Summary
Rapid7 began fiscal 2021 with strong top-line momentum. Revenue rose 24.5% to $117.45 million for the first quarter. Annualized recurring revenue reached $455.8 million, up 30% year over year. The customer base grew 11% to 8,945, and ARR per customer rose 17% to $51.0. Recurring revenue represented 91% of total revenue, which supports the durability of the model. Management also completed the $50.5 million acquisition of Alcide in January and announced the acquisition of Velociraptor in April, adding Kubernetes security and digital forensics capabilities.
The GAAP income statement shows the cost of that growth. Gross profit rose 21.8% to $81.16 million, but gross margin slipped to 69.1%, down 1.5 percentage points. The decline reflects a higher mix of cloud-based subscriptions and managed services, which carry lower gross margins than licensed software. Operating loss widened 16.6% to $23.12 million. Operating margin was -19.7%, an improvement of 1.3 percentage points. Net loss widened 30.2% to $29.84 million. GAAP diluted loss per share was $0.56. On a non-GAAP basis, income from operations was $1.9 million, compared with a loss of $3.9 million a year earlier. Adjusted EBITDA was $5.8 million, compared with negative $0.8 million. The gap between GAAP and non-GAAP results remains wide because of stock-based compensation, amortization of acquired intangibles, acquisition-related expenses, and litigation-related expenses.
Cash generation was a clear bright spot. Operating cash flow was $20.60 million, up 385.4% from the prior-year quarter. Capital expenditures fell 64.7% to $0.97 million. Free cash flow was $17.9 million, compared with negative $11.4 million a year earlier. Deferred revenue, current portion, rose 28.6% to $282.24 million. The company also reshaped its balance sheet in March. It issued $600.0 million of 0.25% convertible senior notes due 2027, repurchased $182.6 million of its 2023 notes, and used $76.0 million to buy capped calls. The capped calls have an initial cap price of $159.04 per share. Interest expense increased because of the new debt and a $2.7 million induced conversion expense, though that expense is excluded from non-GAAP results.
Guidance points to continued growth but also to near-term GAAP losses. For the second quarter, management guided revenue to $121.7 million to $123.3 million and non-GAAP income from operations to $4.3 million to $5.3 million. For the full year, revenue guidance is $500.0 million to $506.0 million, with year-over-year growth of 22% to 23%. Second-quarter revenue growth is expected to be 23% to 25%. Full-year non-GAAP income from operations is guided to $12.0 million to $16.0 million, and full-year non-GAAP net income per share is expected to range from negative $0.03 to positive $0.04. Full-year free cash flow is guided to approximately $15.0 million. Second-quarter annualized recurring revenue is expected to be approximately $530.0 million. Management said the guidance does not include potential foreign exchange gains or losses. Risks include the uncertain duration of the COVID-19 pandemic, its effect on sales cycles and customer spending, intense competition, customer renewal rates, integration of acquisitions, foreign exchange swings, and the company's ability to sustain its revenue growth rate while investing in product development.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2021 | Q4 FY2020 | QoQ | Q1 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $117.5M | $113.2M | +3.8% | $94.3M | +24.5% |
| Gross profit | $81.2M | $79.5M | +2.1% | $66.6M | +21.8% |
| Gross margin | 69.1% | 70.2% | -1.1 pp | 70.6% | -1.5 pp |
| Research & development | $33.1M | $29.7M | +11.2% | $24.2M | +36.7% |
| Sales & marketing | $55.0M | $54.4M | +1.0% | $48.1M | +14.2% |
| General & administrative | $16.2M | $15.9M | +1.8% | $14.1M | +15.0% |
| Total operating expenses | $104.3M | $100.1M | +4.2% | $86.4M | +20.6% |
| Operating income (loss) | -$23.1M | -$20.6M | -12.0% | -$19.8M | -16.6% |
| Operating margin | -19.7% | -18.2% | -1.4 pp | -21.0% | +1.3 pp |
| Net income (loss) | -$29.8M | -$28.9M | -3.2% | -$22.9M | -30.2% |
| Net margin | -25.4% | -25.6% | +0.1 pp | -24.3% | -1.1 pp |
Risks
While MD&A states Rapid7 has not experienced significant disruptions from COVID-19 during FY2021 Q1, the pandemic has impacted operations and could cause delays in the sales cycle, failures to renew at anticipated scope, payment term deferrals, and pricing or bundling concessions. The subscription model means the effect may not be fully reflected in results until future periods.
The SecOps market is highly fragmented and intensely competitive, with larger competitors able to bundle products and offer lower pricing. Rapid7 names competitors including Microsoft Sentinel, Splunk, Palo Alto Networks, Qualys, and Tenable.
Greater than half of revenue was attributable to InsightVM, Nexpose, and Metasploit in each of the last three fiscal years, so a decline in demand for vulnerability management offerings could disproportionately harm operating results.
In March 2021 Rapid7 issued $600.0 million of 2027 Notes and repurchased $182.6 million of 2023 Notes. The conditional conversion feature of the 2023 Notes was triggered as of March 31, 2021, allowing holders to convert between April 1, 2021 and June 30, 2021, which could require cash settlement, reduce liquidity, or force reclassification to current liabilities.
Quarterly operating results may vary due to COVID-19 and other factors, and Rapid7 may fail to meet guidance or analyst expectations. In FY2021 Q1 revenue rose 24.5% while operating loss widened to $23.1 million from $19.8 million in FY2020 Q1.
Rapid7 acquired Alcide.IO Ltd. for $50.5 million in January 2021 after DivvyCloud in May 2020, and integration may be difficult due to geographically separate organizations, different cultures, and the need to retain key personnel. Failure to integrate could prevent anticipated cloud security benefits.
Rapid7 is dependent on senior management, particularly CEO Corey Thomas, and other key employees. It faces high turnover in sales and marketing and research and development roles, and failure to attract or retain personnel could impair product development and sales execution.
Rapid7 derived approximately 47%, 43%, and 39% of revenue through channel partners in fiscal years 2020, 2019, and 2018, and those agreements are non-exclusive, so partners may favor competitors or fail to market its products effectively.
Operations outside North America generated 18% and 17% of revenue for the three months ended March 31, 2021 and 2020, and continued international expansion involves regulatory, currency, tax, and Brexit-related data transfer uncertainties.
Total gross margin decreased to 69.1% in FY2021 Q1 from 70.6% in FY2020 Q1, and product gross margin declined as cloud-based subscriptions and managed services, which have lower gross margins than licensed software, increased as a mix of revenue.
A significant percentage of revenue is recognized ratably over subscription terms, so a decline in new sales or renewals in a period may not immediately affect revenue but will negatively affect future periods, and the model makes it difficult to rapidly increase revenue through additional sales.
SaaS KPIs
All quarters →Free Cash Flow
ARR per Customer
Number of Customers
Annualized Recurring Revenue (ARR)
Non-GAAP Operating Margin
Non-GAAP Income from Operations
Adjusted EBITDA
Recurring revenue as % of total revenue
Summary, forecast, risks and KPIs are extracted from Rapid7, Inc.'s SEC filings for Q1 FY2021 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.