Summary
Rapid7 closed fiscal 2021 with fourth-quarter revenue of $151.6 million, up 34.0% from the prior-year quarter. Full-year revenue was $535.4 million, up 30.1%. Annualized recurring revenue ended the year at $599.0 million, up 38% year over year. Customer count rose 18% to 10,283, and ARR per customer climbed 17% to $58.3. Management said the company eclipsed 10,000 customers globally and credited demand for its security transformation and vulnerability management solutions.
Growth again came with margin and profitability pressure. Fourth-quarter gross profit was $101.8 million, up 28.1%, while gross margin slipped to 67.1%, down 3.1 percentage points. Full-year gross profit was $366.5 million, up 26.4%, and full-year gross margin was 68.4%, down 2.0 percentage points. The operating loss widened to $40.7 million, 97.3% larger than the prior-year quarter, and operating margin was -26.8%, down 8.6 percentage points. For the full year the operating loss was $120.1 million, 62.0% wider, with operating margin of -22.4%, down 4.4 percentage points. The net loss was $44.6 million, 54.3% wider than the prior-year quarter. The full-year net loss was $146.3 million, 48.0% wider, and full-year diluted EPS was -$2.65, a loss that widened 36.6%.
Non-GAAP results told a similar story about the cost of growth. Fourth-quarter non-GAAP loss from operations was $6.1 million versus $0.7 million a year earlier, and adjusted EBITDA turned negative at $1.9 million from positive $2.9 million. Full-year non-GAAP income from operations was $7.6 million, and the full-year non-GAAP net loss was $3.0 million. Cash was the bright spot. Fourth-quarter operating cash flow was $4.7 million, up 705.5%, and full-year operating cash flow was $53.9 million, up 1003.3%. Capital expenditures were $4.2 million in the quarter, down 37.5%, and $9.0 million for the year, down 34.7%. Free cash flow, a non-GAAP measure, was negative $2.2 million in the quarter compared with negative $7.8 million, and $35.1 million for the full year compared with negative $15.0 million. Deferred revenue, current portion, stood at $372.1 million at December 31, 2021, up 33.6%.
Guidance points to more growth and a slow climb toward non-GAAP profitability. For the first quarter of 2022, Rapid7 guided non-GAAP loss from operations to $7 million to $5 million and non-GAAP net loss per share to $0.18 to $0.15. For the full year 2022, the company guided annualized recurring revenue to $740 million to $750 million, or 24% to 25% growth, non-GAAP income from operations to $17 million to $24 million, non-GAAP net income per share to $0.05 to $0.16, and free cash flow to $40 million to $45 million. First-quarter and full-year guidance excludes any potential foreign exchange gains or losses, and the non-GAAP figures exclude stock-based compensation, amortization of acquired intangibles, amortization of debt issuance costs, and certain other items.
The outlook carries familiar risks. Rapid7 cites the ongoing COVID-19 pandemic, fluctuations in quarterly results, the possibility of failing to meet publicly announced guidance, its ability to sustain its revenue growth rate, customer renewals, competition, market growth, innovation and growth management, sales cycles, acquisition integration, and compliance with applicable laws. Management also expects cost of revenue, research and development, and sales and marketing expenses to rise in absolute dollars, though sales and marketing should decline as a percentage of revenue, while general and administrative expense stays relatively consistent as a percentage of revenue. A full valuation allowance remains in place for domestic and certain foreign deferred tax assets. The top line is compounding quickly and cash generation has swung positive, yet the path to durable GAAP profitability is still unproven.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q4 FY2021 | Q3 FY2021 | QoQ | Q4 FY2020 | YoY |
|---|---|---|---|---|---|
| Revenue | $151.6M | $139.9M | +8.4% | $113.2M | +34.0% |
| Gross profit | $101.8M | $96.4M | +5.5% | $79.5M | +28.1% |
| Gross margin | 67.1% | 68.9% | -1.8 pp | 70.2% | -3.1 pp |
| Research & development | $48.5M | $43.9M | +10.6% | $29.7M | +63.1% |
| Sales & marketing | $73.2M | $63.0M | +16.1% | $54.4M | +34.5% |
| General & administrative | $20.8M | $23.8M | -12.8% | $15.9M | +30.3% |
| Total operating expenses | $142.5M | $130.7M | +9.0% | $100.1M | +42.3% |
| Operating income (loss) | -$40.7M | -$34.3M | -18.6% | -$20.6M | -97.3% |
| Operating margin | -26.8% | -24.5% | -2.3 pp | -18.2% | -8.6 pp |
| Net income (loss) | -$44.6M | -$37.7M | -18.4% | -$28.9M | -54.3% |
| Net margin | -29.4% | -26.9% | -2.5 pp | -25.6% | -3.9 pp |
| Diluted EPS | -$0.81 | -$0.67 | -$0.14 | — | — |
| Customers | 10,000 | — | — | 9,700 | +3.1% |
Risks
As of December 31, 2021, the conditional conversion feature of the 2025 Notes was triggered, making them convertible at the holders' option between January 1, 2022 and March 31, 2022. If holders convert, Rapid7 may need to settle in cash, and accounting rules could require reclassifying the notes as a current rather than long-term liability, materially reducing net working capital.
Rapid7 acquired IntSights for $322.2 million in July 2021, Alcide for $50.5 million in January 2021, and Velocidex for $3.0 million in April 2021. Integration is complex and expensive, may cause loss of momentum in product development and sales, and could fail to achieve expected synergies or retain key personnel; acquisition-related expenses were $7.2 million for the year ended December 31, 2021.
GAAP net loss widened to $146.3 million for the year ended December 31, 2021 from $98.8 million in the prior year, and operating loss widened to $120.1 million from $74.1 million. Accumulated deficit was $736.0 million as of December 31, 2021, and gross margin decreased to 68.4% from 70.5%.
Approximately half of revenue for the year ended December 31, 2021 was attributable to InsightVM, Nexpose and Metasploit. A decline in demand for these vulnerability management offerings, or failure to increase sales of newer products such as InsightAppSec and InsightCloudSec, would harm operating results more severely than if revenue were diversified.
Rapid7 derived approximately 52% of revenue from channel partners for the year ended December 31, 2021, up from 47% in 2020 and 43% in 2019. These agreements are non-exclusive, and partners may place greater emphasis on their own products or competitors' offerings, which could impair growth in key international markets.
The ongoing COVID-19 pandemic continues to create uncertainty and has caused sales cycle delays, failures of customers to renew at all or on anticipated scope, requests for payment term deferrals, and pricing or bundling concessions. The pandemic may heighten many other risks described in the filing, including renewals, sales cycle and guidance.
The SecOps market is highly fragmented and intensely competitive, with competitors including Qualys, Tenable, Splunk, Microsoft Sentinel, Palo Alto Networks, and others. Larger competitors have greater resources and can bundle competing products at lower prices, increasing pricing pressure on Rapid7's offerings.
Recruiting and retaining cybersecurity personnel has become increasingly difficult, and Rapid7 depends on sales, marketing and research and development employees for growth. The loss of senior management, particularly CEO Corey Thomas, or other key employees could delay or prevent achievement of development and strategic objectives.
SaaS KPIs
All quarters →Free Cash Flow
ARR per Customer
Number of Customers
Annualized Recurring Revenue (ARR)
Non-GAAP Operating Margin
Non-GAAP gross margin
Adjusted EBITDA
Summary, forecast, risks and KPIs are extracted from Rapid7, Inc.'s SEC filings for Q4 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.