AP NEWS

Rapid7 Announces Second Quarter 2018 Financial Results

August 6, 2018

-- Revenue of $58.4 million under ASC 606 -- Revenue growth of 30% year-over-year under ASC 605 -- Annualized recurring revenue of $198.6 million, an increase of 44% year-over-year

BOSTON, Aug. 06, 2018 (GLOBE NEWSWIRE) -- Rapid7, Inc. (NASDAQ: RPD), powering SecOps through its visibility, analytics and automation cloud, today announced its financial results for the second quarter of 2018.

“Rapid7 had a great second quarter, with strong performance around the world and across our solutions,” said Corey Thomas, President and CEO of Rapid7. “For the fourth quarter in a row, ARR growth accelerated, reaching 44%, driven by new customer growth, upsells and cross-sells, and the success of our shift towards recurring revenue. As a result, we are raising our guidance for 2018 ARR growth to over 40%.”

“Rapid7’s cloud-based solutions that provide visibility, analytics and automation are powering SecOps and addressing the fastest growing markets in security. Our customers appreciate that our solutions are easy-to-install and easy-to-use, and they increasingly view these solutions as strategic to their success, as evidenced by increasing adoption of our cloud-based Insight platform.”

Second Quarter 2018 Financial Results (under ASC 606)

-- Total revenue for the second quarter of 2018 was $58.4 million. -- For the second quarter of 2018, GAAP loss from operations was $(14.3) million and non-GAAP loss from operations was $(6.0) million. -- For the second quarter of 2018, GAAP net loss was $(14.3) million or a GAAP loss per share of $(0.31) and non-GAAP net loss was $(6.0) million or a non-GAAP net loss per share of $(0.13). -- Adjusted EBITDA was $(4.2) million in the second quarter of 2018. -- For the second quarter of 2018, total revenue from North America was $49.5 million and comprised 85% of total revenue. Total revenue from the rest of world was $8.9 million and comprised 15% of total revenue in the second quarter of 2018. -- Cash flow from operating activities was $(9.1) million for the second quarter of 2018, compared to $ (4.0) for the second quarter of 2017. Cash flow from operating activities was $(1.8) million in the first six months of 2018, compared to $(0.7) million in the first six months of 2017.

Second Quarter 2018 Financial Results (under ASC 605)

-- Total revenue for the second quarter of 2018 was $61.6 million, an increase of 30% year-over-year. -- For the second quarter of 2018, GAAP loss from operations was $(14.0) million, compared to GAAP loss from operations of $(11.9) million in the second quarter of 2017. For the second quarter of 2018, non-GAAP loss from operations was $(5.7) million, compared to non-GAAP loss from operations of $(6.2) million in the second quarter of 2017. -- For the second quarter of 2018, GAAP net loss was $(14.0) million or a GAAP loss per share of $(0.30), compared to a GAAP net loss of $(11.6) million or a GAAP loss per share of $(0.27) for the second quarter of 2017. For the second quarter of 2018, non-GAAP net loss was $(5.7) million or a non-GAAP net loss per share of $(0.12), compared to a non-GAAP net loss of $(5.9) million or a non-GAAP net loss per share of $(0.14) for the second quarter of 2017. -- Adjusted EBITDA was $(3.9) million in the second quarter of 2018, compared to adjusted EBITDA of $ (5.0) million in the second quarter of 2017. -- For the second quarter of 2018, total revenue from North America increased 29% year-over-year to $52.0 million and comprised 84% of total revenue. Total revenue from the rest of the world increased 33% year-over-year to $9.6 million and comprised 16% of total revenue for the second quarter of 2018.

Recent Business Metrics and Highlights

-- Annualized recurring revenue (ARR) for the second quarter of 2018 was $198.6 million, an increase of 44% year-over-year. -- Our renewal rate for the second quarter of 2018, which includes upsells and cross-sells of additional products and services, was 122%. The expiring renewal rate, which excludes upsells and cross-sells of additional products and services, was 89% in the second quarter of 2018. -- 79% (under ASC 606) and 77% (under ASC 605) of total revenue in the second quarter of 2018 was recurring revenue, which is comprised of content subscriptions, maintenance and support, cloud-based subscriptions, managed services subscriptions, and term licenses, up from 70% (under ASC 605) in the second quarter of 2017, an increase of 43% year-over-year. -- 83% (under ASC 606) and 87% (under ASC 605) of total revenue for the second quarter of 2018 came from deferred revenue on the balance sheet at the beginning of the quarter. -- Ended the second quarter of 2018 with over 7,200 customers, an increase of 10% year-over-year. -- Calculated billings were $63.9 million (under ASC 606) and $64.0 million (under ASC 605) for the second quarter of 2018, an increase of 6% year-over-year. Growth in calculated billings was depressed by an anticipated decrease in weighted average contract lengths from 23 months to 17 months year-over-year as we shift the business towards recurring revenue, and a decrease in professional services growth. During the transition to a more subscription-based model, we believe calculated billings will be a less meaningful metric for our operations. -- On May 14, 2018, we closed on a public offering of 3.0 million shares, all which were sold by certain existing stockholders. We did not receive any of the proceeds from the sale of shares by the selling stockholders. -- Rapid7 introduced Canada and Australia instances of our Security Analytics and Automation Platform. By expanding the platform’s global presence, Rapid7 will give customers in both countries, in addition to our other instances in North America, Europe, and Asia, the ability to better address data governance requirements and the flexibility to keep security data local. -- We announced integration between Rapid7’s Insight platform and Microsoft Azure. This integration provides modern vulnerability management, analytics-driven incident detection for hybrid environments, and simplified agent deployment within the Azure infrastructure. Rapid7 customers utilizing Azure now have, through InsightVM and InsightIDR, increased visibility into security vulnerability and attacks within their cloud and hybrid environments. -- Announced a new capability, Attacker Behavior Analytics (ABA), in our InsightIDR solution. Attacker Behavior Analytics are detections that reveal unknown variants of successful attacker techniques, and are continually crafted by Rapid7’s global security analysts and threat intelligence teams. With ABA, InsightIDR customers directly benefit from this stream of intelligence from Rapid7 SOCs, resulting in earlier attack chain detection and faster possible response to evolving attacks. -- Rapid7 won the Best Security Company Award at SC Awards Europe, based on “an extensive product and services portfolio with good customer service capability, research capability, and community involvement”. -- Our research team published several reports, including 2018 National Exposure Index Research Report: Internet Security Posture by Country; Rapid7 Quarterly Threat Report: 2018 Q1; and, Off the Chain! A Research Paper Observing Bitcoin Nodes on the Public Internet. -- Please see investors.rapid7.com for our Financial Metrics spreadsheet. -- For additional details on the reconciliation of non-GAAP measures to their nearest comparable GAAP measures, please refer to the accompanying financial data tables contained in this press release.

Third Quarter and Full-Year 2018 Guidance

Rapid7 anticipates total revenue, non-GAAP loss from operations, and non-GAAP net loss per share to be in the following ranges:

Third Quarter 2018 Guidance (in millions, except per share data) Impact of Adoption Under ASC 606 Under ASC 605 of ASC 606 Revenue $ 58.6 to $ 60.0 $ 61.7 to $ 63.1 $ (3.1 ) to $ (3.1 ) Year-over-year growth 22 % to 25 % Non-GAAP loss from operations $ (7.3 ) to $ (5.9 ) $ (6.6 ) to $ (5.2 ) $ (0.7 ) to $ (0.7 ) Non-GAAP net loss per share $ (0.15 ) to $ (0.12 ) Weighted average shares outstanding 47.1 Full-Year 2018 Guidance (in millions, except per share data) Impact of Adoption Under ASC 606 Under ASC 605 of ASC 606 Revenue $ 237.0 to $ 240.0 $ 250.0 to $ 253.0 $ (13.0 ) to $ (13.0 ) Year-over-year growth 24 % to 26 % Non-GAAP loss from operations $ (25.0 ) to $ (22.0 ) $ (24.5 ) to $ (21.5 ) $ (0.5 ) to $ (0.5 ) Non-GAAP net loss per share $ (0.52 ) to $ (0.45 ) Weighted average shares outstanding 46.6 ARR year-over-year growth greater than 40%

Guidance for the third quarter and full-year 2018 does not include any potential impact of foreign exchange gains or losses.

Non-GAAP guidance excludes estimates for stock-based compensation expense, amortization of acquired intangible assets, and certain non-recurring items. Rapid7 has provided a reconciliation of historical non-GAAP financial measures to the most comparable GAAP measures in the financial statement tables included in this press release. A reconciliation of non-GAAP guidance measures to the most comparable GAAP measures is not available on a forward-looking basis.

For the second quarter of 2018, we recognized revenue under ASC 606. For the second quarter of 2017, however, we recognized revenue under ASC 605. Therefore, the periods are not directly comparable. In addition, since we adopted ASC 606 using the modified retrospective method, we have presented in the table below, for the second quarter of 2018, a summary of certain consolidated financial statement line items impacted by the adoption of ASC 606 with a comparison of these line items to ASC 605.

Three Months Ended June 30, 2018 Under ASC Under ASC Difference 606 605 ---------- --------- ---------- (in thousands) Products $ 39,043 41,043 $ (2,000 ) Maintenance and support 10,610 11,558 (948 ) Professional services 8,788 8,976 (188 ) -------- - ------- - -------- - Total revenue 58,441 61,577 (3,136 ) Cost of revenue - GAAP 17,393 17,367 26 Gross margin - GAAP 70.2 % 71.8 % Cost of revenue - non-GAAP 16,031 16,005 26 Gross margin - non-GAAP 72.6 % 74.0 % Sales and marketing - GAAP 31,157 34,001 (2,844 ) Sales and marketing - non-GAAP 29,064 31,908 (2,844 ) GAAP loss from operations (14,340 ) (14,022 ) (318 ) Non-GAAP loss from operations (5,992 ) (5,674 ) (318 ) Deferred revenue, current portion 153,634 163,121 (9,487 ) Deferred revenue, non-current portion 70,766 53,378 17,388 -------- - ------- - -------- - Total deferred revenue 224,400 216,499 7,901

Conference Call and Webcast Information

Rapid7 will host a conference call today, August 6, 2018, 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 the Company’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 4169935) until August 13, 2018. A webcast replay will be available at https://investors.rapid7.com.

About Rapid7

Rapid7 (NASDAQ:RPD) powers the practice of SecOps by delivering shared visibility, analytics, and automation so that security, IT, and Development teams can work together more effectively. The Rapid7 Insight platform empowers these teams to jointly manage and reduce risk, detect and contain attackers, and analyze and optimize operations. Rapid7 technology, services, and research drive vulnerability management, application security, incident detection and response (SIEM), orchestration and automation, and log management for more than 7,200 organizations across more than 120 countries, including 54% of the Fortune 100. To learn more about Rapid7 or join our threat research, visit www.rapid7.com.

Non-GAAP Financial Measures and Other Business 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 business metrics, which we believe are helpful to our investors. We use these non-GAAP financial measures and other business 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 business 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.

The presentation of non-GAAP financial information and other business metrics is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. While our non-GAAP financial measures and other business metrics are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, we urge investors to review the reconciliation of these financial measures to the comparable GAAP financial measures included below, and not to rely on any single financial measure to evaluate our business.

Adjusted EBITDA. We define adjusted EBITDA as net loss before (1) interest income (expense), net, (2) other income (expense), net, (3) provision for income taxes, (4) depreciation expense, (5) amortization of intangible assets, (6) stock-based compensation expense, and (7) certain non-recurring 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. Adjusted EBITDA should not be considered as a substitute for other measures of financial performance reported in accordance with GAAP. There are limitations to using this non-GAAP financial measure, including that other companies may calculate this measure differently than we do, that it does not reflect our capital expenditures or future requirements for capital expenditures and that it does not reflect changes in, or cash requirements for, our working capital and excludes some items that are cash based.

We also monitor operating measures of non-GAAP gross profit, non-GAAP operating loss, non-GAAP net loss and non-GAAP net loss per share. These non-GAAP financial measures exclude the effect of stock-based compensation expense, amortization of acquired intangible assets, and certain non-recurring items such as acquisition-related expenses, secondary public offering costs and litigation-related expenses. We believe that these non-GAAP financial measures 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.

Annualized Recurring Revenue (ARR). ARR is a financial measure that we define as the annual value of all recurring revenue related contracts in place at the end of the quarter. ARR should be viewed independently of revenue and deferred revenue as ARR is a performance metric and is intended as a supplemental metric, not a replacement for these items.

Calculated Billings (non-GAAP). Calculated billings is a non-GAAP measure that we define as total revenue recognized in accordance with GAAP plus the change in deferred revenue from the beginning to the end of the period. Historically, we have considered calculated billings to be a useful metric for management and investors, as a supplement to the corresponding GAAP measure of total revenue, because billings drive deferred revenue, which is an important indicator of the health and visibility of trends in our business. With the expansion of our subscription, cloud-based product offerings (InsightVM, InsightIDR, InsightAppSec, and InsightOps) on the Insight platform, the shift of our other products to subscription pricing, and the shift of our sales compensation plans to Annualized Recurring Revenue, we believe calculated billings will be a less meaningful metric for our operations. Our use of calculated billings has limitations as an analytical tool and should not be considered in isolation or as a substitute for revenue recognition or revenue measurement, or an analysis of our results as reported under GAAP. Also, it is important to note that other companies, including companies in our industry, may not use calculated billings as a measure of their business, may calculate billings differently, may have different billing frequencies, or may use other financial measures to evaluate their performance, all of which could reduce the usefulness of calculated billings as a comparative measure.

While a reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis as a result of the uncertainty regarding, and the potential variability of, many of these costs and expenses that we may incur in the future, we have provided a reconciliation of historical non-GAAP financial measures and other business metrics to the nearest comparable GAAP measures in the accompanying financial statement tables included in this press release.

Cautionary Language Concerning Forward-Looking Statements

This press release includes forward-looking statements. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding demand for our product and service offerings, guidance for the third quarter and full-year 2018 and the potential benefits of the integration with Microsoft Azure and ABA, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “estimate,” “expect,” “intend,” “may,” “will” and similar expressions are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, risks related to our rapid growth and ability to sustain our revenue growth rate, the ability of our products and professional services to correctly detect vulnerabilities, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, 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 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission for the quarter ended March 31, 2018 filed with the Securities and Exchange Commission on May 9, 2018, and 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 contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no duty to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law. 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:

Jeff Bray, CFAVice President, Investor Relationsinvestors@rapid7.com(857) 990-4074

Press contact:

Caitlin Dohertypress@rapid7.com(857) 990-4136

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

June 30, 2018 December 31, 2017 ----------- Under ASC Under ASC Under ASC 606 605 605 Assets Current assets: Cash and cash equivalents $ 100,731 $ 100,731 $ 51,562 Short-term investments 13,983 13,983 39,178 Accounts receivable, net 48,476 48,476 73,661 Deferred contract acquisition and fulfillment costs, current portion 9,481 — — Prepaid expenses and other current assets 13,212 12,995 8,877 --------- - --------- - --------- - Total current assets 185,883 176,185 173,278 Long-term investments 3,929 3,929 1,102 Property and equipment, net 11,184 11,184 8,589 Goodwill 83,164 83,164 83,164 Intangible assets, net 16,002 16,002 16,640 Deferred contract acquisition and fulfillment costs, non-current 22,214 — — portion Other assets 1,395 1,395 1,363 --------- - --------- - --------- - Total assets $ 323,771 $ 291,859 $ 284,136 - ------- - - ------- - - ------- - Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 4,612 $ 4,612 $ 2,240 Accrued expenses 21,832 21,832 29,728 Deferred revenue, current portion 153,634 163,121 155,811 Other current liabilities 1,079 1,079 1,706 --------- - --------- - --------- - Total current liabilities 181,157 190,644 189,485 Deferred revenue, non-current portion 70,766 53,378 68,689 Other long-term liabilities 2,305 1,876 1,809 --------- - --------- - --------- - Total liabilities 254,228 245,898 259,983 Stockholders’ equity: Common stock 467 467 441 Treasury stock (4,764 ) (4,764 ) (4,764 ) Additional paid-in-capital 513,598 513,598 463,428 Accumulated other comprehensive loss (24 ) (24 ) (39 ) Accumulated deficit (439,734 ) (463,316 ) (434,913 ) --------- - --------- - --------- - Total stockholders’ equity 69,543 45,961 24,153 --------- - --------- - --------- - Total liabilities and stockholders’ equity $ 323,771 $ 291,859 $ 284,136 - ------- - - ------- - - ------- -

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

Three Months Ended June 30, Six Months Ended June 30, 2018 2018 2017 2018 2018 2017 ----------- ----------- ----------- ----------- ----------- ----------- Under ASC Under ASC Under ASC Under ASC Under ASC Under ASC 606 605 605 606 605 605 Revenue: Products $ 39,043 $ 41,043 $ 27,168 $ 74,322 $ 78,809 $ 53,110 Maintenance and support 10,610 11,558 11,338 21,363 23,240 22,140 Professional services 8,788 8,976 8,937 17,271 17,729 17,438 --------- - --------- - --------- - --------- - --------- - --------- - Total revenue 58,441 61,577 47,443 112,956 119,778 92,688 Cost of revenue: Products 9,650 9,626 5,557 18,086 18,090 10,267 Maintenance and support 2,007 2,007 1,850 3,856 3,856 3,728 Professional services 5,736 5,734 5,672 12,045 12,036 11,348 --------- - --------- - --------- - --------- - --------- - --------- - Total cost of revenue 17,393 17,367 13,079 33,987 33,982 25,343 --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit 41,048 44,210 34,364 78,969 85,796 67,345 --------- - --------- - --------- - --------- - --------- - --------- - Operating expenses: Research and development 16,082 16,082 11,873 32,804 32,804 23,266 Sales and marketing 31,157 34,001 27,132 60,209 64,745 51,942 General and administrative 8,149 8,149 7,256 16,881 16,881 14,504 --------- - --------- - --------- - --------- - --------- - --------- - Total operating expenses 55,388 58,232 46,261 109,894 114,430 89,712 --------- - --------- - --------- - --------- - --------- - --------- - Loss from operations (14,340 ) (14,022 ) (11,897 ) (30,925 ) (28,634 ) (22,367 ) Other income (expense), net: Interest income (expense), net 464 464 218 705 705 387 Other income (expense), net (326 ) (326 ) 229 (248 ) (248 ) 114 --------- - --------- - --------- - --------- - --------- - --------- - Loss before income taxes (14,202 ) (13,884 ) (11,450 ) (30,468 ) (28,177 ) (21,866 ) Provision for income taxes 131 131 187 226 226 316 --------- - --------- - --------- - --------- - --------- - --------- - Net loss $ (14,333 ) $ (14,015 ) $ (11,637 ) $ (30,694 ) $ (28,403 ) $ (22,182 ) - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Net loss per share, basic and $ (0.31 ) $ (0.30 ) $ (0.27 ) $ (0.67 ) $ (0.62 ) $ (0.52 ) diluted - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Weighted-average common shares 46,279,947 46,279,947 42,681,287 45,746,513 45,746,513 42,395,450 outstanding, basic and diluted --------- - --------- - --------- - --------- - --------- - --------- -

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

Three Months Ended June 30, Six Months Ended June 30, 2018 2018 2017 2018 2018 2017 ----------- ----------- ----------- ----------- ----------- ----------- Under ASC Under ASC Under ASC Under ASC Under ASC Under ASC 606 605 605 606 605 605 Cash flows from operating activities: Net loss $ (14,333 ) $ (14,015 ) $ (11,637 ) $ (30,694 ) $ (28,403 ) $ (22,182 ) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 2,678 2,678 1,613 5,077 5,077 3,237 Stock-based compensation expense 7,350 7,350 5,171 13,575 13,575 9,450 Provision for doubtful accounts 300 300 162 456 456 478 Foreign currency re-measurement 324 324 (282 ) 471 471 (238 ) loss (gain) Other non-cash (income) expense (19 ) (19 ) 78 (71 ) (71 ) 175 Changes in operating assets and liabilities: Accounts receivable (10,136 ) (10,136 ) (13,942 ) 24,586 24,586 1,240 Deferred contract acquisition (2,818 ) — — (4,531 ) — — and fulfillment costs Prepaid expenses and other (412 ) (481 ) (1,054 ) (3,602 ) (3,417 ) 412 assets Accounts payable (828 ) (828 ) (1,413 ) 2,391 2,391 (1,657 ) Accrued expenses 3,511 3,511 5,094 (7,806 ) (7,806 ) (2,122 ) Deferred revenue 5,494 2,427 12,782 (1,001 ) (8,008 ) 11,366 Other liabilities (225 ) (225 ) (553 ) (669 ) (669 ) (819 ) --------- - --------- - --------- - --------- - --------- - --------- - Net cash used in operating (9,114 ) (9,114 ) (3,981 ) (1,818 ) (1,818 ) (660 ) activities --------- - --------- - --------- - --------- - --------- - --------- - Cash flows from investing activities: Purchases of property and (3,503 ) (3,503 ) (1,243 ) (5,650 ) (5,650 ) (2,578 ) equipment Capitalization of internal-use (720 ) (720 ) (316 ) (1,413 ) (1,413 ) (316 ) software costs Purchases of investments (6,195 ) (6,195 ) (8,427 ) (10,655 ) (10,655 ) (15,828 ) Sales/maturities of investments 19,066 19,066 13,705 33,128 33,128 14,605 Net cash provided by (used in) 8,648 8,648 3,719 15,410 15,410 (4,117 ) investing activities --------- - --------- - --------- - --------- - --------- - --------- - Cash flows from financing activities: Proceeds from secondary public offering, net of offering costs (324 ) (324 ) — 30,907 30,907 — of $608 Deferred business acquisition — — (796 ) — — (796 ) payment Taxes paid related to net share (543 ) (543 ) (92 ) (1,005 ) (1,005 ) (261 ) settlement of equity awards Proceeds from employee stock — — — 1,632 1,632 1,499 purchase plan Proceeds from stock option 2,696 2,696 3,336 4,657 4,657 4,111 exercises --------- - --------- - --------- - --------- - --------- - --------- - Net cash provided by financing 1,829 1,829 2,448 36,191 36,191 4,553 activities --------- - --------- - --------- - --------- - --------- - --------- - Effect of exchange rate changes on cash, cash equivalents and (278 ) (278 ) 220 (314 ) (314 ) 144 restricted cash --------- - --------- - --------- - --------- - --------- - --------- - Net increase (decrease) in cash, cash equivalents and restricted 1,085 1,085 2,406 49,469 49,469 (80 ) cash Cash, cash equivalents and restricted cash, beginning of 100,146 100,146 50,662 51,762 51,762 53,148 period --------- - --------- - --------- - --------- - --------- - --------- - Cash, cash equivalents and $ 101,231 $ 101,231 $ 53,068 $ 101,231 $ 101,231 $ 53,068 restricted cash, end of period - ------- - - ------- - - ------- - - ------- - - ------- - - ------- -

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

Three Months Ended June 30, Six Months Ended June 30, 2018 2018 2017 2018 2018 2017 ----------- ----------- ----------- ----------- ----------- ----------- Under ASC Under ASC Under ASC Under ASC Under ASC Under ASC 606 605 605 606 605 605 ----------- ----------- ----------- ----------- Total gross profit (GAAP) $ 41,048 $ 44,210 $ 34,364 $ 78,969 $ 85,796 $ 67,345 Add: Stock-based compensation 469 469 308 843 843 510 expense1 Add: Amortization of acquired 893 893 439 1,801 1,801 878 intangible assets2 --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit (non-GAAP) $ 42,410 $ 45,572 $ 35,111 $ 81,613 $ 88,440 $ 68,733 - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Gross margin (non-GAAP) 72.6 % 74.0 % 74.0 % 72.3 % 73.8 % 74.2 % Gross profit (GAAP) - Products $ 29,393 $ 31,417 $ 21,611 $ 56,236 $ 60,719 $ 42,843 Add: Stock-based compensation 157 157 90 282 282 150 expense Add: Amortization of acquired 893 893 439 1,801 1,801 878 intangible assets --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit (non-GAAP) - $ 30,443 $ 32,467 $ 22,140 $ 58,319 $ 62,802 $ 43,871 Products - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Gross margin (non-GAAP) - 78.0 % 79.1 % 81.5 % 78.5 % 79.7 % 82.6 % Products Gross profit (GAAP) - $ 8,603 $ 9,551 $ 9,488 $ 17,507 $ 19,384 $ 18,412 Maintenance and support Add: Stock-based compensation 60 60 81 88 88 141 expense --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit (non-GAAP) - $ 8,663 $ 9,611 $ 9,569 $ 17,595 $ 19,472 $ 18,553 Maintenance and support - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Gross margin (non-GAAP) - 81.6 % 83.2 % 84.4 % 82.4 % 83.8 % 83.8 % Maintenance and support Gross profit (GAAP) - $ 3,052 $ 3,242 $ 3,265 $ 5,226 $ 5,693 $ 6,090 Professional services Add: Stock-based compensation 252 252 137 473 473 219 expense --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit (non-GAAP) - $ 3,304 $ 3,494 $ 3,402 $ 5,699 $ 6,166 $ 6,309 Professional services - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Gross margin (non-GAAP) - 37.6 % 38.9 % 38.1 % 33.0 % 34.8 % 36.2 % Professional services Loss from operations (GAAP) $ (14,340 ) $ (14,022 ) $ (11,897 ) $ (30,925 ) $ (28,634 ) $ (22,367 ) Add: Stock-based compensation 7,350 7,350 5,171 13,575 13,575 $ 9,450 expense1 Add: Amortization of acquired 933 933 483 1,881 1,881 $ 968 intangible assets2 Add: Acquisition-related — — 80 — — 80 expenses3 Add: Secondary public offering 65 65 — 205 205 — costs4 Add: Litigation-related — — — 400 400 — expenses5 --------- - --------- - --------- - --------- - --------- - --------- - Loss from operations (non-GAAP) $ (5,992 ) $ (5,674 ) $ (6,163 ) $ (14,864 ) $ (12,573 ) $ (11,869 ) - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Net loss (GAAP) $ (14,333 ) $ (14,015 ) $ (11,637 ) $ (30,694 ) $ (28,403 ) $ (22,182 ) Add: Stock-based compensation 7,350 7,350 5,171 13,575 13,575 9,450 expense1 Add: Amortization of acquired 933 933 483 1,881 1,881 968 intangible assets2 Add: Acquisition-related — — 80 — — 80 expenses3 Add: Secondary public offering 65 65 — 205 205 — costs4 Add: Litigation-related — — — 400 400 — expenses5 --------- - Net loss (non-GAAP) $ (5,985 ) $ (5,667 ) $ (5,903 ) $ (14,633 ) $ (12,342 ) $ (11,684 ) - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Net loss per share, basic and $ (0.13 ) $ (0.12 ) $ (0.14 ) $ (0.32 ) $ (0.27 ) $ (0.28 ) diluted (non-GAAP) Weighted-average common shares 46,279,947 46,279,947 42,681,287 45,746,513 45,746,513 42,395,450 outstanding, basic and diluted 1 Includes stock-based compensation expense as follows: Cost of revenue $ 469 $ 469 $ 308 $ 843 $ 843 $ 510 Research and development 2,850 2,850 1,689 5,416 5,416 3,202 Sales and marketing 2,055 2,055 1,779 3,618 3,618 3,182 General and administrative 1,976 1,976 1,395 3,698 3,698 2,556 2Includes amortization of acquired intangible assets as follows: Cost of revenue $ 893 $ 893 $ 439 $ 1,801 $ 1,801 $ 878 Sales and marketing 38 38 39 77 77 76 General and administrative 2 2 5 3 3 14 3Includes acquisition-related expenses as follows: General and administrative $ — $ — $ 80 $ — $ — $ 80 4Includes secondary public offering costs as follows: General and administrative $ 65 $ 65 $ — $ 205 $ 205 $ — 5Includes litigation-related expenses as follows: General and administrative $ — $ — $ — $ 400 $ 400 $ —

RAPID7, INC.Reconciliation of Total Revenue to Calculated Billings (Unaudited)(in thousands)

Three Months Ended June 30, Six Months Ended June 30, 2018 2018 2017 2018 2018 2017 ------------- ------------- ------------- ------------- ------------- ------------- Under ASC 606 Under ASC 605 Under ASC 605 Under ASC 606 Under ASC 605 Under ASC 605 Total revenue $ 58,441 $ 61,577 $ 47,443 $ 112,956 $ 119,778 $ 92,688 Add: Deferred revenue, end of 224,400 216,499 180,429 224,400 216,499 180,429 period Less: Deferred revenue, beginning 218,898 214,066 167,647 225,393 224,500 169,063 of period -------- ---- --------- --- --------- --- Calculated billings $ 63,943 $ 64,010 $ 60,225 $ 111,963 $ 111,777 $ 104,054 - ------ ---- - ------ ---- - ------ ---- - ------- --- - ------- --- - ------- ---

Reconciliation of Net Loss to Adjusted EBITDA (Unaudited)(in thousands)

Three Months Ended June 30, Six Months Ended June 30, 2018 2018 2017 2018 2018 2017 ----------- ----------- ----------- ----------- ----------- ----------- Under ASC Under ASC Under ASC Under ASC Under ASC Under ASC 606 605 605 606 605 605 ----------- ----------- ----------- ----------- Net loss $ (14,333 ) $ (14,015 ) $ (11,637 ) $ (30,694 ) $ (28,403 ) $ (22,182 ) Interest (income) expense, net (464 ) (464 ) (218 ) (705 ) (705 ) (387 ) Other (income) expense, net 326 326 (229 ) 248 248 (114 ) Provision for income taxes 131 131 187 226 226 316 Depreciation expense 1,642 1,642 1,130 3,025 3,025 2,268 Amortization of intangible 1,036 1,036 483 2,052 2,052 968 assets Stock-based compensation expense 7,350 7,350 5,171 13,575 13,575 9,450 Acquisition-related expenses — — 80 — — 80 Secondary public offering costs 65 65 — 205 205 — Litigation-related expenses — — — 400 400 — Adjusted EBITDA $ (4,247 ) $ (3,929 ) $ (5,033 ) $ (11,668 ) $ (9,377 ) $ (9,601 ) - ------- - - ------- - - ------- - - ------- - - ------- - - ------- -

RAPID7, INC.Adjusted Opening Consolidated Balance Sheet Under ASC 606 (Unaudited)(in thousands)

Adjusted under ASC 606 ----------- January 1, 2018 ----------- Cash and cash equivalents $ 51,562 Short-term investments 39,178 Accounts receivable, net 73,661 Deferred contract acquisition and fulfillment costs, current portion 7,844 Prepaid expenses and other current assets 8,907 Long-term investments 1,102 Property and equipment, net 8,589 Goodwill 83,164 Intangible assets, net 16,640 Deferred contract acquisition and fulfillment costs, non-current portion 19,321 Other assets 1,363 --------- - Total assets $ 311,331 - ------- - Accounts payable $ 2,240 Accrued expenses 29,728 Deferred revenue, current portion 142,020 Other current liabilities 1,706 Deferred revenue, non-current portion 83,373 Other long-term liabilities 2,238 --------- - Total liabilities 261,305 Common stock 441 Treasury stock (4,764 ) Additional paid-in-capital 463,428 Accumulated other comprehensive loss (39 ) Accumulated deficit (409,040 ) --------- - Total stockholders’ equity 50,026 --------- - Total liabilities and stockholders’ equity $ 311,331 - ------- -

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