Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Rapid7 Inc (RPD, Financial) reported an 11% year-over-year growth in ARR, reaching $807 million in the first quarter of 2024.
- The company saw strong performance in its detection and response business, maintaining over 20% growth year-over-year.
- Revenue for the first quarter was $205 million, a 12% increase from the previous year, and at the high end of the guidance range.
- Rapid7 Inc (RPD) is making strategic long-term investments to enhance its security operations platform, focusing on AI-driven solutions and expanding cloud security capabilities.
- The company is actively working on improving its integrated risk management offerings, with plans to launch an updated Cloud Risk Complete solution in the summer of 2024.
Negative Points
- The ending ARR for the first quarter was below expectations due to a slower-than-anticipated transition of the BM base to the integrated risk offering.
- Rapid7 Inc (RPD) experienced a slowdown in new pipeline generation as it transitioned away from lower quality, less efficient sources.
- The company has revised its full-year 2024 guidance downward, reflecting a slower start to the year and modest contributions expected from the new Cloud Risk Complete offering.
- There was a noticeable decline in the non-platform customer base, indicating challenges in traction for the integrated risk offering.
- Despite efforts to improve execution, there are ongoing challenges with the transition and integration of new sales strategies, impacting short-term growth.
Q & A Highlights
Q: Corey, could you elaborate on the slowdown in package momentum due to customers not seeing the value, and how this relates to elongated sales cycles?
A: Corey Thomas, President and CEO of Rapid7, explained that the slowdown, particularly in new sales, was due to the transition to more integrated offerings, which caused a temporary freeze in sales activities as teams awaited the release of updated solutions. He emphasized that while the Threat Complete package is performing well, the Cloud Risk Complete needed adjustments, which they are addressing by enhancing cloud capabilities and integrating experiences more effectively.
Q: Can you provide insights into the churn in the customer base and its impact on expansion opportunities?
A: Tim Adams, CFO of Rapid7, noted that while there was a modest sequential decline in the non-platform customer base, platform customers actually increased. The churn was primarily among non-platform customers, impacting overall customer count but not the platform customer segment.
Q: What are the main differences between Threat Complete and Cloud Risk Complete, and why is there a discrepancy in demand?
A: Corey Thomas clarified that the issue with Cloud Risk Complete is not demand but execution and timing of updates. Cloud Risk Complete aims to provide integrated risk management across various environments, which is different from Threat Complete's focus on detection and response. The upcoming updates to Cloud Risk Complete are expected to address these issues and improve its performance.
Q: How are investments being adjusted in response to the revised financial outlook, and what is the focus for the remainder of the year?
A: Corey Thomas stated that Rapid7 is maintaining a focus on long-term investments in product and technology, despite short-term challenges. These investments are aimed at enhancing their security operations platform and ensuring it meets future needs, which may impact short-term financial performance but are expected to contribute to long-term growth.
Q: What is driving the difference in growth rates between international and North American markets?
A: Corey Thomas responded that the observed differences are short-term fluctuations and not indicative of long-term trends. He expects growth to normalize and be consistent globally, attributing past discrepancies to baseline fluctuations from previous years.
Q: Could you discuss the balance between top-line growth and profitability, especially in light of recent headcount reductions?
A: Corey Thomas emphasized that Rapid7 is focusing on investing in areas that will ensure long-term healthy growth, such as product development and customer service, rather than evenly distributing resources across all areas. This strategic focus is intended to set the company up for sustained growth and improved profitability over time.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
