GlobeNewswire Inc | Nov 4, 2020 04:05PM EST

November 04, 2020

-- Annualized recurring revenue (ARR) of $398.7 million, an increase of 29% year-over-year -- Revenue of $105.1 million, 26% year-over-year growth; Products revenue of $98.6 million, 29% year-over-year growth -- GAAP operating loss of $(17.9) million; Non-GAAP operating income of $2.4 million -- Raising full year 2020 guidance for ARR and revenue

BOSTON, Nov. 04, 2020 (GLOBE NEWSWIRE) -- Rapid7, Inc. (Nasdaq: RPD), a leading provider of security analytics and automation, today announced its financial results for the third quarter of 2020.

"Rapid7 is pleased to report strong Q3 performance that exceeded growth and profit expectations thanks to solid execution by our team. We ended the quarter with total ARR of $398.7 million dollars, up 29% year-over-year, led by continued strong demand for our security transformation solutions and healthy growth in vulnerability management," said Corey Thomas, Chairman and CEO of Rapid7.

"As organizations lean into the cloud, they are engaging with Rapid7 to modernize and extend their security architectures in the cloud with our Insight Platform."

Third Quarter 2020 Financial Results and Other Metrics

Three Months Ended September 30, 2020 2019 % Change (dollars in thousands)Annualized recurring revenue $ 398,725 $ 310,184 29 %Number of customers 9,347 8,625 8 %ARR per customer $ 42.7 $ 36.0 19 %Recurring revenue as a percentage of 91 % 88 % total revenueRenewal rate 103 % 111 %

Three Months Ended September 30, 2020 2019 % Change (in thousands, except per share data)Products revenue^ (1) $ 98,559 $ 76,476 29 %Professional services revenue 6,516 6,679 (2 )%Total revenue $ 105,075 $ 83,155 26 % North America revenue $ 87,612 $ 69,883 25 %Rest of world revenue 17,463 13,272 32 %Total revenue $ 105,075 $ 83,155 GAAP gross profit $ 74,047 $ 59,525 GAAP gross margin 70 % 72 % Non-GAAP gross profit $ 77,613 $ 61,865 Non-GAAP gross margin 74% 74% GAAP loss from operations $ (17,916) $ (11,756) GAAP operating margin (17 )% (14 )% Non-GAAP income from operations $ 2,444 $ 542 Non-GAAP operating margin 2 % 1 % GAAP net loss $ (25,541) $ (14,406) GAAP net loss per share, basic and $ (0.50) $ (0.29) dilutedNon-GAAP net income $ 25 $ 571 Non-GAAP net income per share, basic $ 0.00 $ 0.01 Non-GAAP net income per share, diluted $ 0.00 $ 0.01 Adjusted EBITDA $ 5,791 $ 3,446 Cash provided by operating activities $ 11,078 $ 1,839

(1) Historically, we have presented revenue on our consolidated statement of operations as products, maintenance and support and professional services revenue. For the three months ended September 30, 2020, we have combined products and maintenance and support revenue together as products revenue on our consolidated statement of operations. Prior periods have been adjusted to conform with this presentation.

For additional details on the reconciliation of non-GAAP measures and certain other business metrics to their nearest comparable GAAP measures, please refer to the accompanying financial data tables included in this press release.

Recent Business Highlights

-- In August 2020, Rapid7 was named a Leader in the Forrester Wave: Midsize Managed Service Providers, Q3 2020 report by Forrester Research. -- In October 2020, Rapid7 released its Cloud Identity and Access Management (IAM) Governance module for DivvyCloud, extending DivvyCloud's capabilities into the emerging Cloud Infrastructure Entitlement Management (CIEM) space. -- In October 2020, Rapid7 announced the availability of Enhanced Endpoint Telemetry (EET) within InsightIDR, providing robust visibility into endpoint activity to enable broader coverage and frictionless investigations into security incidents. -- In October 2020, Rapid7 extended its strategic partnership with Snyk to provide a comprehensive end-to-end solution for cloud native application security. Developers will have the ability to secure the critical components of their cloud native application development underpinned by a combination of Rapid7 and Snyk application security solutions.

Fourth Quarter and Full-Year 2020 Guidance

Rapid7 anticipates annualized recurring revenue, revenue, non-GAAP income (loss) from operations, and non-GAAP net loss per share to be in the following ranges:

Fourth Quarter 2020 Full-Year 2020 (dollars in millions)Annualized recurring revenue $ 418.0 to $ 422.0 Year-over-year growth 23 % to 25 %Revenue $ 107.9 to $ 109.5 $ 406.2 to $ 407.8 Year-over-year growth 18 % to 20 % 24 % to 25 %Non-GAAP (loss) income from $ (1.8 ) to $ (0.8 ) $ 1.0 to $ 2.0 operationsNon-GAAP net loss per share $ (0.09 ) to $ (0.07 ) $ (0.12 ) to $ (0.10 )Weighted average shares 52.1 51.0 outstanding

The guidance provided above is forward-looking in nature. Actual results may differ materially. See the cautionary note regarding Forward-Looking Statements below. Guidance for the fourth quarter and full-year 2020 does not include any potential impact of foreign exchange gains or losses. The weighted average shares outstanding for the fourth quarter and full-year 2020 represent basic shares outstanding given our projected non-GAAP net loss. In addition, fluctuations in Rapid7s quarterly operating results may be particularly pronounced in the current economic environment due to the uncertainty caused by, and the unprecedented nature of, the current COVID-19 pandemic, whose severity, duration and ultimate impact is difficult to predict at this time. The primary set of drivers of Rapid7s actual financial performance relative to the ranges provided will be a function of the timing and pace of economic recovery in the global economy and whether there are broad regional or systematic closures as a result of a sustained pandemic resurgence. The guidance provided above is based on a number of assumptions, estimates and expectations as of the date of this press release and, while presented with numerical specificity, this guidance is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Rapid7's control and are based upon specific assumptions with respect to future business decisions or economic conditions, some of which may change. Rapid7 undertakes no obligation to update guidance after this date.

Non-GAAP guidance excludes estimates for stock-based compensation expense, amortization of acquired intangible assets, amortization of debt discount and issuance costs, and certain other items. Rapid7 has provided a reconciliation of each non-GAAP guidance measure to the most comparable GAAP measures in the financial statement tables included in this press release. The reconciliation does not reflect any items that are unknown at this time, such as acquisition-related expenses and litigation-related expenses for the fourth quarter of 2020, which we are not able to predict without unreasonable effort due to their inherent uncertainty.

Conference Call and Webcast Information

Rapid7 will host a conference call today, November4, 2020, to discuss its results at 4:30 p.m. Eastern Time. The call will be accessible by telephone at 877-357-4230 (domestic) or 629-228-0721 (international). The call will also be available live via webcast on Rapid7's website at https://investors.rapid7.com. A telephone replay of the conference call will be available at 855-859-2056 or 404-537-3406 (access code 1393364) until November 11, 2020. A webcast replay will be available at https://investors.rapid7.com.

About Rapid7

Rapid7 (Nasdaq: RPD) is advancing security with visibility, analytics, and automation delivered through our Insight Platform. Our solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks. Over 9,300 customers rely on Rapid7 technology, services, and research to improve security outcomes and securely advance their organizations. For more information, visit our website, check out our blog, or follow us on Twitter.

Non-GAAP Financial Measures and Other Metrics

To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we provide investors with certain non-GAAP financial measures and other metrics, which we believe are helpful to our investors. We use these non-GAAP financial measures and other metrics for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We also use certain non-GAAP financial measures as performance measures under our executive bonus plan. We believe that these non-GAAP financial measures and other metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

While our non-GAAP financial measures are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, you should review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not rely on any single financial measure to evaluate our business.

Non-GAAP Financial Measures

We disclose the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) per share and adjusted EBITDA. We also disclose non-GAAP gross margin and non-GAAP operating margin derived from these financial measures.

We define non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt discount and issuance costs and certain other items such as acquisition-related expenses and litigation-related expenses. Non-GAAP net income (loss) per basic and diluted share is calculated as non-GAAP net income (loss) divided by the weighted average shares used to compute net income (loss) per share, with the number of weighted average shares decreased to reflect the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes.

We believe these non-GAAP financial measures are useful to investors in assessing our operating performance due to the following factors:

Stock-based compensation expense. We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense. We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.

Amortization of acquired intangible assets. We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the intangible assets are valued at the time of acquisition and are amortized over several years after the acquisition.

Amortization of debt discount and issuance costs. The expense for the amortization of debt discount and debt issuance costs related to our convertible senior notes and revolving credit facility is a non-cash item, and we believe the exclusion of this interest expense provides a more useful comparison of our operational performance in different periods.

Litigation-related expenses. We exclude certain litigation-related expenses consisting of professional fees and related costs incurred by us related to significant litigation outside the ordinary course of business. We believe it is useful to exclude such expenses because we do not consider such amounts to be part of our ongoing operations.

Acquisition-related expenses. We exclude acquisition-related expenses as costs that are unrelated to the current operations and neither are comparable to the prior period nor predictive of future results.

Anti-dilutive impact of capped call transaction. Our capped calls transactions are intended to offset potential dilution from the conversion features in our convertible senior notes. Although we cannot reflect the anti-dilutive impact of the capped call transactions under GAAP, we do reflect the anti-dilutive impact of the capped call transactions in non-GAAP net income (loss) per diluted share to provide investors with useful information in evaluating our financial performance on a per share basis.

Adjusted EBITDA (non-GAAP).Adjusted EBITDA is a non-GAAP measure that we define as net loss before (1) interest income, (2) interest expense, (3) other income (expense), net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, and (8) certain other items. We believe that the use of adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business and an important part of the compensation provided to our employees.

Other Metrics

Annualized Recurring Revenue (ARR). ARR is defined as the annual value of all recurring revenue related contracts in place at the end of the period. ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or replace these items. ARR is not a forecast of future revenue and can be impacted by contract start and end dates and renewal rates, and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of operations.

Number of Customers. We define a customer as any entity that has (1)an active Rapid7 contract or a contract that expired within 90 days or less of the applicable measurement date; and for Logentries products, those customers with a contract value equal to or greater than $2,400 per year, or (2)purchased Rapid7 professional services within the 12 months preceding the applicable measurement date.

ARR per Customer. We define ARR per customer as ARR divided by the number of customers at the end of the period.

Recurring Revenue. We define recurring revenue as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support.

Renewal Rate. We calculate our renewal rate by dividing the dollar value of renewed customer agreements, including upsells and cross-sells of additional products, but excluding professional services, in a trailing 12-month period by the dollar value of the corresponding customer agreements.

Cautionary Language Concerning Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the statements regarding our financial guidance for the fourth quarter and full year 2020, the assumptions underlying such guidance and the timing of global economic recovery and the anticipated impact of COVID-19 on our guidance, business, financial condition and results of operations. Our use of the words anticipate, believe, estimate, expect, intend, may, will and similar expressions are intended to identify forward-looking statements. The events described in our forward-looking statements are subject to a number of risks and uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Risks that could cause or contribute to such differences include, but are not limited to, risks arising from the ongoing COVID-19 pandemic, fluctuations in our quarterly results, failure to meet our publicly announced guidance or other expectations about our business, our rapid growth and ability to sustain our revenue growth rate, the ability of our products and professional services to correctly detect vulnerabilities, our customers renewal of their subscriptions with us, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, our sales cycles, our ability to integrate acquired companies, including DivvyCloud, our ability to operate in compliance with applicable laws as well as other risks and uncertainties set forth in the Risk Factors section of our most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the SEC) on August 10, 2020 and in the subsequent reports that we file with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed in any forward-looking statements we may make. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.

Investor contact:

Sunil ShahVice President, Investor Relationsinvestors@rapid7.com(857) 990-4074

Press contact:

Caitlin Dohertypress@rapid7.com(857) 990-4240

RAPID7, INC.Consolidated Balance Sheets (Unaudited) (in thousands)

September 30, December 31, 2020 2019Assets Current assets: Cash and cash equivalents $ 239,409 $ 123,413 Short-term investments 81,209 116,158 Accounts receivable, net 73,625 87,927 Deferred contract acquisition and fulfillment 19,269 17,047 costs, current portionPrepaid expenses and other current assets 20,521 20,051 Total current assets 434,033 364,596 Long-term investments 10,813 22,887 Property and equipment, net 50,305 50,670 Operating lease right-of-use assets 69,797 60,984 Deferred contract acquisition and fulfillment 37,269 34,213 costs, non-current portionGoodwill 213,727 97,866 Intangible assets, net 45,942 28,561 Other assets 4,931 5,136 Total assets $ 866,817 $ 664,913 Liabilities and Stockholders? Equity Current liabilities: Accounts payable $ 9,033 $ 6,836 Accrued expenses 48,035 41,021 Operating lease liabilities, current portion 9,568 7,179 Deferred revenue, current portion 231,560 231,518 Other current liabilities 85 119 Total current liabilities 298,281 286,673 Convertible senior notes, net 373,318 185,200 Operating lease liabilities, non-current portion 77,863 72,294 Deferred revenue, non-current portion 30,632 36,226 Other long-term liabilities 1,370 1,352 Total liabilities 781,464 581,745 Stockholders? equity: Common stock 518 499 Treasury stock (4,764 ) (4,764 ) Additional paid-in-capital 677,983 605,650 Accumulated other comprehensive (loss) income (23 ) 213 Accumulated deficit (588,361 ) (518,430 ) Total stockholders? equity 85,353 83,168 Total liabilities and stockholders? equity $ 866,817 $ 664,913

RAPID7, INC.Consolidated Statements of Operations (Unaudited)(in thousands, except share and per share data)

Three Months Ended September 30, Nine Months Ended September 30, 2020 2019 2020 2019Revenue: Products $ 98,559 $ 76,476 $ 278,538 $ 214,900 Professional 6,516 6,679 19,789 20,399 servicesTotal revenue 105,075 83,155 298,327 235,299 Cost of revenue: Products 25,196 17,703 69,569 48,709 Professional 5,832 5,927 18,254 17,075 servicesTotal cost of 31,028 23,630 87,823 65,784 revenueTotal gross 74,047 59,525 210,504 169,515 profitOperating expenses:Research and 28,509 20,154 78,831 57,645 developmentSales and 48,448 39,904 141,552 113,214 marketingGeneral and 15,006 11,223 43,589 32,336 administrativeTotal operating 91,963 71,281 263,972 203,195 expensesLoss from (17,916 ) (11,756 ) (53,468 ) (33,680 ) operationsOther income (expense), net:Interest income 87 1,448 1,343 4,761 Interest expense (7,328 ) (3,399 ) (16,707 ) (9,940 ) Other income 143 (492 ) (94 ) (727 ) (expense), netLoss before (25,014 ) (14,199 ) (68,926 ) (39,586 ) income taxesProvision for(benefit from) 527 207 1,005 (87 ) income taxesNet loss $ (25,541 ) $ (14,406 ) $ (69,931 ) $ (39,499 ) Net loss pershare, basic and $ (0.50 ) $ (0.29 ) $ (1.38 ) $ (0.82 ) dilutedWeighted-averagecommon sharesoutstanding, 51,293,210 49,020,449 50,707,553 48,437,686 basic anddiluted

RAPID7, INC.Consolidated Statements of Cash Flows (Unaudited)(in thousands)

Three Months Ended September Nine Months Ended September 30, 30, 2020 2019 2020 2019Cash flows fromoperating activities:Net loss $ (25,541 ) $ (14,406 ) $ (69,931 ) $ (39,499 ) Adjustments toreconcile netloss to net cash provided by (usedin) operatingactivities:Depreciation and 5,928 4,598 16,347 11,969 amortizationAmortization ofdebt discount and 5,206 2,679 12,213 7,783 issuance costsStock-basedcompensation 17,128 10,426 46,921 29,490 expenseProvision for 752 429 1,760 1,782 doubtful accountsDeferred income ? ? ? (761 ) taxesForeign currencyre-measurement 109 379 308 570 lossOther non-cash 60 (345 ) (87 ) (1,635 ) (income) expenseChanges inoperating assets and liabilities:Accounts 2,393 6,311 13,228 10,860 receivableDeferred contractacquisition and (2,284 ) (2,231 ) (5,278 ) (5,403 ) fulfillment costsPrepaid expenses (421 ) (544 ) 1,352 (9,878 ) and other assetsAccounts payable 1,785 (1,052 ) 1,922 1,132 Accrued expenses 4,358 2,490 (3,079 ) (4,822 ) Deferred revenue 1,540 (7,058 ) (10,456 ) (12,124 ) Other liabilities 65 163 (915 ) 1,292 Net cash providedby (used in) 11,078 1,839 4,305 (9,244 ) operatingactivitiesCash flows frominvesting activities:Businessacquisition, net (55 ) 14 (125,826 ) (14,607 ) of cash acquiredPurchases ofproperty and (3,170 ) (9,341 ) (7,125 ) (27,053 ) equipmentCapitalization ofinternal-use (1,459 ) (1,534 ) (4,407 ) (4,686 ) software costsPurchases of (59,451 ) (41,776 ) (108,710 ) (114,208 ) investmentsSales/maturities 9,000 36,985 155,599 177,287 of investmentsNet cash (usedin) provided by (55,135 ) (15,652 ) (90,469 ) 16,733 investingactivitiesCash flows fromfinancing activities:Proceeds fromissuance ofconvertible (701 ) ? 222,799 ? senior notes, netof issuance costspaid of $7,201Purchase ofcapped callsrelated to ? ? (27,255 ) ? convertiblesenior notesDeferred businessacquisition (150 ) ? (150 ) ? paymentPayments of debt (163 ) ? (411 ) ? issuance costsTaxes paidrelated to net (2,534 ) (2,087 ) (5,984 ) (4,926 ) share settlementof equity awardsProceeds fromemployee stock 3,736 2,887 7,082 5,521 purchase planProceeds fromstock option 2,491 1,866 6,219 7,924 exercisesNet cash providedby financing 2,679 2,666 202,300 8,519 activitiesEffect ofexchange ratechanges on cash, 461 (497 ) 160 (648 ) cash equivalentsand restrictedcashNet (decrease)increase in cash,cash equivalents (40,917 ) (11,644 ) 116,296 15,360 and restrictedcashCash, cashequivalents andrestricted cash, 280,626 126,569 123,413 99,565 beginning ofperiodCash, cashequivalents and $ 239,709 $ 114,925 $ 239,709 $ 114,925 restricted cash,end of period

RAPID7, INC.GAAP to Non-GAAP Reconciliation (Unaudited)(in thousands, except share and per share data)

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019GAAP gross profit $ 74,047 $ 59,525 $ 210,504 $ 169,515 Add: Stock-based 1,132 679 3,194 1,970 compensation expense^1Add: Amortization ofacquired intangible 2,434 1,661 6,267 4,681 assets^2Non-GAAP gross profit $ 77,613 $ 61,865 $ 219,965 $ 176,166 Non-GAAP gross margin 73.9 % 74.4 % 73.7 % 74.9 % GAAP gross profit - $ 73,363 $ 58,773 $ 208,969 $ 166,191 ProductsAdd: Stock-based 730 386 2,013 1,036 compensation expenseAdd: Amortization ofacquired intangible 2,434 1,661 6,267 4,681 assetsNon-GAAP gross profit - $ 76,527 $ 60,820 $ 217,249 $ 171,908 ProductsNon-GAAP gross margin - 77.6 % 79.5 % 78.0 % 80.0 %Products GAAP gross profit - $ 684 $ 752 $ 1,535 $ 3,324 Professional servicesAdd: Stock-based 402 293 1,181 934 compensation expenseNon-GAAP gross profit - $ 1,086 $ 1,045 $ 2,716 $ 4,258 Professional servicesNon-GAAP gross margin - 16.7 % 15.6 % 13.7 % 20.9 %Professional services GAAP loss from operations $ (17,916 ) $ (11,756 ) $ (53,468 ) $ (33,680 )Add: Stock-based 17,128 10,426 46,921 29,490 compensation expense^1Add: Amortization ofacquired intangible 2,581 1,694 6,556 4,789 assets^2Add: Acquisition-related ? ? 1,138 514 expenses^3Add: Litigation-related 651 178 1,629 506 expenses^4Non-GAAP income from $ 2,444 $ 542 $ 2,776 $ 1,619 operations GAAP net loss $ (25,541 ) $ (14,406 ) $ (69,931 ) $ (39,499 )Add: Stock-based 17,128 10,426 46,921 29,490 compensation expense^1Add: Amortization ofacquired intangible 2,581 1,694 6,556 4,789 assets^2Add: Acquisition-related ? ? 1,138 514 expenses^3Add: Litigation-related 651 178 1,629 506 expenses^4Add: Amortization of debtdiscount and issuance 5,206 2,679 12,213 7,783 costsAdd: Release of valuationallowance, ? ? ? (761 )acquisition-relatedNon-GAAP net income $ 25 $ 571 $ (1,474 ) $ 2,822 (loss) Reconciliation of net(loss) income per share, basicGAAP net loss per share, $ (0.50 ) $ (0.29 ) $ (1.38 ) $ (0.82 )basicNon-GAAP adjustments to 0.50 0.30 1.35 0.88 net lossNon-GAAP net (loss) $ ? $ 0.01 $ (0.03 ) $ 0.06 income per share, basic Reconciliation of net(loss) income per share, dilutedGAAP net loss per share, $ (0.50 ) $ (0.29 ) $ (1.38 ) $ (0.82 )dilutedNon-GAAP adjustments to 0.50 0.30 1.35 0.87 net loss

Non-GAAP net income(loss) per share, $ ? $ 0.01 $ (0.03 ) $ 0.05 diluted Weighted averageshares used in GAAPper share 51,293,210 49,020,449 50,707,553 48,437,686 calculation, basicand diluted Weighted averageshares used in non-GAAP per sharecalculation:Basic 51,293,210 49,020,449 50,707,553 48,437,686 Diluted 53,894,202 52,404,657 50,707,553 51,879,345 ^1 Includesstock-based compensation expenseas follows:Cost of revenue $ 1,132 $ 679 $ 3,194 $ 1,970 Research and 6,818 3,996 17,852 11,224 developmentSales and marketing 4,506 3,047 12,529 8,453 General and 4,672 2,704 13,346 7,843 administrative ^2 Includesamortization of acquired intangibleassets as follows:Cost of revenue $ 2,434 $ 1,661 $ 6,267 $ 4,681 Sales and marketing 31 32 143 105 General and 116 1 146 3 administrative ^3 Includesacquisition-related expenses as follows:General and $ ? $ ? $ 1,138 $ 514 administrative ^4 Includeslitigation-related expenses as follows:General and $ 651 $ 178 $ 1,629 $ 506 administrative

RAPID7, INC.Reconciliation of Net Loss to Adjusted EBITDA (Unaudited)(in thousands)

Three Months Ended September Nine Months Ended September 30, 30, 2020 2019 2020 2019GAAP net loss $ (25,541 ) $ (14,406 ) $ (69,931 ) $ (39,499 ) Interest income (87 ) (1,448 ) (1,343 ) (4,761 ) Interest expense 7,328 3,399 16,707 9,940 Other (income) (143 ) 492 94 727 expense, netProvision for(benefit from) 527 207 1,005 (87 ) income taxesDepreciation 2,706 2,520 8,121 6,426 expenseAmortization of 3,222 2,078 8,226 5,543 intangible assetsStock-basedcompensation 17,128 10,426 46,921 29,490 expenseAcquisition-related ? ? 1,138 514 expensesLitigation-related 651 178 1,629 506 expensesAdjusted EBITDA $ 5,791 $ 3,446 $ 12,567 $ 8,799

RAPID7, INC.Fourth Quarter and Full-Year 2020 GuidanceGAAP to Non-GAAP Reconciliation(in millions, except per share data)

Fourth Quarter 2020 Full-Year 2020Reconciliation of GAAPto Non-GAAP (loss) income from operations:Anticipated GAAP loss $ (20.9 ) to $ (19.9 ) $ (74.2 ) to $ (73.2 ) from operationsAdd: Anticipatedstock-based 16.5 to 16.5 63.4 to 63.4 compensation expenseAdd: Anticipatedamortization of 2.6 to 2.6 9.1 to 9.1 acquired intangibleassetsAdd: Anticipatedacquisition-related ? to ? 1.1 to 1.1 expensesAdd: Anticipatedlitigation-related ? to ? 1.6 to 1.6 expensesAnticipated non-GAAP(loss) income from $ (1.8 ) to $ (0.8 ) $ 1.0 to $ 2.0 operations Reconciliation of GAAP to Non-GAAP net loss:Anticipated GAAP net $ (29.0 ) to $ (28.0 ) $ (98.7 ) to $ (97.7 ) lossAdd: Anticipatedstock-based 16.5 to 16.5 63.4 to 63.4 compensation expenseAdd: Anticipatedamortization of 2.6 to 2.6 9.1 to 9.1 acquired intangibleassetsAdd: Anticipatedacquisition-related ? to ? 1.1 to 1.1 expensesAdd: Anticipatedlitigation-related ? to ? 1.6 to 1.6 expensesAdd: Anticipatedamortization of debt 5.3 to 5.3 17.5 to 17.5 discount and issuancecostsAnticipated non-GAAP $ (4.6 ) to $ (3.6 ) $ (6.0 ) to $ (5.0 ) net loss Anticipated GAAP net $ (0.56 ) $ (0.54 ) $ (1.94 ) $ (1.92 ) loss per shareAnticipated non-GAAP $ (0.09 ) $ (0.07 ) $ (0.12 ) $ (0.10 ) net loss per share Weighted average sharesused in GAAP andnon-GAAP per share 52.1 51.0 calculation, basic anddiluted

The reconciliation does not reflect any items that are unknown at this time, such as acquisition-related expenses and litigation-related expenses for the fourth quarter of 2020, which we are not able to predict without unreasonable effort due to their inherent uncertainty.