we on greater build I to frame we execution focus look with current upon

traction The see on XXXX. the about first improvements we two call. XXXX offerings are last early and force as to on under track of half platform our challenges control and areas our introduction exiting believe second the we to support and spoke related We the risk the selling enablement in to positive growth motion. a our in of these complete of The executional they consolidation remain sales training see master we threat and

macroeconomic broader the is The third key area environment.

the expect Looking are customer the ahead, we saw slowed customer fourth of segment, and exited pressure mid-market as near we the the incrementally cautious we more XXXX. in continuation quarter which term budget a on in

we're moderate economic as while from account particularly in a to platform currently accounted duration full assume more depend All line entered seeing. sustainable reacceleration we in mid taking more growth this begin view cycles timing the and prudent and uncertainty, will the our elongated segment year acknowledging deterioration offerings. our a in of time of severity We have said, our With the long for uncertain the the to we year remain large to as and macroeconomic business backdrop. confident ongoing for profile all, deal drive growth sales consolidation that term pressure of outlook for we on we're

rigor is focus margin as support make for area to around in scaling want to the drive our recovers. expansion our to the to invest environment and more as look The executing I growth. against business doing for efficient to commitment current commitment our lastly, This dedicated work efficiency increased operational this will continued profitably a and we reinforce economy me both we're targets our profitability, for how And we year. by

flow basis optimization business confidence across in Our while a us gives strong XXX on year. the point cash doubling focus cost margin operating free expansion target this meeting

our joining will to financial the detail on over share call today. that, our thank turn additional you Tim With us and Adams, on now call outlook. results the I for Tim? to CFO,

Tim Adams

Thank and you everyone, today. thank for good call on afternoon, and us Corey, you, joining the

reminder all results financial are we to Before for quick stated. results, revenue, otherwise except unless discuss will a measures, non-GAAP financial I that the today turn

can led in RapidX release. response be non-GAAP difficult and our security by GAAP the $XXX of prioritize found more budget between solutions, projects year-over-year. results continue Growth our our reconciliations navigating customers ARR growing ended XX% press earnings year in a million, despite where cloud and environment. with detection to areas Additionally, was

headwind modest quarter picture. macroeconomic bookings This earlier, certain retention As within drove in the saw Corey this customer fourth moderation segment alongside our in as more a new in these we segment on a navigate to ARR moderate growth mid-market mentioned in rates markets. international customers

continue customers towards see mix coming to this both growth a and new from existing growing customers of bias We a environment. existing with in

X% with grew year-over-year XXXX globally. base customers customer XX,XXX over end Our to

XX% over over expand ARR the $XXX the of per platform. as the prior prior to high million Full customer and guidance our our $XXX exceeded prior XX% the $XX,XXX year to revenue grew range. of use year more grew million. of continue over Product and revenue at to XX% year Insight customers year end year-end grew

operating These Our the commitment all including throughout were improvements made exceeded robust metrics. was shared how critical of year more all, cash we flow. spending a manage and in joined profitability our All increased macroeconomic and as XXXX, on this half organization. framework I we drove of profitability results, of ROI XXX the in shifted accountability our evident is focus in which analysis with ago, growth when financial consistent basis to the of stated company-wide represents $XX environment we improvements million which generated priorities a income the of we $XX and decisions, company margin second In of process profitable expansion number the we and outlook million on year. actions XXXX, and in our points our free

of results. million. million our above guidance. $XXX XX% fourth was grew the Total Product of and our revenue high prior revenue year-over-year to $XXX year end XX% up the turning over Now quarter QX to

expectations. quarter and XX% revenue total of of in year grew scale gross the near prior to represented and prior of XX% international grew Product quarter, represented our XX% the over while Total of we margin North quarter, margin Our end America revenue. efficiencies. revenue for higher continue the XX% total for revenue fourth XX% as the was than year gross XX% high drive was the range the

to in continue trend gross We to XXs. and product margin mid-XXs in expect overall margin the low to the gross be

of Sales framework. R&D quarter fourth the in our marketing year-over-year and from year and X% prior million revenue, of against closely year. the down executed XX% XX% XX% represented the better while expenses in guidance. year. with quarter the revenue, line as XX% from prior operating prior expense was managed we of in than represented $XX expense We revenue, profitability operating than slightly represented and our lower income G&A X% was down roughly grew Fourth of

Our per was $XX quarter million adjusted the and income EBITDA in $X.XX. share was net

year. sheet cash cash of our year investments delivered million brings us and higher to which for free from XXXX. with balance profitability, on cash, cash end million this equivalents at for the operating This to $XXX cash $XX We quarter. QX the our $XXX Moving ended the of operations compared quarter We flow. to million of better-than-expected fourth guidance flow and drove

both be year drivers to terms around better of consolidation traction improvement, of as sales ARR three how enablement the executional performance offerings well this broader impacts will growth shared, the macroeconomic on and customer environment related Corey as behavior. success buying in As our largest

range of deterioration improvements to not the modest a mid-market, year, of guidance although assuming then. are in Our expect from half this executional any do the reflects macroeconomic by levels, continued in back we we improvement level see current and particularly

anticipate macroeconomic until the updating stabilizing this the spending Given see don’t dynamic backdrop ARR in we year, trends our environment. we outlook

believe year mind, growth ending limited we XX%. XXXX year, into macroeconomic the this the cautious range that XXXX full XX% is stage in budget the for visibility million of million, net given With current to which customer total a for the decline ARR and to $XXX at we trends year. ARR the in dynamics This new which $XXX of represents implies expect appropriately

years. outlook, year to going of see As continue part prior more a QX is budget full ARR our in process customers embedded the macroeconomic than tentative that deterioration in setting we through

guide appropriate unique quarterly As such, believe ARR we while directional typically environment, this we not to share in do QX. targets for to it’s context

net the a we reconcile new growth more ARR plans, spending with budgets with begin we of QX, our in as XX% of customer as that anticipate the to improvements expectation steady second ARR ARR customers their improvement through approximately our in half hold. as driving in performance settle see Specifically, in the the stabilization range year QX muted new execution take year-over-year, net will

of single-digit in from XX% to to year million, range expect we total anticipate operating to measures, We profitability revenue be of greater. of growth to million for margin representing contribution in of year, professional revenue. points the $XX or full growth be full the range the which to $XXX XX% income implies million On basis $XX expansion $XXX services with million for high the XXX operating

in million $X.XX income diluted on net to average range expect weighted $X.XX per outstanding. XX.X based of We share an estimated shares the

generating as expenditures. represents to margin from For XXX full free flow double flow approximately capital expanding basis cash year expansion. This expect free at points flow $XX of operating we cash as lower least XXXX, cash million well

a cash expenses free concentrated in ramp XXXX quarter free of quarter timing We year, tax cash as seasonality, are FY the and cash capital cash first and continued would in anticipate the payments number payments of in flow improvement with through balance flow expenditures. second including negative notable the of terms the the In in early bonus of flow year. the we then expect

guidance. quarterly to Moving

the in of range expect first XX% revenue to of quarter XXXX, $XXX total the representing of year-over-year million, growth million we XX%. For $XXX to

to diluted non-GAAP based first of per We $X.XX, average shares XX.X to $X share in which the range non-GAAP income $X is operating million on weighted million outstanding. net and expect million quarter of the in income $X.XX

and risk driving vendor security for growth cloud operations on and on-prem focused choice enterprise-wide of supporting both visibility as and environments. firmly are analytics the We

our around with As consolidator, framework. our go-to-market is value growth environment, we driving platform productivity navigate strategy strong spending uncertainty sales supported current customers profitability proposition our for to the by consistent expansion commitment refining margin a and improving durable motion a providing and and our as

Thank join call the for you that, And with will we Operator? today. time open us for to the on the call questions. taking

Operator

We’ll Barclays. Saket Instructions] take question with Kalia from [Operator you. Thank first our

Your line open. is

Saket Kalia

to to here. tough that way, and to comment taking there answer, expect for it’s want maybe Thanks question to question Is asked it’s reports down of but I forum. given question guys. my a I you’d an Hey advisers in topical, Great. RapidX road? housekeeping a the open the has make Corey, explore any in to Okay. just out like just make sure the that just hired options get of it’s sort

Corey Thomas

we Well, executing first this. will us, we shocker In because foremost, people not have a talk and a opportunity to opportunity, we have that. actually broader in we’re that we’re front and Saket. the pretty good Well, against that we’re numerous well to going speculation on a us, positioned thanks, context, of massive have well just policy capture said, and Gap] in and about it’s That opportunity a [Audio continue both that market.

Saket Kalia

Absolutely.

a question mentioned could the you. call, threat bundles If you’ll and there for a vulnerability allow here, how complete, for part the and I’d if love, the that differentiator? pricing how be might particularly you that about of in me talk Corey, management couple the risk threat complete business works, you

Corey Thomas

profile they able environment, found looking and that strategic in Yes. and stop to And of this cloud monitor we that’s core Look, environment, visibility secure the that, manage and have have and they one, but assets. risk security are to just environment. how be two really to attacks actually detect in components. not and how One, actually they do to their improve what customers their especially things, two environment, they their their is increasingly past

Our pretty straightforward. is strategy

we risk the as environment. forward, are what holistic because threat go are holistic we As and a a assets of view taking cloud-first a view that’s strategic and

is context, strategic. In vulnerability that management

that. We have people working on

of a component are platform. and But it dedicated it. is who have We feature our to teams

cloud-first allows are offer manage overall We a that vulnerability management our security. that part as that visibility need they our people platform to SecOps company to a actually the have of

As deal part way, momentum, consolidation strategy. the of of our a the in our you offering the early point. are price that the saw part larger, as we’re larger, overall strategy, included is it succeeding price points deals and is By in just are the from

Operator

Owens Next, Sandler. to with we’ll Rob go Piper

now is line open. Your

Rob Owens

Saket two in. [indiscernible] sneaking questions

seeing what see I can two. ask touch to do mid-market. in within environment. your and the weakness So, at? really guys you both I to are is what base, employee of Wanted moving you terms in ask customer you’re What current perspective, guess, process will, I’ll one, on own the churn I guess talked the also but in about And you But kind some where your if forward of Thanks. hiring? thought from

Corey Thomas

Yes. I’ll take that.

and First after tight, the actually years we’re labor focus our good market. and – employees, customers, of retain seeing we’re but couple is employees a very on market very on The employee rates. retention down a we seeing still tight healthy very of double our

think relates And broader retention Tim sort very commented I that say is the it would like see and I healthy if – North consistent to As of of you on performance What we customers. America, actually overall, his customers look good. script. quite retention quite is

addressing proactive allow and with them some going seeing focused are and save customers being money. we primarily pressure to and budget to we’re mid-market by that pressures, consolidation to that on that’s Europe, that, specifically in we and offers tied international, out incremental those think We are

international North of we’ve America, healthy overall, little market, there. a incremental again, pressure seen So fairly bit

Operator

Morgan Fodderwala Stanley. Hamza to with go we’ll Next,

open. is line Your

Hamza Fodderwala

Thanks my for question. taking

around And if throughout any ability your force year the in enable sort I’m that the motion you around sales curious Thank sales in two you. the productivity sales product to seen to improvement your guidance? platform? assuming categories. are have of guys that broader – the improvements the sell more you On you’ve any clear

Corey Thomas

a it’s great No, question.

seeing gave there. And we our improvements broadly. efforts confidence. just in so us overall part more the actually are We of that That’s out sales one, force what rolled

ways we you it rolled So exiting introduce is when actually would in about the year, introduced you – it new, the expect. think way of which that out something you like as sort to

used saw actually the and team you sales like, as the incredible out your of what’s the executing. kicked it’s we our actually actually just off, momentum rolling just confidence just build we side start as and sales we’re actually sales get on offers say, And also And feedback to receptivity. doing good it consolidation it have rolling both out we team. pipe get the that from you in Part

assumptions as seeing the gave we’re with consistent actually our actually that the the tracking the far as go, and over we well year, you expect feedback productivity progress. of that we last towards sort improve us Now time, to course

steady productivity increases we of think pressured It’s in line about goals like not sort environment. Now aspirational. are a productivity with more actually what the economic as

Tim Adams

is I And discussions macroeconomic challenging look, Tim. would it’s in year, had this for many guidance we that we when Hamza, environment that, there – for the everyone. just see clearly the say Yes. this you mid-market. about and that is certainly

it improves solves that we’re a for assuming budget So, we’re constrained, to not packages enthusiasm. think vendors. about market lot And of Corey are talked sales us. this getting too now that, prepared comments about. challenges the customers many our had very really team And consolidation that the who behind with really is in just for who of we lot We and are optimistic a a lot that bringing

half the going coupled is that we the think to second help in us of So, year.

Operator

Boolani go we’ll Fatima Citi. with Next, to

line is open. now Your

Fatima Boolani

my you Hi this good afternoon. Corey, taking for one’s you. Thank for questions.

digestible Just more the you to more Can this intuitive to undertaken you’ve and to you’re that completed of packaging environment. type formally going seeing maybe reconstitution and about resonate what of form now relative the us will bundles making uplift back pricing in and that now talk in

you’re better TCV whether if would a environment, price [ph]. love it ACV cover a predecessor which higher configurations sense being a of of or bundling? seeing yield, you now the able in to terms get of it’s means that solutions you’re give newly better or I’d to larger that,

Thank we see profitability just strength the follow-up the outlook? item next sneaky a for as And most operating kind me. Tim, guidance, from of basis a just year, given long where that’s of of leverage then just it And coming for you. on should the the

Corey Thomas

Yes, I’ll then start the off question. up guidance Tim will and pick on

So much did sort pricing sizes, I actually both up one, script larger XX. strategy, average exceeded those about for space the like I we areas deal represent talked of that said the as as as general, – think which I we’re see I sort in ASPs, larger, of But we what far XX% on wouldn't little bit are we’re seeing uplift seeing in the because, quarter covers I consolidation saw saw think in general. with we a enterprise The we – our of seeing again, our the my be That we’re the an deals wallet. say that the as of our was expectations of seeing more actually momentum offerings. of XX%, is, apply that over more size traction and in share to the was I would in more in clear

to I adoption, grow of later think that we quite come the actually specific trading the we’re a well. little continue our bit as but like multiple in will uplift

Tim Adams

focus at our you this Yes. we everything. really looking to Fatima, assist it that at on our really investing journey just efficiencies. in. continues been R ratios, and this everything leverage, cost in we we to across the just serve, gross do. at across sale, board – want we’re it everything We look the our that optimize engaged to to team trying the really XXXX, And we’re at cost is it’s the structure look margins, and early efficient cost look When more E we’re and started to look dollars is has the all and and on more drive we really P&L, that to be at

leverage. strokes So, I broad see pretty you’ll think of

Operator

go we’ll Fishbein Joel Truist to Next, Securities. with

open. is Your line

Joel Fishbein

ask for are Thanks around question. cash to Fatima’s expansion, goals free margin question to a I’m follow-up the going taking pretty impressive. about the and flow which

thanks that. for So

of can what Just Thanks what’s that continue force in the that reaccelerate that’s to does plans in macro Or sales when the going that understand from the how and as to get come just improves, hire more to contemplate? you So out going to hiring environment? flow? growth you traction terms how you’re or Tim. the

Tim Adams

one have. Joe, the Yes. opportunities of we

the and you where lower-cost know, can little we leverage talent of have particularly still where area, that R&D the we’re locations, these can seeing you want we globe. you locations do you As a we find [Audio that lower attract And have some cost and across recently, Gap]. in some right saw of type the

of going that’s how try to leverage. drive more to the one be So we piece of

Joel Fishbein

the regarding And capacity? sales you plans in right. if All just hiring, could, of terms

Tim Adams

Yes.

We on are headcount with don’t we and hiring. still numbers, year. the focused overall are are to this it to this add exact going disclose the are We overall growth but hiring year. driving company, still modest, will the more we but we be

Corey Thomas

Yes.

hope terms a a Just can performance our keep model, more to to start. strong follow because have up pretty with that very setup targeted actually on We coming headcount. we year their employee ability that, actually But in a contribute. it’s of strongly modest we base into the hiring with good a

Operator

Tindle Next, Raymond we’ll go to with James. Adam

is line now Your open.

Adam Tindle

Okay. Tim, improvement. I continue conversation operational the to on want

competitor about you know on you’ve line, And starting space do in a I margin there’s probability light the I if as ask ceiling more lot It any outsourcing think Just way that to to a EBITDA XX%. has we got VM ask of do you’re that like it core low-cost in on well. could a XX%, sounds countries. that?

So –

think the term? we you about runway could longer longer profitability maybe you just term, differences this competitor? How and that about think tackle to can Thanks. any main between ceiling you how structural

Tim Adams

It attractive of of this you the across the in you to is contract. very can labor. made confident, board. part for as use as Yes. continue sourcing We the can that the everything And We’ve guidance platform. have profitability. improvements labor, feel we to see year of we renegotiated AWS in the look and Adam, XXXX drive we the at type that

really that focuses utilizing platform. the how team we a of on efficiency that We have optimize

really it the is So broad company. across very

across an go, the We think really opportunity focus that will have focus But there, continue broad and to it’s on continue to company is. some effort. made and I drive We’ve very improvement margins. it we does our where gross

Corey Thomas

reiterate really plan in we’ve gotten year Yes. that – to years. And one; brought next platform driving started feedback last the that is the I way that customers the is over had a thing efficiencies. that we’ve on the We a five we relevant is would think we customer that

we good think efficiency the still we’re situation I days a say so sitting into. would And early in, our pretty I are curve. of where

And actually modern aspects so a security gains a strategic of that’s that actually we cloud focused has for actually operations. profitability. to we But world actually the doing platform on have relevance have all

to as an of the what it us as our profit year. have the allows pressure business global outside actually a to sort But that is profile mid-market economics more little us sort even growth global mid of pressure allows like have economy in and that’s and And right we like is this bit do to so half now. long-term the again increasing of of

Operator

we’ll Moskowitz go Mizuho. to Next Gregg with

Your line now is open.

Gregg Moskowitz

have question. to pretty Good cycles days, with front Thank any guys. you getting it afternoon the these obviously, progress are taking with sales longer and speak but Corey, in for frequency regard you for you’re executives? just of everyone C-level seen the may much early, too which

lower that. for was one is quick that growth guidance slightly a macro. behind the obviously to the a initial below ARR maybe bit quarter, of the the think for I was than ARR quite guidance comment preliminary then approach XX% Tim And last XXXX derisk Today’s

if specifically, business assuming mid-market if the terms you’re assumptions, to And speak so in delta or could it’s and latest of the a as solely wondering due tougher-than-expected enterprise a you business if you. well? Thank weaker I’m to

Corey Thomas

that larger of part partners. of offers, And are both we are see is finance this the quick strategic having actually It just as more of because in a more do the yes, more, CISOs actually them. the we their environment. work CISOs now might that do Southeast procurement with are CISOs see, sort look [ph] more of Yes. we’re partner to yes, budgetary to be deals Asian and for we in again, selling But especially front we at

Tim Adams

and And made Corey earlier. reiterate of the that I Yes. some would both Gregg, just I comments

to going and environment expect We course a not through in are we certainly of improve the do mid-market seeing XXXX. there, challenging is out that the

modestly we where fact, bit than In worse it think we today. are a probably little gets

we is of, that really we said And are the ago three now. where to months right driver so, what

in think an seeing in challenges the that we when But out segment. give are there we’re view appropriately I to customer are again, the mid-market cautious taking economic that year base we And guidance.

Operator

Next, William we’ll Ho to with go Jonathan Blair.

Your line is now open.

Jonathan Ho

afternoon. good Hi,

or Just the should going of for we remain how prior any maybe one of shift in it’s customer of that guess, customer? incremental ARR XXXX acquisition per one makeup guide, with your sort quick the relative think between new the to me. periods I breakdown Thank ratio Are about you. terms here ARR consistent somewhat and – to ARR?

Corey Thomas

sales Yes, that thanks also looking and ARR we as customer base adds oriented towards be new our have our because is versus in But weighting focus to on future cloud-based. actually an the is great have see would installed more a to the Jonathan. consolidate one, imagine. Look, heavier across installed can company offerings pretty expect with, and increased customer with actually good team, do we much actually we towards that’s looking consolidation so our we have per you internally actually base relationships expect we a to

that’s now, this primary future. We’ll heavily per our customer. not so year. we’re focused focus. right on add a It’s in focus But And customer the ARR necessarily for

Operator

Essex we’ll JPMorgan. with Next, go to Brian

now is Your open. line

Brian Essex

your pivoting Yes. in question. Corey, within afternoon. one the question, you of taking guess regards more the my Thank of spending for customers seeing Thank topic, see kind from how you spend. side of and but you’re kind specifically I a around what to Good them you.

I budgets that are saw staff XX% of less survey and security indicated compensation. think one I

of you’re So sense. incremental are of kind of little what is and those way positioned if automation seeing on the to kind when some I there outside your could see levers front, the to with maybe lot you portfolio a vendor in level? CISO upside a of any color, it be or budgets budgets that consolidation there, those Anything pivot? makes starting gain obviously on guess kind draw the And side, from

Corey Thomas

Yes.

Again, a we – thoughtful we with we’re our we as Tim the approach bit is assumptions actually about and and yes, how So others, respond do that mid-market one, there have I more indicated today. just to about upside. it. see think make And what

how the me see we – give of Let just spend overall of breakdown sort like the a environment.

people the to The what’s a – is into that little health of the big are was what trying security I exiting first out priority, trying is lot a midsize shape period figure themes overall going of that out bit hear their year. enterprise, in but especially I short-term our are. think what their right the and in a they’re we’re their are And market, customers, in in figure a from budgets. mid-market, QX, of thing of the especially dominate security where And budgets business, the think that budgets bit we to even is little the the it’s a of one the

rationalization I the see are so determine are. trying freeze, you what just budgets not And a a of to budget what budget would but people say

not is doubtful We expect but coming green pessimistic, why out be projects it. cautious security and of to which we’re are actually about that, we

business. we So one that’s their counterparts process, own a dynamic own that little in to planning just more lots for their overall security through finance actually figure going trying budget they’re because assumptions their just just see intensive a of that’s out bit teams

I second thing, things. how is The handle actually to sort to see though, get to two big on we comes like organization trying that really out is that down say a every It figure would of spending.

of inflationary the is security wage said, you one areas. As bigger

that actually got So to they’re lot trying to how a market, manage managing the about so expensive they think figure talent of to that. and out overheads how actually an fact

manual have that built our we across We we focus actually cost security require those both heavy we believe a from productivity platform, security leverage security focused a of lot the that but have actually that’s is core driving detection mid a operations we that and perspective, across why over the of cloud which and capabilities management, a we actually long-term broad really and customers mostly lots of a tools of of automation lots the vulnerability interaction. on there’s is And the platform have tackle and core response.

through they thing customers customers our more and execute need what securities And and mean heavily cost second leanly. by their partners that on core actually actually our them actually provide I manage effectively. directly to we partner is to both and can ecosystem costs that expertise, focus is deploy to resource security the us The customer resource

things give are focus, us us that and and consolidation give both we two ecosystem actually together, budget our the expertise upside. enabled Those pricing, in plus automation for think durability things us the the

Operator

go with to Mike Genuity. Next, Walkley Canaccord we’ll

is line now open. Your

Unidentified Analyst

on guys, Hey good is afternoon. This for taking Mike. Daniel Thanks for my question.

spoke about some of you of weakness the So the mid-market.

been business segment headwinds how color Just your provide bit curious traction larger this been still the the a if you has well? within it enterprise accounts. macro Or has Are on of could more your just some as steady? impacting

Corey Thomas

enterprise large bit steady. more has been The Yes. a

better have We visibility.

have We pipeline healthy there.

they’re We are delays episodic. seeing deal some but

And so impact in larger midsized the I’d the enterprise. has say been

happening consolidation Lots the of about stuff accounts. that actually talked and the in we larger momentum is the

I think midsize they’ll to enterprise. the apply

actually spend And part that our be see those is teams business. enterprise optimistic right well we very and about a midsize think enterprise. that against you impact larger It’s of anticipate the And to the differently. budget strategic But focus We’re more space. in that are healthy organizations economy long-term more we going there’ll the core now, just executing

Operator

Powell Next, Gray to we’ll BTIG. go with

open. Your is line now

Gray Powell

category Thanks for then that think to taking line? did the translation in something used but to the you And the going that how we split remarks, call and about disclosed? you’re question. still you And have give? guys growth there prepared should just I the other in this Great. may Yes, year security VMand is that between missed transformation out it

Corey Thomas

Yes.

will allocation be is it As the break like and forward. we execute expected allocation. more just the an has out, Because, actually complete consolidation offerings gotten to our both momentum make backroom VM of some it the are out risk platform part complete gate. we sense of And of that again, it offers, than core doesn’t threat going just mostly because as

sold out to going not all We’re forward. be of our on less capability but actually core a VM going it’s be that stand-alone of And basis. a will breaking solutions, again,

Tim Adams

well think as metric, I the Corey, you’ll pay share as have per ARR and see packages per won’t these exact more wallet that will investors that customers the ARR driving just we from customer. But the customer I Yes. because breakout. we than in attention think to are

Operator

with go we’ll Rudy to D.A. Kessinger Davidson. Next,

open. now is line Your

Rudy Kessinger

Great. taking for my questions guys. Thanks

in good two just packages. space this the coming in you’re XX% those curious, versus of products for see Some list recently. of I guess what’s price the there to pressure new But your competitors have I’m called of out just the level it’s pricing package, individually? in from throwing product discounting ARR

thus quarter. track is tangible too. don’t tangible seen force selling full would productivity. anything the around those great, more I you percentage packages more in improvement the there share you’ve portfolio or the sales then far of know there the And you anything in But could reps if be

Corey Thomas

rolling now, Yes. Look, of Right about we’ll that later. talk it we’re some out.

of towards but I and proficient momentum, our well of I would they’re selling that. end the QX, week-by-week I think goal by a all is of tracking our it’s good sort it. have say quite And reps increase. we So are actually

momentum of the excited than we of we’re offers far higher we as had ramping so the consolidation and the sales actually packages and the attainment both rep as rep part schedule. is two, why And actually going for And the platform of onboarding expected. one, is feedbacking ahead that

can we actually what that’s there. say So

of part question other the – part question? of The was what the other the

Rudy Kessinger

On pricing.

Corey Thomas

customer $XXX,XXX And then is ARR potential the that premature the look, look Look, quarter. is roughly. at that compelling strategy like the ARR say from at premature. too What of very but the because, per $XXX,XXX-ish pricing. I it that, it way $XX,XXX customer, we it to actually sales ARR but general, is in per customer. total we’re $XXX,XXX it’s core would velocity a pricing and it’s what’s that only sort On over too Look, XX% a to it’s again, I do was in per our of get

then, with I’ll share that upside the And yes, customers.

I customer long on it in make if actually a $XXX,XXX change from total our get that average out to our So day all that we trade ARR turns $XXX,XXX accelerate would to consolidating. actually velocity $XXX,XXX, but per per customer,

there. actually we’re have play that’s and are And think to customer is focused that. And profitable And what what we how wallet we security profitability. of on. which of us. more we help in we’re have that the share and lots customers room drives have we focused building operations to total It’s momentum on again, So economics, their strategy do do

Operator

we’ll Galvin Robert Stifle. Next, go to with

line open. now Your is

Robert Galvin

on Hi, RapidX oversubscribed were how for inflection Brad the deployments? you worked in ago, an to know to Rob want the quarters or on Thank taking partners. that Have for the of in there’s has you. delays you Galvin through if question. backlog some couple growth this customer get of MDR is mentioned been onboarded partners I MDR. for seen RapidX Thanks backlog Reback. of had A for you

Corey Thomas

it’s do working we’re good we’ve Yes, – brand a question. it good detection to and I built can still very that. a response with offerings. I around our had and last say would as you imagine, time operations our through security mean,

to continuing in we partners have so to the our right to have level. those certified infrastructure the quality make and some brand, And put sure and so are their want – place and they use available to partners we’ll have that

effort. so And we’re that continuing

expanding a in we steadily that to ecosystem. like partners sort of the tailwind of overall our be that, And a business. is think will number mid-term it So

Operator

we’ll to Capital Next, Matt go with Hedberg RBC Markets.

Your line is open.

Matt Hedberg

here. together taking two bundle for questions my just Thanks Great. guys. I’ll

any how progress all, Did of mid-market things of XQ? linearity? like deteriorate? First can sort some And on maybe position? in Did the the secondarily, – And has thoughts budget you you CRO how bit did a maybe of but that mentioned of you terms flush? into Corey, maybe weakness, talk then trended of quarter your see little

Corey Thomas

question. great Yes,

budget the just buzz and about economic have quarters own progressed of an progressed, say last And were lots did I not think and especially anticipate people in economic the talked the there on – So things pessimism. quarter you would it’s lot concerns if flush. economic when as it. heard didn’t part of their buzz, a call, some But I the also mid-markets economic one, again, more I we of business. actually needs, But

the in from that range deteriorating say factored saw as slow to, that more quarter, bit why course little quarter, of about was exited frankly, perspective. get basically we that that it the assumptions was that over is continues You down and that our of challenging XXXX, into to progressively would look things our got and which start the a I more outcomes.

based think will what that bit do on mid-market, or budget year. overall of exit come about the we especially that lighten little to conclusion environment, the to I expecting the And customers entering year are going Now, but this profile more we in is. exit we last some think a a rate pressured as

Matt Hedberg

the And CRO on search. then just

Corey Thomas

great search, candidates. we’re CRO seeing listen

time platform a We’re folks, it’s and when you update good we’ll to for I’m it, you. and very update optimistic about

Operator

And our with final Wolfe comes Joshua Tilton question Research. from

Your line is now open.

Joshua Tilton

for me thanks guys, sneaking in Hey here.

enterprise guys any the Just a it assume Is for for worse as for simple you that worse customers one that me. why your sounds It mid-market customers. gets well? things reason assumes guidance get there like the wouldn’t

Corey Thomas

Yes.

So a it’s point. great

environment So It’s just that degrees them. the impact yes, just is between slightly worse. of presuming the different macroeconomic actually we are are that

we’re same not So enterprise that that like completely just the the as unaffected. impacting midsized actually it’s it’s that is enterprise. not saying degree It’s

there. some make frankly, just outlook, in, we want did I We board. presumptions higher we did ratios be our to And clear factored about So that. coverage across the

you have deal very outlooks. have delays at looks healthy, coverage because And that’s one is things. pushes, other higher the we pipeline our A, so just of but like like, This actually and look ratios to things

that factor we So that’s in. – did

Operator

the back additional And or turn over I’ll closing CEO, today’s call session. now Corey that conclude to question-and-answer for remarks. Thomas, does any

Corey Thomas

everyone thank we a and us good for evening, night. Have want appreciate it. joining just this I Well, to

Operator

call. conference concludes This today’s

You may now disconnect.

Rapid7 (RPD) 8 Feb 232022 Q4 Earnings call transcript