Summary
Rapid7 started fiscal 2022 with strong demand for its security platform. Total revenue for the first quarter was $157.38 million, up 34.0% from a year earlier. Annualized recurring revenue reached $627 million, up 38%. The customer base grew 16% to 10,407 accounts, and ARR per customer rose 18% to $60.3. Products revenue grew 36% while professional services revenue grew 2%. North America revenue rose 30% and the rest of the world rose 54%. Recurring revenue was 94% of the total, up from 91% in the prior-year quarter. Part of the top-line gain came from the IntSights acquisition, which closed in July 2021.
The bottom line did not keep pace. GAAP gross profit was $106.10 million, up 30.7%, but gross margin fell to 67.4%, down 1.7 percentage points. Management pointed to a heavier mix of cloud-based subscriptions and managed services, which carry lower margins than licensed software, and to higher amortization of the developed technology intangible tied to IntSights. GAAP operating loss widened to $40.38 million, an operating margin of -25.7%, down 6.0 percentage points from the prior-year quarter. Net loss widened to $45.00 million, and diluted loss per share widened to $0.78. On a non-GAAP basis, Rapid7 posted a loss from operations of $5.6 million against income of $1.9 million a year ago, and adjusted EBITDA was negative $1.2 million versus positive $5.8 million. Stock-based compensation of $28.9 million was the largest swing factor between the GAAP and non-GAAP results.
Cash generation thinned. Operating cash flow was $10.40 million, down 49.5%. Capital expenditures rose 214.1% to $3.05 million. Free cash flow, which the company defines as operating cash flow less purchases of property and equipment and capitalized internal-use software costs, fell to $3.8 million from $17.9 million. Deferred revenue, current portion, grew 34.0% to $378.34 million, a signal of billings momentum heading into the rest of the year.
Costs climbed across the board. Cost of revenue rose 41.3%, faster than revenue. Research and development expense rose 50.6%, sales and marketing rose 36.7%, and general and administrative rose 32.7%. The filing attributes much of the increase to headcount growth, cloud computing costs, and stock-based compensation, including retention awards connected to the IntSights deal. In March 2022 the company signed a new AWS agreement covering a 36-month term that begins April 1, 2022, with a total commitment of $300.0 million. That is a large fixed obligation, and it raises the bar on volume growth to keep unit economics steady.
Guidance frames the rest of the year. For the second quarter of 2022, Rapid7 expects revenue of $163 million to $165 million, growth of 29% to 31%, and ARR of $740 million to $750 million, growth of 24% to 25%. Second quarter non-GAAP income from operations is projected at $0 to $2 million, with non-GAAP net loss per share of $0.07 to $0.03. For the full year 2022, revenue is guided to $686 million to $692 million, growth of 28% to 29%, with non-GAAP income from operations of $17 million to $24 million, non-GAAP net income per share of $0.05 to $0.16, and free cash flow of $40 million to $45 million. The outlook excludes any potential impact of foreign exchange gains or losses.
Risk disclosures in the filing lean on familiar themes: the ongoing COVID-19 pandemic, competition, the ability to sustain the revenue growth rate, customer renewal rates, integration of acquired companies, and foreign exchange volatility. The quarter mixed robust demand with a wider operating loss and thinner cash generation, so execution on hiring, cloud infrastructure costs, and the AWS commitment will shape how the year plays out.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q1 FY2022 | Q4 FY2021 | QoQ | Q1 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $157.4M | $151.6M | +3.8% | $117.5M | +34.0% |
| Gross profit | $106.1M | $101.8M | +4.3% | $81.2M | +30.7% |
| Gross margin | 67.4% | 67.1% | +0.3 pp | 69.1% | -1.7 pp |
| Research & development | $49.8M | $48.5M | +2.7% | $33.1M | +50.6% |
| Sales & marketing | $75.1M | $73.2M | +2.7% | $55.0M | +36.7% |
| General & administrative | $21.5M | $20.8M | +3.6% | $16.2M | +32.7% |
| Total operating expenses | $146.5M | $142.5M | +2.8% | $104.3M | +40.5% |
| Operating income (loss) | -$40.4M | -$40.7M | +0.8% | -$23.1M | -74.7% |
| Operating margin | -25.7% | -26.8% | +1.2 pp | -19.7% | -6.0 pp |
| Net income (loss) | -$45.0M | -$44.6M | -0.8% | -$29.8M | -50.8% |
| Net margin | -28.6% | -29.4% | +0.8 pp | -25.4% | -3.2 pp |
| Diluted EPS | -$0.78 | -$0.81 | +$0.03 | — | — |
Risks
The SecOps market is highly fragmented and intensely competitive, with larger competitors such as Qualys, Tenable, Splunk, Microsoft Sentinel and Palo Alto Networks able to bundle competing products and pressure pricing. This could cause average sales prices for Rapid7 offerings to decline and make it harder to compete successfully.
The conditional conversion features of the 2025 Notes were triggered as of March 31, 2022, and those notes are convertible at holder option between April 1, 2022 and June 30, 2022. Conversion or required reclassification of the principal as a current liability could reduce net working capital and adversely affect liquidity.
The ongoing COVID-19 pandemic could delay sales cycles, reduce customer renewals, and lead to payment term deferrals or pricing and bundling concessions. MD&A states the company has not experienced significant disruptions for the three months ended March 31, 2022, but cannot accurately predict the full impact due to uncertainties including duration, variants and vaccination efforts.
The timing of sales is difficult to forecast because of the length and unpredictability of the sales cycle, particularly with large enterprises, and customer requirements have increased complexity and prolonged the sales cycle. MD&A also notes COVID-19 may impact sales cycle and sales execution.
Recruiting, hiring and retaining cybersecurity personnel has become increasingly difficult, and Rapid7 faces high turnover in sales and marketing and research and development roles. Headcount grew from 1,079 in 2017 to 2,353 in 2021, and research and development expense increased 50.6% for the three months ended March 31, 2022 compared with the prior-year period.
Continued international expansion adds complexity and exposure to foreign exchange, regulatory and geopolitical risks. Operations outside North America generated 21% and 18% of revenue for the three months ended March 31, 2022 and 2021, and the armed conflict between Russia and Ukraine could have a material adverse impact through sanctions, regional instability and currency and market effects.
Approximately half of revenue was attributable to InsightVM, Nexpose and Metasploit for the year ended December 31, 2021. A decline in demand, pricing or renewals for these vulnerability management offerings would harm operating results more seriously than if revenue were more diversified.
Rapid7 derived approximately 52%, 47% and 43% of revenue through channel partners for the years ended December 31, 2021, 2020 and 2019, respectively. These agreements are non-exclusive, and partners may favor competitors or fail to effectively market and sell Rapid7 products, particularly in international markets.
Total gross margin decreased to 67.4% for the three months ended March 31, 2022 from 69.1% in the prior-year period. MD&A attributes the decline primarily to a higher mix of lower-margin cloud-based subscriptions and managed services and increased amortization of the IntSights acquired intangible asset.
In March 2022, Rapid7 entered a new AWS cloud infrastructure services agreement for a 36-month period beginning April 1, 2022 with a total commitment of $300.0 million. This contractual obligation increases fixed cloud infrastructure spending and could pressure cash flows if usage or business growth does not match the commitment.
SaaS KPIs
All quarters →Free Cash Flow
ARR per Customer
Number of Customers
Annualized Recurring Revenue (ARR)
Non-GAAP gross margin
Recurring revenue (% of total revenue)
Summary, forecast, risks and KPIs are extracted from Rapid7, Inc.'s SEC filings for Q1 FY2022 (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.