AP NEWS

Rapid7 Announces Third Quarter 2018 Financial Results

November 6, 2018

-- Revenue of $62.4 million under ASC 606 -- Revenue growth of 30% year-over-year under ASC 605 -- Annualized recurring revenue of $217.4 million, an increase of 46% year-over-year -- Raised revenue guidance for full-year 2018

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

“Rapid7 had a great third quarter reflecting strong performance across the board” said Corey Thomas, President and CEO of Rapid7. “As security teams with limited resources try to manage increasing workloads driven by a more complex ecosystem, and a rising threat environment, our customers are seeking solutions to help them streamline their processes, reduce risk and quickly respond to issues. With the launch of InsightConnect and the acquisition of tCell, we are executing on our vision to expand our best-of-breed platform, which helps customers not only identify security problems but also resolve them more efficiently.”

“For the fifth quarter in a row, our ARR growth accelerated, reaching 46%, driven by strong new customer growth, lower churn and the success of our platform strategy. We are exceeding our growth goals while demonstrating greater operating leverage.”

Third Quarter 2018 Financial Results (under ASC 606)

-- Total revenue for the third quarter of 2018 was $62.4 million. -- For the third quarter of 2018, GAAP loss from operations was $(11.3) million and non-GAAP loss from operations was $(2.8) million. -- For the third quarter of 2018, GAAP net loss was $(11.8) million or a GAAP loss per share of $(0.25) and non-GAAP net loss was $(2.1) million or a non-GAAP net loss per share of $(0.04). -- Adjusted EBITDA was $(1.1) million in the third quarter of 2018. -- For the third quarter of 2018, total revenue from North America was $53.2 million and comprised 85% of total revenue. Total revenue from the rest of world was $9.2 million and comprised 15% of total revenue in the third quarter of 2018. -- Cash flow from operating activities was $(4.1) million for the third quarter of 2018, compared to $5.7 million for the third quarter of 2017. Cash flow from operating activities was $(5.9) million in the first nine months of 2018, compared to $5.1 million in the first nine months of 2017.

Third Quarter 2018 Financial Results (under ASC 605)

-- Total revenue for the third quarter of 2018 was $65.5 million, an increase of 30% year-over-year. -- For the third quarter of 2018, GAAP loss from operations was $(10.0) million, compared to GAAP loss from operations of $(13.0) million in the third quarter of 2017. For the third quarter of 2018, non-GAAP loss from operations was $(1.5) million, compared to non-GAAP loss from operations of $(6.8) million in the third quarter of 2017. -- For the third quarter of 2018, GAAP net loss was $(10.5) million or a GAAP loss per share of $(0.22), compared to a GAAP net loss of $(10.3) million or a GAAP loss per share of $(0.24) for the third quarter of 2017. For the third quarter of 2018, non-GAAP net loss was $(0.8) million or a non-GAAP net loss per share of $(0.02), compared to a non-GAAP net loss of $(6.6) million or a non-GAAP net loss per share of $(0.15) for the third quarter of 2017. -- Adjusted EBITDA was $0.2 million in the third quarter of 2018, compared to adjusted EBITDA of $(5.6) million in the third quarter of 2017. -- For the third quarter of 2018, total revenue from North America increased 29% year-over-year to $55.4 million and comprised 85% of total revenue. Total revenue from the rest of the world increased 33% year-over-year to $10.1 million and comprised 15% of total revenue for the third quarter of 2018.

Recent Business Metrics and Highlights

-- Annualized recurring revenue (ARR) for the third quarter of 2018 was $217.4 million, an increase of 46% year-over-year. -- Our renewal rate for the third quarter of 2018, which includes upsells and cross-sells of additional products and services, was 120%. The expiring renewal rate, which excludes upsells and cross-sells of additional products and services, was 90% in the third quarter of 2018. -- 82% (under ASC 606) and 81% (under ASC 605) of total revenue in the third 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 71% (under ASC 605) in the third quarter of 2017. Recurring revenue increased 48% year-over-year. -- 85% (under ASC 606) and 87% (under ASC 605) of total revenue for the third quarter of 2018 came from deferred revenue on the balance sheet at the beginning of the quarter. -- Ended the third quarter of 2018 with 7,400 customers, an increase of 10% year-over-year. -- Calculated billings were $61.1 million (under ASC 606) and $61.0 million (under ASC 605) for the third quarter of 2018, an increase of 4% year-over-year. Growth in calculated billings was depressed by a 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 billings. During the transition to a more subscription-based model, we believe calculated billings will be a less meaningful metric for our operations. -- In August 2018, we issued $230.0 million aggregate principal amount of 1.25% convertible senior notes due August 2023. The total net proceeds from the offering, after deducting initial purchase discounts and estimated debt issuance costs, was $223.1 million. In connection with the issuance of these notes, we paid $26.9 million for capped call transactions with certain counterparties, which are expected to offset the potential dilution to our common stock upon any conversion of the notes. -- In August 2018, we were recognized by Frost & Sullivan with its 2018 Global Vulnerability Management Market Leadership Award. -- In October 2018, we acquired tCell.io, Inc. (tCell), a leading provider of web application threat defense and monitoring, for total cash consideration of $14.4 million. -- In October 2018, we began the global rollout of InsightConnect, a security orchestration and automation solution that helps security teams reduce manual workloads, create efficiency without sacrificing control, and work more efficiently with IT and development teams. In addition, our InsightVM and InsightIDR solutions will include pre-built automation functionality for some of the most common use cases. -- 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.

Fourth Quarter and Full-Year 2018 Guidance

For the fourth quarter and the full-year 2018 we will be providing guidance on an ASC 606 basis only.

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

Fourth Quarter and Full-Year 2018 Guidance Under ASC 606 (in millions, except per share data) Fourth Quarter 2018 Full-Year 2018 Revenue $ 65.8 to $ 67.2 $ 241.1 to $ 242.5 Year-over-year growth 20 % to 21 % Non-GAAP loss from operations $ (5.5 ) to $ (4.5 ) $ (23.0 ) to $ (22.0 ) Non-GAAP net loss per share $ (0.10 ) to $ (0.08 ) $ (0.46 ) to $ (0.43 ) Weighted average shares outstanding 47.5 46.5

Guidance for the fourth 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, amortization of debt discount and issuance costs, 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 without unreasonable efforts due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures.

Third Quarter 2018 Line Items Impacted by the Adoption of ASC 606

For the third quarter of 2018, we recognized revenue under ASC 606. For the third 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 third 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 September 30, 2018 Under ASC Under ASC Difference 606 605 ---------- --------- ---------- (in thousands) Products $ 43,829 45,310 $ (1,481 ) Maintenance and support 10,614 11,467 (853 ) Professional services 7,922 8,730 (808 ) -------- - ------- - -------- - Total revenue 62,365 65,507 (3,142 ) Cost of revenue - GAAP 17,810 17,766 44 Gross margin - GAAP 71.4 % 72.9 % Cost of revenue - non-GAAP 16,431 16,387 44 Gross margin - non-GAAP 73.7 % 75.0 % Sales and marketing - GAAP 30,570 32,468 (1,898 ) Sales and marketing - non-GAAP 28,466 30,364 (1,898 ) GAAP loss from operations (11,301 ) (10,013 ) (1,288 ) Non-GAAP loss from operations (2,822 ) (1,534 ) (1,288 ) Deferred revenue, current portion 159,408 165,673 (6,265 ) Deferred revenue, non-current portion 63,680 46,331 17,349 -------- - ------- - -------- - Total deferred revenue 223,088 212,004 11,084

Conference Call and Webcast Information

Rapid7 will host a conference call today, November 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 1228978) until November 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 that unites security, IT, and DevOps teams. 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, and log management for 7,400 organizations across more than 120 countries, including 52% 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 (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 (benefit from) income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, and (8) 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, amortization of debt discount and issuance costs and certain non-recurring items such as acquisition-related expenses, secondary public offering costs, and litigation-related expenses. We exclude litigation-related charges or benefits as well as legal costs associated with significant legal matters, because we do not believe they are reflective of on-going business and operating results. 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 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.

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, InsightOps, and InsightConnect) on the Insight platform, the shift of our other products to subscription pricing, and the shift of our sales compensation plans to ARR, we believe calculated billings is 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 fourth quarter and full-year 2018, expected benefits, features and availability of InsightConnect and automation functionality in InsightIDR and InsightVM, and the potential benefits of the acquisition of tCell, 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 integrate acquired operations, 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 June 30, 2018 filed with the Securities and Exchange Commission on August 7, 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, CFA investors@rapid7.com (857) 990-4074

Press contact:

Caitlin Doherty press@rapid7.com (857) 990-4136

RAPID7, INC. Consolidated Balance Sheets (Unaudited) (in thousands) December September 30, 2018 31, 2017 ----------- Under ASC Under ASC Under ASC 606 605 605 ----------- ----------- ----------- Assets Current assets: Cash and cash equivalents $ 131,160 $ 131,160 $ 51,562 Short-term investments 140,633 140,633 39,178 Accounts receivable, net 53,771 53,771 73,661 Deferred contract acquisition and fulfillment costs, current portion 10,376 — — Prepaid expenses and other current assets 11,616 11,359 8,877 --------- - --------- - --------- - Total current assets 347,556 336,923 173,278 Long-term investments 39,275 39,275 1,102 Property and equipment, net 11,859 11,859 8,589 Goodwill 83,164 83,164 83,164 Intangible assets, net 16,023 16,023 16,640 Deferred contract acquisition and fulfillment costs, non-current 23,174 — — portion Other assets 906 906 1,363 --------- - --------- - --------- - Total assets $ 521,957 $ 488,150 $ 284,136 - ------- - - ------- - - ------- - Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 2,766 $ 2,766 $ 2,240 Accrued expenses 27,392 27,392 29,728 Deferred revenue, current portion 159,408 165,673 155,811 Other current liabilities 838 838 1,706 --------- - --------- - --------- - Total current liabilities 190,404 196,669 189,485 Convertible senior notes, net 172,165 172,165 — Deferred revenue, non-current portion 63,680 46,331 68,689 Other long-term liabilities 2,607 2,178 1,809 --------- - --------- - --------- - Total liabilities 428,856 417,343 259,983 Stockholders’ equity: Common stock 473 473 441 Treasury stock (4,764 ) (4,764 ) (4,764 ) Additional paid-in-capital 549,101 549,101 463,428 Accumulated other comprehensive loss (144 ) (144 ) (39 ) Accumulated deficit (451,565 ) (473,859 ) (434,913 ) --------- - --------- - --------- - Total stockholders’ equity 93,101 70,807 24,153 --------- - --------- - --------- - Total liabilities and stockholders’ equity $ 521,957 $ 488,150 $ 284,136 - ------- - - ------- - - ------- -

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, 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 $ 43,829 $ 45,310 $ 29,626 $ 118,151 $ 124,119 $ 82,736 Maintenance and support 10,614 11,467 11,654 31,977 34,707 33,794 Professional services 7,922 8,730 9,241 25,193 26,459 26,679 --------- - --------- - --------- - --------- - --------- - --------- - Total revenue 62,365 65,507 50,521 175,321 185,285 143,209 Cost of revenue: Products 10,294 10,256 6,888 28,380 28,346 17,155 Maintenance and support 1,901 1,901 1,739 5,757 5,757 5,467 Professional services 5,615 5,609 5,740 17,660 17,645 17,088 --------- - --------- - --------- - --------- - --------- - --------- - Total cost of revenue 17,810 17,766 14,367 51,797 51,748 39,710 --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit 44,555 47,741 36,154 123,524 133,537 103,499 --------- - --------- - --------- - --------- - --------- - --------- - Operating expenses: Research and development 17,111 17,111 13,570 49,915 49,915 36,836 Sales and marketing 30,570 32,468 28,224 90,779 97,213 80,166 General and administrative 8,175 8,175 7,402 25,056 25,056 21,906 --------- - --------- - --------- - --------- - --------- - --------- - Total operating expenses 55,856 57,754 49,196 165,750 172,184 138,908 --------- - --------- - --------- - --------- - --------- - --------- - Loss from operations (11,301 ) (10,013 ) (13,042 ) (42,226 ) (38,647 ) (35,409 ) Other income (expense), net: Interest income 813 813 209 1,520 1,520 666 Interest expense (1,679 ) (1,679 ) (11 ) (1,681 ) (1,681 ) (81 ) Other income (expense), net 181 181 235 (67 ) (67 ) 349 --------- - --------- - --------- - --------- - --------- - --------- - Loss before income taxes (11,986 ) (10,698 ) (12,609 ) (42,454 ) (38,875 ) (34,475 ) Provision for (benefit from) (155 ) (155 ) (2,325 ) 71 71 (2,009 ) income taxes --------- - --------- - --------- - --------- - --------- - --------- - Net loss $ (11,831 ) $ (10,543 ) $ (10,284 ) $ (42,525 ) $ (38,946 ) $ (32,466 ) - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Net loss per share, basic and $ (0.25 ) $ (0.22 ) $ (0.24 ) $ (0.92 ) $ (0.84 ) $ (0.76 ) diluted - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Weighted-average common shares 46,914,077 46,914,077 43,279,025 46,139,978 46,139,978 42,693,212 outstanding, basic and diluted --------- - --------- - --------- - --------- - --------- - --------- -

RAPID7, INC. Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended September 30, Nine Months Ended September 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 $ (11,831 ) $ (10,543 ) $ (10,284 ) $ (42,525 ) $ (38,946 ) $ (32,466 ) Adjustments to reconcile net loss to net cash (used in) provided by operating activities: Depreciation and amortization 2,660 2,660 2,067 7,737 7,737 5,304 Amortization of debt discount 1,296 1,296 — 1,296 1,296 — and issuance costs Stock-based compensation expense 7,424 7,424 5,288 20,999 20,999 14,738 Provision for doubtful accounts 24 24 31 480 480 509 Deferred income taxes — — (2,632 ) — — (2,632 ) Foreign currency re-measurement 95 95 (172 ) 566 566 (410 ) loss (gain) Other non-cash (income) expense (274 ) (274 ) 39 (345 ) (345 ) 214 Changes in operating assets and liabilities: Accounts receivable (5,299 ) (5,299 ) (1,110 ) 19,287 19,287 130 Deferred contract acquisition (1,854 ) — — (6,385 ) — — and fulfillment costs Prepaid expenses and other 1,168 1,210 189 (2,434 ) (2,207 ) 601 assets Accounts payable (1,826 ) (1,826 ) 1,335 565 565 (322 ) Accrued expenses 5,632 5,632 2,925 (2,174 ) (2,174 ) 803 Deferred revenue (1,312 ) (4,496 ) 8,214 (2,313 ) (12,504 ) 19,580 Other liabilities 47 47 (146 ) (622 ) (622 ) (965 ) --------- - --------- - --------- - --------- - --------- - --------- - Net cash (used in) provided by (4,050 ) (4,050 ) 5,744 (5,868 ) (5,868 ) 5,084 operating activities --------- - --------- - --------- - --------- - --------- - --------- - Cash flows from investing activities: Business acquisition, net of — — (14,717 ) — — (14,717 ) cash acquired Purchases of property and (2,754 ) (2,754 ) (928 ) (8,404 ) (8,404 ) (3,506 ) equipment Capitalization of internal-use (1,092 ) (1,092 ) (440 ) (2,505 ) (2,505 ) (756 ) software costs Purchases of investments (168,290 ) (168,290 ) (5,856 ) (178,945 ) (178,945 ) (21,684 ) Sales/maturities of investments 6,448 6,448 9,917 39,576 39,576 24,522 Net cash used in investing (165,688 ) (165,688 ) (12,024 ) (150,278 ) (150,278 ) (16,141 ) activities --------- - --------- - --------- - --------- - --------- - --------- - Cash flows from financing activities: Proceeds from issuance of convertible senior notes, net of 223,529 223,529 — 223,529 223,529 — issuance costs paid of $6,471 Purchase of capped calls related (26,910 ) (26,910 ) — (26,910 ) (26,910 ) — to convertible senior notes Proceeds from secondary public offering, net of offering costs — — — 30,907 30,907 — of $608 Deferred business acquisition — — — — — (796 ) payment Taxes paid related to net share (707 ) (707 ) (207 ) (1,712 ) (1,712 ) (468 ) settlement of equity awards Proceeds from employee stock 2,005 2,005 1,415 3,637 3,637 2,914 purchase plan Proceeds from stock option 1,864 1,864 884 6,521 6,521 4,995 exercises --------- - --------- - --------- - --------- - --------- - --------- - Net cash provided by financing 199,781 199,781 2,092 235,972 235,972 6,645 activities --------- - --------- - --------- - --------- - --------- - --------- - Effect of exchange rate changes on cash, cash equivalents and (114 ) (114 ) 175 (428 ) (428 ) 319 restricted cash --------- - --------- - --------- - --------- - --------- - --------- - Net increase (decrease) in cash, cash equivalents and restricted 29,929 29,929 (4,013 ) 79,398 79,398 (4,093 ) cash Cash, cash equivalents and restricted cash, beginning of 101,231 101,231 53,068 51,762 51,762 53,148 period --------- - --------- - --------- - --------- - --------- - --------- - Cash, cash equivalents and $ 131,160 $ 131,160 $ 49,055 $ 131,160 $ 131,160 $ 49,055 restricted cash, end of period - ------- - - ------- - - ------- - - ------- - - ------- - - ------- -

RAPID7, INC. GAAP to Non-GAAP Reconciliation (Unaudited) (in thousands, except share and per share data) Three Months Ended September 30, Nine Months Ended September 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) $ 44,555 $ 47,741 $ 36,154 $ 123,524 $ 133,537 $ 103,499 Add: Stock-based compensation 478 478 305 1,321 1,321 815 expense1 Add: Amortization of acquired 901 901 853 2,702 2,702 1,731 intangible assets2 --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit (non-GAAP) $ 45,934 $ 49,120 $ 37,312 $ 127,547 $ 137,560 $ 106,045 - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Gross margin (non-GAAP) 73.7 % 75.0 % 73.9 % 72.8 % 74.2 % 74.0 % Gross profit (GAAP) - Products $ 33,535 $ 35,054 $ 22,738 $ 89,771 $ 95,773 $ 65,581 Add: Stock-based compensation 142 142 92 424 424 242 expense Add: Amortization of acquired 901 901 853 2,702 2,702 1,731 intangible assets --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit (non-GAAP) - $ 34,578 $ 36,097 $ 23,683 $ 92,897 $ 98,899 $ 67,554 Products - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Gross margin (non-GAAP) - 78.9 % 79.7 % 79.9 % 78.6 % 79.7 % 81.7 % Products Gross profit (GAAP) - $ 8,713 $ 9,566 $ 9,915 $ 26,220 $ 28,950 $ 28,327 Maintenance and support Add: Stock-based compensation 73 73 71 161 161 212 expense --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit (non-GAAP) - $ 8,786 $ 9,639 $ 9,986 $ 26,381 $ 29,111 $ 28,539 Maintenance and support - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Gross margin (non-GAAP) - 82.8 % 84.1 % 85.7 % 82.5 % 83.9 % 84.4 % Maintenance and support Gross profit (GAAP) - $ 2,307 $ 3,121 $ 3,501 $ 7,533 $ 8,814 $ 9,591 Professional services Add: Stock-based compensation 263 263 142 736 736 361 expense --------- - --------- - --------- - --------- - --------- - --------- - Total gross profit (non-GAAP) - $ 2,570 $ 3,384 $ 3,643 $ 8,269 $ 9,550 $ 9,952 Professional services - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Gross margin (non-GAAP) - 32.4 % 38.8 % 39.4 % 32.8 % 36.1 % 37.3 % Professional services Loss from operations (GAAP) $ (11,301 ) $ (10,013 ) $ (13,042 ) $ (42,226 ) $ (38,647 ) $ (35,409 ) Add: Stock-based compensation 7,424 7,424 5,288 20,999 20,999 $ 14,738 expense1 Add: Amortization of acquired 940 940 894 2,821 2,821 $ 1,863 intangible assets2 Add: Acquisition-related 115 115 87 115 115 167 expenses3 Add: Secondary public offering — — — 205 205 — costs4 Add: Litigation-related — — — 400 400 — expenses5 --------- - --------- - --------- - --------- - --------- - --------- - Loss from operations (non-GAAP) $ (2,822 ) $ (1,534 ) $ (6,773 ) $ (17,686 ) $ (14,107 ) $ (18,641 ) - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Net loss (GAAP) $ (11,831 ) $ (10,543 ) $ (10,284 ) $ (42,525 ) $ (38,946 ) $ (32,466 ) Add: Stock-based compensation 7,424 7,424 5,288 20,999 20,999 14,738 expense1 Add: Amortization of acquired 940 940 894 2,821 2,821 1,863 intangible assets2 Add: Acquisition-related 115 115 87 115 115 167 expenses3 Add: Secondary public offering — — — 205 205 — costs4 Add: Litigation-related — — — 400 400 — expenses5 Add: Release of valuation — — (2,632 ) — — (2,632 ) allowance, acquisition-related Add: Amortization of debt 1,296 1,296 — 1,296 1,296 — discount and issuance costs --------- - --------- - --------- - --------- - --------- - --------- - Net loss (non-GAAP) $ (2,056 ) $ (768 ) $ (6,647 ) $ (16,689 ) $ (13,110 ) $ (18,330 ) - ------- - - ------- - - ------- - - ------- - - ------- - - ------- - Net loss per share, basic and $ (0.04 ) $ (0.02 ) $ (0.15 ) $ (0.36 ) $ (0.28 ) $ (0.43 ) diluted (non-GAAP) Weighted-average common shares 46,914,077 46,914,077 43,279,025 46,139,978 46,139,978 42,693,212 outstanding, basic and diluted 1 Includes stock-based compensation expense as follows: Cost of revenue $ 478 $ 478 $ 305 $ 1,321 $ 1,321 $ 815 Research and development 2,984 2,984 1,986 8,400 8,400 5,188 Sales and marketing 2,066 2,066 1,512 5,684 5,684 4,694 General and administrative 1,896 1,896 1,485 5,594 5,594 4,041 2Includes amortization of acquired intangible assets as follows: Cost of revenue $ 901 $ 901 $ 853 $ 2,702 $ 2,702 $ 1,731 Sales and marketing 38 38 37 115 115 114 General and administrative 1 1 4 4 4 18 3Includes acquisition-related expenses as follows: General and administrative $ 115 $ 115 $ 87 $ 115 $ 115 $ 167 4Includes secondary public offering costs as follows: General and administrative $ — $ — $ — $ 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 September 30, Nine Months Ended September 30, 2018 2018 2017 2018 2018 2017 --------- --------- ---------- ---------- ---------- ---------- Under ASC Under ASC Under ASC Under ASC Under ASC Under ASC 605 606 605 605 606 605 Total revenue $ 62,365 $ 65,507 $ 50,521 $ 175,321 $ 185,285 $ 143,209 Add: Deferred revenue, end of period 223,088 212,004 188,643 223,088 212,004 188,643 Less: Deferred revenue, beginning of 224,400 216,499 180,429 225,393 224,500 169,063 period -------- --------- --------- Calculated billings $ 61,053 $ 61,012 $ 58,735 $ 173,016 $ 172,789 $ 162,789 - ------ - ------ - ------ - - ------- - ------- - -------

Reconciliation of Net Loss to Adjusted EBITDA (Unaudited) (in thousands) Three Months Ended September 30, Nine Months Ended September 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 $ (11,831 ) $ (10,543 ) $ (10,284 ) $ (42,525 ) $ (38,946 ) $ (32,466 ) Interest income (813 ) (813 ) (209 ) (1,520 ) (1,520 ) (666 ) Interest expense 1,679 1,679 11 1,681 1,681 81 Other (income) expense, net (181 ) (181 ) (235 ) 67 67 (349 ) Provision for (benefit from) (155 ) (155 ) (2,325 ) 71 71 (2,009 ) income taxes Depreciation expense 1,591 1,591 1,173 4,616 4,616 3,441 Amortization of intangible 1,069 1,069 894 3,121 3,121 1,863 assets Stock-based compensation expense 7,424 7,424 5,288 20,999 20,999 14,738 Acquisition-related expenses 115 115 87 115 115 167 Secondary public offering costs — — — 205 205 — Litigation-related expenses — — — 400 400 — Adjusted EBITDA $ (1,102 ) $ 186 $ (5,600 ) $ (12,770 ) $ (9,191 ) $ (15,200 ) - ------- - - ------- - - ------- - - ------- - - ------- - - ------- -

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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