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What changed in Rapid7, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Rapid7, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+292 added−281 removedSource: 10-K (2025-02-28) vs 10-K (2024-02-26)

Top changes in Rapid7, Inc.'s 2024 10-K

292 paragraphs added · 281 removed · 242 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

55 edited+16 added−12 removed39 unchanged
Biggest changeWith a single subscription, organizations can secure hybrid environments 5 Ta ble of Contents from development to production; detect and address risk across endpoints, cloud workloads, and traditional infrastructure; and perform dynamic application security testing to remediate application risk. • InsightCloudSec is a cloud risk and compliance management solution that provides cloud native application protection platform capabilities and enables organizations to securely accelerate cloud adoption with continuous security and compliance throughout the entire software development lifecycle. • InsightAppSec is a dynamic application security testing tool, delivered via the cloud, that combines powerful application crawling and attack capabilities, flexibility in scan and scheduling, and accuracy in results with a modern user interface, intuitive workflows, and sensible data organization.
Biggest changeThe code-to-cloud protection also includes continuous web-app scanning and expanded risk coverage. 5 Table of Contents • Surface Command is the most accessible Cyber Asset Attack Service Management (“CAASM”) solution in the market providing customers a 360° attack surface view they can trust to detect and prioritize security issues from endpoint to cloud. • Vector Command is a continuous red-teaming service that validates the external attack surface exposures and tests defenses with continuous red team operations to provide trusted insights into the exposures that matter. • InsightCloudSec is a cloud risk and compliance management solution that provides Cloud-Native Application Protection Platform (“CNAPP”) capabilities and enables organizations to securely accelerate cloud adoption with continuous security and compliance throughout the software development lifecycle. • InsightVM is a Vulnerability Management (“VM”) solution that provides visibility across on-premise and remote endpoints, enabling security teams to evaluate the business risk of vulnerabilities and configurations and share with their IT counterparts for remediation. • InsightAppSec is a Dynamic Application Security Testing (“DAST”) tool, delivered via the cloud, that combines powerful application crawling and attack capabilities, flexibility in scan and scheduling, and accuracy in results with a modern user interface, intuitive workflows, and sensible data organization. • Managed VM offloads day-to-day VM operations to experts and extends coverage across the attack surface. • Managed AppSec provides guidance from a dedicated security advisor and AppSec experts to validate application test results, reduce noise for the AppSec team assessing results, and save time for developers remediating issues. • Penetration Testing is professional services that assess the modern attack surface for exposures with offerings covering internal and external networks, web applications, mobile applications, Internet of Things, wireless network testing, social engineering and red team attack simulation.
“Never Done” is one of our core values, and our employees take advantage of a myriad of opportunities for continuous learning, both through internal training and development experiences, on-demand learning modules, and access to content-specific curriculum based on need and interest.
“Never Done” is one of our core values, and our employees take advantage of a myriad of opportunities for continuous learning, both through internal training and development experiences, on-demand learning modules, and access to a content-specific curriculum based on need and interest.
Our platform consolidation offerings are helping our customers maximize their budgets and giving them command of their attack surface, becoming our most dominant customer acquisition and expansion motions. • Further strengthen our customer renewal rate: We intend to continue to drive customer satisfaction and renewals by offering professional services, support, and strong investments in customer success functions.
Our platform consolidation offerings are helping our customers maximize their budgets and giving them command of their attack surface, becoming our most dominant customer acquisition and expansion motions. • Strengthen our customer renewal rate: We intend to continue to drive customer satisfaction and renewals by offering professional services, support, and strong investments in customer success functions.
This single agent enables a number of impactful use cases across the platform, including next-gen antivirus (“NGAV”), vulnerability scanning, endpoint detections, investigation and forensic search capabilities, and threat containment. • Rapid7 Insight Network Sensor: Our lightweight Insight Network Sensor passively analyzes raw end-to-end network traffic to increase visibility into user activity, pinpoint real threats, and accelerate investigations with granular detail of attacker movement. • Rapid7 Cloud Event Data Harvesting: Given the scale, complexity, and rapid evolution of modern dynamic cloud environments, real-time detection of risks and threats is paramount.
This single agent enables a number of impactful use cases across the platform, including next-generation antivirus (“NGAV”), vulnerability scanning, endpoint detections, investigation and forensic search capabilities, and threat containment. • Rapid7 Insight Network Sensor: Our lightweight Insight Network Sensor passively analyzes raw end-to-end network traffic to increase visibility into user activity, pinpoint real threats, and accelerate investigations with granular detail of attacker movement. • Rapid7 Cloud Event Data Harvesting: Given the scale, complexity, and rapid evolution of modern dynamic cloud environments, real-time detection of risks and threats is paramount.
These experiences align to our core values and promote the leadership skills and behaviors we believe are critical to the success of our mission, customers, and development of our people. As a supporter of internal career growth, we actively mentor and invest in the pipeline of our future leaders.
These experiences align with our core values and promote the leadership skills and behaviors we believe are critical to the success of our mission, customers, and the development of our people. As a supporter of internal career growth, we actively mentor and invest in the pipeline of our future leaders.
We primarily compete with established and emerging security product vendors, including the following: • large companies that incorporate security features into their products; • XDR and SIEM vendors; • cloud security vendors; • vulnerability risk management vendors; • application security vendors; • threat intelligence vendors; and • legacy security, systems management, MSSPs, and other IT vendors.
We primarily compete with established and emerging security product vendors, including the following: • large companies that incorporate security products into their products; • XDR and SIEM vendors; • cloud security vendors; • vulnerability risk management vendors; • application security vendors; • threat intelligence vendors; and • legacy security, systems management, MSSPs, and other IT vendors.
Our cloud architecture utilizes a combination of native collection technologies and application programming interfaces, and third-party event sources, to scale in alignment with the digital transformation occurring within our customers’ organizations. • Rapid7 Insight Agent: Our universal endpoint agent, the Insight Agent, is a lightweight, software-based agent which can be installed on assets across on-premises and cloud environments to centralize and monitor data on our platform.
Our cloud architecture utilizes a combination of native collection technologies and application programming interfaces as well as third-party event sources to scale in alignment with the digital transformation occurring within our customers’ organizations. • Rapid7 Insight Agent: Our universal endpoint agent, the Insight Agent, is a lightweight, software-based agent which can be installed on assets across on-premises and cloud environments to centralize and monitor data on our platform.
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge on or through our website at investors.rapid7.com as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. 11 Ta ble of Contents
Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge on or through our website at investors.rapid7.com as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. 11 Table of Contents
The main drivers of our growth strategy are: • Continued investments in product development: We intend to continue to invest in our product development to enhance our platform and deliver additional features to meet customer demand and grow our addressable markets. • Expanding Strategic Partnerships: By expanding our strategic partnerships with system integrators we enable our customers to succeed with our technology and platform in their ecosystem and deliver more value from their security operations program.
The main drivers of our growth strategy are: • Continued investments in product innovation: We intend to continue to invest in our product development to enhance our platform and deliver additional features to meet customer demand and grow our addressable markets. • Expand our partner ecosystem • Strategic Partnerships: By expanding our strategic partnerships with system integrators we enable our customers to succeed with our technology and platform in their ecosystem and deliver more value from their security operations program.
By utilizing our powerful proprietary analytics to assess and understand the context and relationships related to users, IT assets and cyber threats within a customer’s environment, our solutions make it easier for teams to identify and remediate vulnerabilities, monitor for misconfigurations and malicious behavior, investigate and shutdown attacks, and automate operations. 4 Ta ble of Contents Endpoint to Cloud Data Collection and Sharing In response to our customers’ expanding digital footprints, we have invested in our capacity to gather, standardize, enrich, and correlate diverse telemetry within our platform.
By utilizing our powerful proprietary analytics to assess and understand the context and relationships related to users, IT assets and cyber threats within a customer’s environment, our solutions make it faster and easier for teams to identify and remediate vulnerabilities, monitor for misconfigurations and malicious behavior, investigate and shutdown attacks, and automate operations. 4 Table of Contents Endpoint to Cloud Data Collection and Sharing In response to our customers’ expanding digital footprints, we have invested in our capacity to gather, standardize, enrich, and correlate diverse telemetry within our platform.
To further invest in the future of cybersecurity and to deliver on our company mission, we created a platform that includes the most recent product training materials, as well as makes certification exams available at zero cost.
To further invest in the future of cybersecurity and to deliver on our company mission, we created a platform that includes the most recent product training materials and makes certification exams available at zero cost.
Our customers span a wide variety of industries including manufacturing, financial services, healthcare and life sciences, retail, technology, government, media and entertainment, energy, education, transportation, real estate, and other professional services, with customers in the manufacturing industry representing our largest industry in 2023 at 15% of our revenue.
Our customers span a wide variety of industries including technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, education, real estate, transportation, government and professional services, with customers in the manufacturing industry representing our largest industry in 2024 at 15% of our revenue.
Additional laws in all of these areas are likely to be passed in the future, which could result 8 Ta ble of Contents in significant limitations on or changes to the ways in which we can collect, use, host, store or transmit the personal information and data of our customers or employees, communicate with our customers, and deliver products and services, which may significantly increase our compliance costs.
Additional laws in all of these areas are likely to be passed in the future, which could result in significant limitations on or changes to the ways in which we can collect, use, host, store or transmit the personal information and data of our customers or employees, communicate with our customers, and deliver products and services, which may significantly increase our compliance costs.
In addition, we expect that there is likely to be continued consolidation in our industry that could lead to increased price competition and other forms of competition. With the introduction of new technologies, the evolution of our offerings and new market entrants, we expect competition to intensify in the future.
In addition, we expect that there is likely to be continued consolidation in our industry that could 8 Table of Contents lead to increased price competition and other forms of competition. With the introduction of new technologies, the evolution of our offerings and new market entrants, we expect competition to intensify in the future.
The platform was built using our extensive experience in collecting and analyzing data from diverse sources, including multi-cloud platforms, applications, endpoints and networks, to enable our customers to create and manage analytics-driven cybersecurity risk management programs.
The platform was built using our extensive experience in collecting and analyzing data from diverse sources, including multi-cloud platforms, applications, endpoints and networks, and thus enables our customers to create and manage analytics-driven cybersecurity risk management programs.
With a strong focus on customer experience, satisfaction, and the value proposition of our platform, we intend to expand customers' usage of products they own (upsell) and help them adopt additional products (cross-sell).
With a strong focus on customer experience, satisfaction, and the value proposition of our platform, we intend to expand customers' usage of products they own (upsell) and help them adopt additional products 6 Table of Contents (cross-sell).
Electronic certificates can be published to an employee’s LinkedIn professional profile, and the CPEs associated with the exam and learning materials help cybersecurity professionals maintain their minimum “continuing development” points for their professional certifications such as Certified Information Systems Security Professional, Global Information Assurance Certification and Certified Professional Hacker.
Electronic certificates can be published to an employee’s LinkedIn professional profile, and the Continuing Professional Education (“CPEs”) associated with the exam and learning materials help cybersecurity professionals maintain their minimum “continuing development” points for their professional certifications such as Certified Information Systems Security Professional, Global Information Assurance Certification and Certified Professional Hacker.
In 2023, 45% of our revenue was generated from enterprises, which we define as organizations that have either annual revenue greater than $1.0 billion or more than 2,500 employees, and the balance was generated from middle-market and small organizations.
In 2024, 43% of our revenue was generated from enterprises, which we define as organizations that have either annual revenue greater than $1.0 billion or more than 2,500 employees, and the balance was generated from middle-market and small organizations.
We have over two hundred issued patents and a number of registered and unregistered trademarks. The standard length of our patents is 20 years and while the grant dates of our patents vary, we believe that the duration of our issued patents is sufficient when considering the expected lives of our products.
We have over two hundred and fifty issued patents and a numb er of registered and unregistered trademarks. The standard length of our patents is 20 years and while the grant dates of our patents vary, we believe that the duration of our issued patents is sufficient when considering the expected lives of our products.
We define a customer as any entity that has an active Rapid7 recurring revenue contract as of the specified measurement date, excluding only InsightOps and Logentries customers with a contract value less than $2,400 per year.
We define a customer as any entity that has an active Rapid7 recurring revenue contract as of the specified measurement date, excluding customers of only InsightOps or Logentries that have a contract value of less than $2,400 per year.
We are often iterating our approach to ensure we are balancing the needs of the business with the desires of our people, but remain committed to our view that offices remain a vital environment for fostering mentorship, career 9 Ta ble of Contents development and collaboration.
We are often iterating our approach to ensure we are balancing the needs of the business with the desires of our people, but remain committed to our view that offices remain a vital environment for fostering mentorship, career development and collaboration.
These include investments in infrastructure, sales and marketing, and strategic partnerships. 6 Ta ble of Contents • Strategic M&A: We have and may continue to make acquisitions that enhance the value of our Insight Platform and bolster our ability to solve emerging customer challenges, allowing us to deliver on the vision of becoming the SecOps leader.
These include investments in infrastructure, sales and marketing, and strategic partnerships. • Strategic M&A: We have and may continue to make acquisitions that enhance the value of our Command Platform and bolster our ability to solve emerging customer challenges, allowing us to deliver on the vision of becoming the SecOps leader.
Our revenue is not concentrated with any individual customer, with no customers representing more than 1% of our revenue in 2023, 2022 or 2021. Our Competition The markets we operate in are highly competitive, fragmented, and subject to technology change and innovation.
Our revenue is not concentrated with any individual customer, and no customer represented more than 1% of our revenue in 2024, 2023 or 2022. Our Competition The markets we operate in are highly competitive, fragmented, and subject to technology change and innovation.
As the threat landscape continues to grow in complexity, customers are demonstrating demand for integrated expertise to support them in effectively managing their security technologies. The convergence of these key trends – security consolidation, integrated cloud security, and expertise driven outcomes – are the foundation of what we view as the new extended SOC.
As the threat landscape continues to grow in complexity, customers are demonstrating demand for integrated expertise to support them in effectively managing their security technologies. The convergence of these key trends – security consolidation, integrated cloud security, and expertise driven outcomes – are the foundation of what our customers require for the modern SOC.
The Foundation’s mission, which aligns closely to that of Rapid7, is to promote a more diverse and inclusive cyber workforce and advance security by supporting cybersecurity programs and solutions that are free and open. These include, among others, Hack.Diversity, the Cyber Peace Institute and its program Cyber Peace Builders and Cyversity.
The Foundation’s mission, which aligns closely to that of Rapid7, is to promote a more diverse and inclusive cyber workforce and advance security by supporting cybersecurity programs and solutions that are free and open. These include, among others, Hack.Diversity, Mass Cyber Center and Cyversity.
After seeding the Foundation with an initial contribution of $1.0 million in 2021, Rapid7 continued its support of the Foundation with an additional investment of $0.5 million in 2022.
After seeding the Foundation with an initial contribution of $1.0 million in 2021, Rapid7 continued its support of the Foundation with an aggregate additional investment of $1.0 million between 2022 and 2024.
In addition to cash and equity compensation, we also offer employees a wide array of benefits such as life and health (medical, dental and vision) insurance, travel benefits, paid time off and retirement benefits for all eligible full-time employees, We also provide emotional well-being services through our Employee Assistance Program.
In addition to cash and equity compensation, we also offer employees a wide array of benefits such as life and health (medical, dental and vision) insurance, travel benefits, paid time off and retirement benefits for all eligible full-time employees.
Our telephone number is +1 617-247-1717. Our website address is www.rapid7.com . “Rapid7,” the Rapid7 logo, and other trademarks or service marks of Rapid7, Inc. appearing in this Annual Report on Form 10-K are the property of Rapid7, Inc.
Corporate Information Our principal executive offices are located at 120 Causeway Street, Boston, Massachusetts. Our telephone number is +1 617-247-1717. Our website address is www.rapid7.com . “Rapid7,” the Rapid7 logo, and other trademarks or service marks of Rapid7, Inc. appearing in this Annual Report on Form 10-K are the property of Rapid7, Inc.
The goal of the interdisciplinary lab at USF is to catalyze new collaborative research efforts in cyber threat detection, track malicious threat actors through an extensive sensor network, support an inclusive approach to diverse talent development in cybersecurity, and serve as a hub for thought leadership and community-engaged programming both locally and within the global cybersecurity industry. 10 Ta ble of Contents Corporate Information Our principal executive offices are located at 120 Causeway Street, Boston, Massachusetts.
The goal of the interdisciplinary lab at USF is to catalyze new collaborative research efforts in cyber threat detection, track malicious threat actors through an extensive sensor network, support an inclusive approach to diverse talent development in cybersecurity, and serve as a hub for thought leadership and community-engaged programming both locally and within the global cybersecurity industry.
This connectivity enables our customers to focus on security outcomes, rather than systems integrations, and accelerates both tasks associated with the normal course of business, as well as time-sensitive containment and remediation activities to minimize exposure and eliminate threats.
This connectivity enables our customers to focus on security outcomes, rather than systems integrations, and accelerates both tasks associated with the normal course of business, as well as time-sensitive containment and remediation activities to minimize exposure and eliminate threats. Our Offerings Offerings are consumed via our platform and delivered as either Software-as-a-Service (“SaaS”) solutions, managed services or professional services.
Our focus is to be the leading provider of integrated security solutions for the extended SOC by providing risk and threat management within the context of overall security. As of December 31, 2023, we had more than 11,500 customers that rely on Rapid7 technology, services, and research to improve security outcomes and securely advance their organizations.
Our focus is to be the leading provider of integrated security operations solutions by providing exposure and threat management that leverages our ability to give customers command of their attack surface. As of December 31, 2024, we had more than 11,700 customers that rely on Rapid7 technology, services, and research to improve security outcomes and securely advance their organizations.
Leveraging threat intelligence from our free and open-source projects, we continuously enhance our products and services to improve the customer experience. • Metasploit: Our Metasploit framework has an active community of contributors and users, including security researchers who contribute modules to the Metasploit Framework that serve as a resource about real-world attacker techniques.
Our open source projects that serve the community and enrich our offerings include: • Metasploit: Our Metasploit framework has an active community of contributors and users, including security researchers who contribute modules to the Metasploit Framework that serve as a resource about real-world attacker techniques.
We incurred net losses of $149.3 million, $124.7 million and $146.3 million in 2023, 2022 and 2021, respectively, as we continued to invest for long-term growth.
We achieved net income of $25.5 million in 2024 and incurred net losses of $152.8 million and $124.7 million in 2023 and 2022, respectively, as we continued to invest for long-term growth.
Customers are also able to add NGAV which delivers high-fidelity prevention against both known static threats and suspicious behavior before they execute, or Managed Digital Risk Protection (“MDRP”), which searches for potential threats from stolen or leaked data and phishing attempts. • MDR delivers end-to-end threat detection and response, encompassing 24x7 monitoring to incident containment to breach response. • MVM offloads day-to-day VM operations to experts and extends coverage across the attack surface. • Rapid7 Threat Complete unifies Rapid7 InsightIDR (“InsightIDR”) and Rapid7 InsightVM (“InsightVM”) to provide complete risk and threat coverage in a single offering.
Customers are also able to add NGAV which delivers high-fidelity prevention against both known static threats and suspicious behavior, or Managed Digital Risk Protection (“MDRP”), which searches for potential threats from stolen or leaked data and phishing attempts. • Threat Complete unifies InsightIDR (“InsightIDR”) and InsightVM (“InsightVM”) to provide vulnerability management and threat coverage in a single offering.
As of December 31, 2023, we had 2,228 full-time employees, including 418 in product and service delivery and support, 840 in sales and marketing, 692 in research and development and 278 in general and administrative. As of December 31, 2023, we had 1,277 full-time employees in the U.S. and 951 full-time employees internationally.
As of December 31, 2024, we had 2,413 full-time employees, including 452 in product and service delivery and support, 852 in sales and marketing, 779 in research and development and 330 in general and administrative. As of December 31, 2024, we had 1,241 full-time employees in the U.S. and 1,172 full-time employees internationally.
All high performing employees globally are eligible to receive equity under our 2015 Equity Incentive Plan (the “2015 Plan”). Additionally, all employees in the United States, United Kingdom, Ireland, Canada, Australia, Germany and Israel may participate in our Employee Stock Purchase Plan (“ESPP”). As of December 31, 2023, over 90% of our employees were eligible to participate in the ESPP.
We also provide emotional well-being services through our Employee Assistance Program. 9 Table of Contents All high performing employees globally are eligible to receive equity under our 2015 Equity Incentive Plan (the “2015 Plan”). Additionally, all employees in the United States, United Kingdom, Ireland, Canada, Australia, Germany and Israel may participate in our Employee Stock Purchase Plan (“ESPP”).
Our Platform Our extended SOC platform provides a high level of scalability and combines integrated technology, managed services, threat intelligence, and threat-aware risk context, enabling us to anticipate, detect, and promptly respond to threats once identified.
Our Command Platform is delivered via integrated technology, managed services, threat intelligence, and threat-aware risk context, enabling us to anticipate, detect, and promptly respond to threats once identified.
In addition, we offer deployment and training services related to our platform, to further help customers operationalize and customize their platform experience.
In addition, we offer deployment and training services related to our platform to further help customers operationalize and customize their platform experience. By accessing our security talent, we help organizations develop an approach and road map to further mature and strengthen their security programs.
We have experienced strong revenue growth with revenue increasing from $326.9 million in 2019 to $777.7 million in 2023, representing a 24% compound annual growth rate. In 2023, 2022 and 2021 recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 95%, 94% and 92%, respectively, of total revenue.
Revenue has increased from $411.5 million in 2020 to $844.0 million in 2024, representing a 20% compound annual growth rate. In 2024, 2023 and 2022 recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 96%, 95% and 94%, respectively, of total revenue.
The Metasploit community also provides us with visibility into new cyber attacks as they occur and a deeper understanding of attacker behaviors. • Project Lorelei: Project Lorelei began in 2014 to understand what attackers, researchers, and organizations are doing in, across, and against cloud environments and gain deeper insights into the tactics, techniques, and procedures employed by both bots and human attackers. • Project Sonar: We conduct internet-wide scans across many services and protocols to gain insight into global exposures and vulnerabilities and collect data for platform analytics and preparation of core research reports. • Velociraptor Open Source Digital Forensic and Incident Response ("DFIR"): Velociraptor is an open-source endpoint monitoring, digital forensic and cyber response platform.
This community-driven platform empowers security professionals to exchange information about vulnerabilities so they can better understand the impact and likelihood of being exploited. • Project Lorelei: Project Lorelei began in 2014 to understand what attackers, researchers, and organizations are doing in, across, and against cloud environments and gain deeper insights into the tactics, techniques, and procedures employed by both bots and human attackers. • Project Sonar: We conduct internet-wide scans across many services and protocols to gain insight into global exposures and vulnerabilities and collect data for platform analytics and preparation of core research reports.
For more than twenty years, Rapid7 has partnered with customers across the globe representing a diverse range of industries and sizes to improve the efficacy and productivity of their security operations (“SecOps”).
Item 1. Business Overview Rapid7 is a global cybersecurity software and service provider on a mission to create a safer digital world by making cybersecurity simpler and more accessible. For more than twenty years, Rapid7 has partnered with enterprises across the globe representing a diverse range of industries to improve the efficacy and productivity of their security operations (“SecOps”).
Our Growth Strategy Our goal is to help customers command their attack surface by helping them anticipate, pinpoint, and act on exposure-led threats from endpoint to the cloud.
Each of these SOCs is staffed with security analysts, threat engineers, incident responders and customer advisors that provide full-lifecycle support for our global managed services customers. Our Growth Strategy Our goal is to help customers command their attack surface by helping them anticipate, pinpoint, and act on exposure-led threats from endpoint to the cloud.
Our customer success teams provide expertise to help our customers realize exceptional value and improve their security outcomes, leading to higher customer satisfaction. • Managed Security Service Providers (“MSSPs”): Our platform products enable MSSPs to expand existing services to include detection and response (XDR/SIEM/MDR), vulnerability management, cloud security, threat intelligence, and application security.
We will continue to invest in partner models that enable us to create long-term customer value. • Managed Security Service Providers (“MSSPs”): Our platform products enable MSSPs to expand existing services to include detection and response (XDR/SIEM/MDR), vulnerability management, cloud security, threat intelligence, and application security.
Our commitment extends beyond just words, it is an ongoing investment that is visible in our partnerships, yearly programming, internal events, training and development and available resources. Over the past year we have made significant progress on internal programming and support, which in turn allowed us for the first time to be featured on the Human Rights Campaign Equality Index.
Our commitment extends beyond just words - it is an ongoing investment that is visible in our partnerships, yearly programming, internal events, training and development and available resources. Over the past year, we have made significant strides in fostering cultural agility, competency, and inclusive programming that nurtures a sense of belonging for all employees.
With a combination of proprietary AI-driven detections and indicators of compromise mapped to the MITRE framework, our detection content spans both known and unknown threats across the threat life cycle. When analyzed against the diverse telemetry data, this content enables us to pinpoint threats across endpoints, network, users, cloud, and customers’ wider ecosystem.
When analyzed against the diverse telemetry data, this content 7 Table of Contents enables us to pinpoint threats across endpoints, network, users, cloud, and customers’ wider ecosystem.
Our research and development teams are located in Boston, Massachusetts; Austin, Texas; Arlington, Virginia; Dublin and Galway, Ireland; Belfast, Northern Ireland; and Tel Aviv, Israel, providing us with exposure to worldwide engineering talent. We are also establishing a new development and service center in Prague, Czech Republic that we anticipate will continue to grow over the next year.
Our research and development teams are located in Boston, Massachusetts; Austin, Texas; Arlington, Virginia; Dublin and Galway, Ireland; Belfast, Northern Ireland; Tel Aviv, Israel; and Prague, Czech Republic, providing us with exposure to worldwide engineering talent. Rapid7 Labs: Open Source Community Our industry-leading attack experts analyze vulnerabilities, misconfigurations, and threat data to offer proactive guidance for organizations’ security programs.
Additionally, we believe gathering in person allows our people to foster stronger relationships and trust, and helps to contribute to our great work culture. Talent Development We believe in investing in the growth and development of all of our employees.
Additionally, we believe gathering in person allows our people to foster stronger relationships and trust, and helps to contribute to our great work culture, evidenced by Rapid7’s thirteen consecutive years of recognition as a Best Place to Work in Boston and achieving similar recognition in other locations where we operate.
In today's rapidly evolving IT environment, customers are encountering escalating challenges due to the widening spectrum of attackers and techniques, including the proliferation of cyberattacks leveraging artificial intelligence (“AI”) and targeted automation. To fortify their security posture, organizations will require greater visibility, advanced capabilities leveraging increased expertise, and integrated data to effectively anticipate, identify, and respond to threats.
In today's rapidly evolving IT environment, customers are encountering escalating challenges due to the widening spectrum of attackers and techniques, including the proliferation of cyberattacks leveraging artificial intelligence (“AI”) and targeted automation. We empower security professionals to manage a modern attack surface through our trusted AI infused technology, leading-edge research, and broad, strategic expertise.
In addition, all our employees now have access to education geared toward collaborating with supporting neurodivergent team members. Community Involvement & The Rapid7 Cybersecurity Foundation We give back to the communities where we live and work, and believe that this commitment helps in our efforts to attract and retain employees.
We remain committed to investing in partnerships that align with our corporate values and advance our mission of building multidimensional teams reflective of the global population we support. 10 Table of Contents Community Involvement & The Rapid7 Cybersecurity Foundation We give back to the communities where we live and work, and believe that this commitment helps in our efforts to attract and retain employees.
Recent technology alliances that drive this experience include ServiceNow, Microsoft, AWS, GCP and Palo Alto Networks. • Grow our customer base: We believe we have a strong opportunity to address the security needs of resource constrained organizations of any size.
These relationships also allow us to leverage MSSP expertise to further expand our customer outreach. • Grow our customer base: We believe we have a strong opportunity to address the security needs of resource constrained organizations of any size.
These relationships also allow us to leverage MSSP expertise to further expand our customer outreach. • Channel partner ecosystem continued investment: We maintain a global channel partner network that complements our sales organization, particularly in Europe, the Middle East and Africa (“EMEA”); and Asia Pacific (“APAC”).
Recent technology alliances that drive this experience include ServiceNow, Microsoft, AWS, GCP and Palo Alto Networks. • Channel Partners: We maintain a global channel partner network that complements our sales organization, particularly in Europe, the Middle East and Africa (“EMEA”), and Asia Pacific (“APAC”).
In addition to our consolidation offerings, we individually offer each of our platform solutions, including InsightIDR, InsightCloudSec, InsightIVM, InsightsAppSec, InsightConnect and Rapid7 Threat Command. Our platform products are available globally and reduce the need for customers to manage a large, complex, data infrastructure.
Our platform products are available globally and reduce the need for customers to manage a large, complex, data infrastructure. Customers can add expertise via our managed services delivered out of our SOCs located in the U.S., Ireland, Australia and the Czech Republic.
Rapid7 extends and expands the expertise of the Security Operations Center (“SOC") across information security, cloud operations, development, and IT teams, enabling them to better understand the attacker and leverage that information to take control of their fragmented attack surface.
Rapid7 enables the Security Operations Center (“SOC”) to understand their fragmented attack surface with attacker perspective, allowing them to proactively secure their attack surface and better detect and respond to threats.
Using a shared agent, customers receive clarity and higher-efficacy detection coverage around priority vulnerabilities, enabling them to eliminate risks and threats faster across their environments. • InsightIDR is a next-generation SIEM and extended detection and response (“XDR”) solution that delivers highly efficient, accelerated detection and response. • InsightVM is a vulnerability management solution that provides visibility across on-premise and remote endpoints, enabling security teams to evaluate the business risk of vulnerabilities and configurations and share with their IT counterparts for remediation. • Rapid7 Cloud Risk Complete (“CRC”) combines the power of Rapid7 InsightCloudSec (“InsightCloudSec”), InsightVM, and for CRC advanced customers, Rapid7 InsightAppSec (“InsightAppSec”) to manage risk across hybrid environments.
Using a shared agent, customers receive clarity and higher-efficacy detection coverage around priority vulnerabilities, enabling them to eliminate risks and threats faster across their environments. • InsightIDR is a next-generation Security Information and Event Management (“ SIEM”) and Extended Detection and Response (“XDR”) solution with high-fidelity detections that eliminate alert noise to pinpoint incidents and accelerate response with expert recommendations and automation. • Incident Response Services are proactive and responsive professional services to help customers prepare and respond to potential breaches.
Through our security operations platform, anchored on our cloud security, security information and event management (“SIEM”), advanced detection and response, and vulnerability management offerings, we believe that Rapid7 is poised to expand the capabilities of today's SecOps teams.
Rapid7’s comprehensive security solutions help our global customers unite exposure management with threat detection and response to reduce attack surfaces and eliminate threats with speed and precision. Our Command Platform is anchored on our cloud security, security information and event management (“SIEM”), advanced detection and response, and vulnerability management offerings.
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Item 1. Business Overview Rapid7 is a global cybersecurity software and services provider on a mission to offer customers greater clarity and control of their attack surface through our comprehensive and consolidated security offerings.
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Our Platform Rapid7’s Command Platform is a unified threat exposure, detection and response platform that allows SecOps teams to integrate their critical security data by providing a unified view of vulnerabilities, exposures, and threats from endpoint to cloud to close security gaps and prevent attacks.
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Our Offerings Our consolidation offerings combine our compelling platform technology and lean into vendor consolidation as well as the prioritization of security budgets around critical spending areas. • Rapid7 Managed Threat Complete (“MTC”) is our flagship offering and unifies the leading detection and response of Rapid7 Managed Detection and Response (“MDR”) and the robust exposure management of Rapid7 Managed Vulnerability Management (“MVM”) to manage customers’ most imminent risks, pinpoint and eliminate threats as early as possible, and build resiliency for their future.
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By integrating native cloud, on premises and security monitoring data and correlating it with an organization’s ecosystem of IT and business data, the Command Platform provides visibility of a customer’s attack surface. By providing the means to confidently discover, identify, prioritize and remediate risk, detect threats, and respond, the fully-integrated, AI-enabled platform gives SecOps teams greater visibility they can trust.
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In addition to our MDR solution, customers purchasing MTC receive unlimited vulnerability management to minimize the potential of an attack and unlimited incident response which leverages our deep forensics capabilities.
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Customers can consume consolidated software and/or managed service offerings that combine leading capabilities and lean into vendor consolidation to maximize security budgets.
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Our “Executive Risk View” dashboard provides extensive visibility, enabling users to clearly understand, communicate, and prioritize risk.
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Detection and Response • Managed Threat Complete (“MTC”) is our flagship offering that unifies Managed Detection and Response (“MDR”) and the robust exposure management of Managed Vulnerability Management (“MVM”) delivered via a shared agent to prevent attacks across the kill chain, pinpoint advanced threats wherever they are, and respond confidently with unlimited incident response from an always-on MDR.
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To complement our products, we offer a range of standalone managed services, including MDR, MVM, MDRP and Rapid7 Managed Application Security, based on our software solutions, and professional services, including penetration testing services, incident response services, security advisory services, and deployment and training.
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MDR delivers end-to-end threat detection and response, encompassing 24x7 monitoring to incident containment to breach response.
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Our managed services are delivered out of our SOC’s located in the U.S., Ireland, Australia and the Czech Republic. Each of these SOC’s consist of security analysts, threat engineers, incident responders and customer advisors that provide full-lifecycle support for our global managed services customers.
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Exposure Management • Exposure Command is an exposure management offering that provides attack surface visibility with proactive exposure mitigation and remediation prioritization optimized for hybrid environments. Customers with advanced cloud security use cases can purchase Exposure Command Advanced to provide strong security for workloads leveraging real-time visibility, identity analysis, and automated remediation.
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We will continue to invest in partner models that enable us to create long term customer value. • International expansion: We continue to make investments to expand our international presence.
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Our customer success teams provide expertise to help our customers realize exceptional value and improve their security outcomes, leading to higher customer satisfaction. • International expansion: We continue to make investments to expand our international presence.
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Rapid7 Labs: Open Source Community Our industry-leading attack experts analyze vulnerabilities, misconfigurations, and threat data to offer proactive guidance for organizations’ security programs.
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Leveraging threat intelligence from our free and open-source projects, we continuously enhance our products and services to improve the customer experience.
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It was developed by DFIR professionals as an efficient way to hunt for specific artifacts and monitor activities across fleets of endpoints.
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The Metasploit community also provides us with visibility into new cyber attacks as they occur and a deeper understanding of attacker behaviors. • Velociraptor: Velociraptor is a unique, advanced open-source endpoint monitoring, digital forensic and cyber response platform.
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By accessing our security talent, we help organizations develop an approach and road map to further mature and strengthen their security programs. 7 Ta ble of Contents Our Customers Our customer base has grown from approximately 10,000 customers at the end of 2021 to more than 11,500 customers as of December 31, 2023, in 151 countries, including 40% of the organizations in the Fortune 100.
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It provides you with the ability to more effectively respond to a wide range of digital forensic and cyber-incident response investigations and data breaches. • AttackerKB: The AttackerKB was created in 2020 as a forum for the security community to discuss, analyze, and prioritize threats.
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Our employee resource groups offered roundtables and educational sessions focused on embracing identity, navigating difficult conversations, building a personal brand and reputation, advocating for yourself, celebrating and supporting those who are neurodivergent and more. We welcomed the launch of our newest employee resource group established to create intentional space for those identifying as LatinX and/or Hispanic.
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With a combination of proprietary AI-driven detections and indicators of compromise mapped to the ATT&CK Framework (public resource that maps adversary tactics, techniques and procedures), our detection content spans both known and unknown threats across the threat life cycle.
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We continue to offer our comprehensive e-learning program on diversity, equity, and inclusion, for all new hires. Our efforts also extended to our global talent acquisition teams, holding in-person and virtual training, focused on leveraging the key tenets of cultural competency to support our ongoing efforts to build multidimensional talent pipelines.
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Our Customers As of December 31, 2024, we had more than 11,700 customers in 147 countries, including 43% of the organizations in the Fortune 100.
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As of December 31, 2024, over 90% of our employees were eligible to participate in the ESPP.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

90 edited+13 added−15 removed346 unchanged
Biggest changeIf our customers do not renew their agreements with us or renew on terms less favorable to us, our revenues and results of operations may be adversely impacted. 15 Ta ble of Contents Our future growth is also affected by our ability to sell additional offerings to our existing customers, which depends on a number of factors, including customers’ satisfaction with our products and services and general economic conditions.
Biggest changeOur future growth is also affected by our ability to sell additional offerings to our existing customers, which depends on a number of factors, including customers’ satisfaction with our products and services and general economic conditions. If our efforts to cross-sell and upsell to our customers are unsuccessful, the rate at which our business grows might decline.
Prolonged economic uncertainties or downturns could adversely affect our business. Prolonged economic uncertainties or downturns could adversely affect our business operations or financial results.
Prolonged economic uncertainties or downturns could adversely affect our business operations or financial results.
For example, the conflict in Ukraine and associated activities in Ukraine and Russia may increase the risk of cyberattacks on various types of infrastructure and operations, and the United States government has warned companies to be prepared for a significant increase in Russian cyberattacks in response to the sanctions on Russia.
For example, the conflict in Ukraine and associated activities in Ukraine and Russia may increase the risk of cyberattacks on various types of infrastructure and operations, and the United States government has warned companies to be prepared for a significant increase in Russian cyberattacks in response to the sanctions on Russia.
In addition, the change by us and other companies to offer a remote or hybrid work environment may increase the competition for such employees from employers outside of our traditional office locations. Our workforce has evolved to a hybrid-first model following the COVID-19 pandemic, which requires regular in-office attendance but utilizes a hybrid approach.
In addition, the change by us and other companies to offer a remote or hybrid work environment may increase the competition for such employees from employers outside of our traditional office locations. Our workforce evolved to a hybrid-first model following the COVID-19 pandemic, which requires regular in-office attendance but utilizes a hybrid approach.
These investments may not result in increased revenue or growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations will be harmed, and we may not be able to achieve or maintain profitability over the long term.
These investments may not result in increased revenue or growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations will be harmed, and we may not be able to maintain profitability over the long term.
Defects may cause our products to be vulnerable to attacks, cause them to fail to detect vulnerabilities or threats, or temporarily interrupt customers’ networking traffic. Any errors, defects, disruptions in service or other performance problems with our products may damage our customers’ businesses and could hurt our reputation.
Defects may cause our products to be vulnerable to attacks, fail to detect vulnerabilities or threats, or temporarily interrupt customers’ networking traffic. Any errors, defects, disruptions in service or other performance problems with our products may damage our customers’ businesses and could hurt our reputation.
The Capped Calls cover, subject to customary adjustments, the number of shares of our common stock initially underlying each of the 2023 Notes, the 2025 Notes, the 2027 Notes and the 2029 Notes. The Capped Calls are expected to offset the potential dilution as a result of conversion of such Notes.
The Capped Calls cover, subject to customary adjustments, the number of shares of our common stock initially underlying each of the 2025 Notes, the 2027 Notes and the 2029 Notes. The Capped Calls are expected to offset the potential dilution as a result of conversion of such Notes.
Factors that may affect the market price of our common stock include: • actual or anticipated fluctuations in our financial condition and operating results; • variance in our financial performance from expectations of securities analysts; • changes in our projected operating and financial results; • changes in the prices of our products and service offerings; • changes in laws or regulations applicable to our products or service offerings; • announcements by us or our competitors of significant business developments, acquisitions or new offerings; • our involvement in any litigation or investigations by regulators; • our sale of our common stock or other securities in the future; • changes in our board of directors, senior management or key personnel; • trading volume of our common stock; • price and volume fluctuations in the overall stock market; 31 Ta ble of Contents • effects of inflation and increased interest rates; • changes in the anticipated future size and growth rate of our market; • sales of shares of our common stock by us or our stockholders, including sales and purchases of any common stock issued upon conversion of our convertible senior notes; and • general economic, regulatory and market conditions and/or market speculation or rumors.
Factors that may affect the market price of our common stock include: • actual or anticipated fluctuations in our financial condition and operating results; • variance in our financial performance from expectations of securities analysts; • changes in our projected operating and financial results; • changes in the prices of our products and service offerings; • changes in laws or regulations applicable to our products or service offerings; • announcements by us or our competitors of significant business developments, acquisitions or new offerings; • our involvement in any litigation or investigations by regulators; • our sale of our common stock or other securities in the future; 31 Table of Contents • changes in our board of directors, senior management or key personnel; • trading volume of our common stock; • price and volume fluctuations in the overall stock market; • effects of inflation and increased interest rates; • changes in the anticipated future size and growth rate of our market; • sales of shares of our common stock by us or our stockholders, including sales and purchases of any common stock issued upon conversion of our convertible senior notes; and • general economic, regulatory and market conditions and/or market speculation or rumors.
Our current international operations and future initiatives will involve a variety of risks, including: • increased management, infrastructure and legal costs associated with having international operations; • reliance on channel partners; • trade and foreign exchange restrictions; • economic or political instability or uncertainty in foreign markets and around the world; • foreign currency exchange rate fluctuations; • greater difficulty in enforcing contracts, accounts receivable collection and longer collection periods; • changes in regulatory requirements, including, but not limited to data privacy, data protection and data security regulations; 18 Ta ble of Contents • difficulties and costs of staffing and managing foreign operations; • the uncertainty and limitation of protection for intellectual property rights in some countries; • costs of compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • costs of compliance with U.S. laws and regulations for foreign operations, including the U.S.
Our current international operations and future initiatives will involve a variety of risks, including: • increased management, infrastructure and legal costs associated with having international operations; • reliance on channel partners; • trade and foreign exchange restrictions; • economic or political instability or uncertainty in foreign markets and around the world; • foreign currency exchange rate fluctuations; • greater difficulty in enforcing contracts, accounts receivable collection and longer collection periods; • changes in regulatory requirements, including, but not limited to data privacy, data protection and data security regulations; 18 Table of Contents • difficulties and costs of staffing and managing foreign operations; • the uncertainty and limitation of protection for intellectual property rights in some countries; • costs of compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations; • costs of compliance with U.S. laws and regulations for foreign operations, including the U.S.
The capped call transactions may affect the value of the Notes and our common stock. In connection with the issuance of the 2023 Notes, the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into capped call transactions with certain counterparties (the “Capped Calls”).
The capped call transactions may affect the value of the Notes and our common stock. In connection with the issuance of the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into capped call transactions with certain counterparties (the “Capped Calls”).
An adverse outcome of a dispute may require us to: • pay substantial damages, including treble damages, if we are found to have willfully infringed a third party’s patents or copyrights; • cease making, licensing or using solutions that are alleged to infringe or misappropriate the intellectual property of others; 24 Ta ble of Contents • expend additional development resources to attempt to redesign our solutions or otherwise develop non-infringing technology, which may not be successful; • enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or intellectual property rights; and • indemnify our partners and other third parties.
An adverse outcome of a dispute may require us to: • pay substantial damages, including treble damages, if we are found to have willfully infringed a third party’s patents or copyrights; • cease making, licensing or using solutions that are alleged to infringe or misappropriate the intellectual property of others; 24 Table of Contents • expend additional development resources to attempt to redesign our solutions or otherwise develop non-infringing technology, which may not be successful; • enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or intellectual property rights; and • indemnify our partners and other third parties.
Our indebtedness may: • limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes; • limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes; • require us to use a substantial portion of our cash flow from operations to make debt service payments; 32 Ta ble of Contents • limit our flexibility to plan for, or react to, changes in our business and industry; • place us at a competitive disadvantage compared to our less leveraged competitors; and • increase our vulnerability to the impact of adverse economic and industry conditions.
Our indebtedness may: • limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes; 32 Table of Contents • limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes; • require us to use a substantial portion of our cash flow from operations to make debt service payments; • limit our flexibility to plan for, or react to, changes in our business and industry; • place us at a competitive disadvantage compared to our less leveraged competitors; and • increase our vulnerability to the impact of adverse economic and industry conditions.
Our operating results, including the levels of our revenue, annualized recurring revenue (“ARR”), cash flow, deferred revenue and gross margins, have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control, including: • the level of demand for our products and service offerings; • customer renewal rates and ability to attract new customers; • the extent to which customers purchase additional products or service offerings; • the mix of our products, as well as service offerings, sold during a period; • the ability to successfully grow our sales of our cloud-based solutions, including through the shift to a consolidated platform sales approach; • the level of perceived threats to organizations’ cybersecurity; • network outages, security breaches, technical difficulties or interruptions with our products; • changes in the growth rate of the markets in which we compete; • sales of our products and service offerings due to seasonality and customer demand; • the timing and success of new product or service introductions by us or our competitors or any other changes in the competitive landscape of our industry, including consolidation among our competit ors and initiatives that use artificial intelligence (“AI”); • the introduction or adoption of new technologies that compete with our offerings; • decisions by potential customers to purchase cybersecurity products or service offerings from other vendors; • the amount and timing of operating costs and capital expenditures related to the operations and expansion of our business; • price competition; • our ability to successfully manage and integrate any acquired businesses, including without limitation, the amount and timing of expenses and potential future charges for impairment of goodwill from acquired companies; • business disruptions in regions affecting our operations, stemming from actual, imminent or perceived outbreak or reemergence of contagious disease; • our ability to increase, retain and incentivize the channel partners that market and sell our products and service offerings; • our continued international expansion and associated exposure to changes in foreign currency exchange rates; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure; • the announcement or adoption of new regulations and policy mandates or changes to existing regulations and policy mandates that impact our business or industry; • the cost or results of existing or unforeseen litigation and intellectual property infringement; • the strength of regional, national and global economies; 12 Ta ble of Contents • the impact of climate change, natural disasters or manmade problems, including terrorism or war (such as the Russia- Ukraine war and the Israel-Hamas conflict); and • future accounting pronouncements or changes in our accounting policies or practices.
Our operating results, including the levels of our revenue, annualized recurring revenue (“ARR”), cash flow, deferred revenue and gross margins, have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control, including: • the level of demand for our products and service offerings; • customer renewal rates and ability to attract new customers; • the extent to which customers purchase additional products or service offerings; • the mix of our products, as well as service offerings, sold during a period; • the ability to successfully grow our sales of our cloud-based solutions, including through the shift to a consolidated platform sales approach; • the level of perceived threats to organizations’ cybersecurity; • network outages, security breaches, technical difficulties or interruptions with our products; • changes in the growth rate of the markets in which we compete; • sales of our products and service offerings due to seasonality and customer demand; • the timing and success of new product or service introductions by us or our competitors or any other changes in the competitive landscape of our industry, including consolidation among our competit ors and initiatives that use artificial intelligence (“AI”); • the introduction or adoption of new technologies that compete with our offerings; • decisions by potential customers to purchase cybersecurity products or service offerings from other vendors; • the amount and timing of operating costs and capital expenditures related to the operations and expansion of our business; • price competition; • our ability to successfully manage and integrate any acquired businesses, including without limitation, the amount and timing of expenses and potential future charges for impairment of goodwill from acquired companies; • business disruptions in regions affecting our operations, stemming from actual, imminent or perceived outbreak or reemergence of contagious disease; • our ability to increase, retain and incentivize the channel partners that market and sell our products and service offerings; • our continued international expansion and associated exposure to changes in foreign currency exchange rates; • the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure; • the announcement or adoption of new regulations and policy mandates or changes to existing regulations and policy mandates that impact our business or industry; • the cost or results of existing or unforeseen litigation and intellectual property infringement; • the strength of regional, national and global economies; 12 Table of Contents • the impact of climate change, natural disasters or manmade problems, including terrorism or war (such as the Russia- Ukraine war and the ongoing conflicts in the Middle East); and • future accounting pronouncements or changes in our accounting policies or practices.
Our future success will depend in part on our ability to manage our growth effectively, which will require us to, among other things: • maintain and expand our customer base, including through continued investments and strategies to evolve to a consolidated platform sales approach; • increase revenues from existing customers through increased or broader use of our products and professional services within their organizations; • improve the performance and capabilities of our products through research and development; • continue to develop our cloud-based solutions; • maintain the rate at which customers purchase and renew subscriptions to our cloud-based solutions, content subscriptions, maintenance and support and managed services; • continue to successfully expand our business domestically and internationally; • continue to improve our key business applications, processes and IT infrastructure to support our business needs and appropriately documenting such systems and processes; • continue to effectively attract, integrate and retain employees, particularly members of our sales and marketing and research and development teams; • enhance our information and communication systems to ensure that our employees and offices around the world are well coordinated and can effectively communicate with each other and our growing base of customers and partners; • improve our financial, management, and compliance systems and controls; and • successfully compete with other companies.
Our future success will depend in part on our ability to manage our growth effectively, which will require us to, among other things: • maintain and expand our customer base, including through continued investments and strategies to evolve to a consolidated platform sales approach; • increase revenues from existing customers through increased or broader use of our product subscriptions and service offerings within their organizations; • improve the performance and capabilities of our products through research and development; • continue to develop our cloud-based solutions; • maintain the rate at which customers purchase and renew subscriptions to our cloud-based solutions, content subscriptions, maintenance and support and managed services; • continue to successfully expand our business domestically and internationally; • continue to improve our key business applications, processes and IT infrastructure to support our business needs and appropriately document such systems and processes; • continue to effectively attract, integrate and retain employees, particularly members of our sales and marketing and research and development teams; • enhance our information and communication systems to ensure that our employees and offices around the world are well coordinated and can effectively communicate with each other and our growing base of customers and partners; • improve our financial, management, and compliance systems and controls; and • successfully compete with other companies.
The counterparties and/or or their respective affiliates may modify or unwind their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the applicable Notes (and are likely to do so on each exercise date of the capped call transactions, which are 33 Ta ble of Contents scheduled to occur during the applicable observation period relating to any conversion of the 2025 Notes on or after November 1, 2024, relating to any conversion of the 2027 Notes on or after December 15, 2026 or relating to any conversion of the 2029 Notes on or after December 15, 2028, in each case that is not in connection with a redemption).
The counterparties and/or or their respective affiliates may modify or unwind their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the applicable Notes (and are likely to do so on each exercise date of the capped call transactions, which are scheduled to occur during the applicable observation period relating to any conversion of the 2025 Notes on or after November 1, 2024, relating to any conversion of the 2027 Notes on or after December 15, 2026 or relating to any conversion of the 2029 Notes on or after December 15, 2028, in each case that is not in connection with a redemption).
Demand for platform solutions are affected by a number of factors beyond our control, including continued market acceptance of cloud-based offerings, the timing of development and release of new products by our competitors, technological change, and growth or contraction in our market and the economy in general.
Demand for our platform solutions is affected by a number of factors beyond our control, including continued market acceptance of cloud-based offerings, the timing of development and release of new products by our competitors, technological change, and growth or contraction in our market and the economy in general.
While we have experienced significant revenue growth in recent periods, we may not obtain a high enough volume of sales of our products and service offerings to sustain or increase our growth or achieve or maintain profitability in the future.
While we have experienced significant revenue growth in recent periods and achieved profitability, we may not obtain a high enough volume of sales of our products and service offerings to sustain or increase our growth or maintain profitability in the future.
If we are unable to adapt our products to changing legal and regulatory standards or other requirements in a timely manner, or if our products fail to assist with, or expedite, our 22 Ta ble of Contents customers’ cybersecurity defense and compliance efforts, our customers may lose confidence in our products and could switch to products offered by our competitors or threaten or bring legal actions against us.
If we are unable to adapt our products to changing legal and regulatory standards or other requirements in a timely manner, or if our products fail to assist with, or expedite, our customers’ cybersecurity defense and compliance efforts, our customers may lose confidence in our products and could switch 22 Table of Contents to products offered by our competitors or threaten or bring legal actions against us.
Although we expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if we are unable to obtain adequate financing or financing on terms satisfactory to us if and when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.
Although we expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if we are unable to obtain adequate financing or financing on terms satisfactory to us if and when we 35 Table of Contents require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.
The adverse effect on our financial results may be particularly acute because of the significant research, development, marketing, sales and other expenses we will have incurred in connection with the new offerings or enhancements. 16 Ta ble of Contents We face intense competition in our market, which could adversely affect our business, financial condition, and results of operations.
The adverse effect on our financial results may be particularly acute because of the significant research, development, marketing, sales and other expenses we will have incurred in connection with the new offerings or enhancements. 16 Table of Contents We face intense competition in our market, which could adversely affect our business, financial condition, and results of operations.
From time to time, there may be changes in our senior management team resulting from 21 Ta ble of Contents the termination or departure of our executive officers and key employees. Our senior management and key employees are employed on an at-will basis, which means that they could terminate their employment with us at any time.
From time to time, there may be changes in our senior management team resulting from the termination or departure of our executive officers and key employees. Our senior management and key employees are 21 Table of Contents employed on an at-will basis, which means that they could terminate their employment with us at any time.
If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under such transaction. Our exposure will depend on many factors but, generally, our exposure will increase if the market price or the volatility of our common stock increases.
If an 33 Table of Contents option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under such transaction. Our exposure will depend on many factors but, generally, our exposure will increase if the market price or the volatility of our common stock increases.
While presented with numerical specificity, this guidance is necessarily speculative in nature, and is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions or economic conditions, some of which may change.
While presented with numerical specificity, this guidance is necessarily speculative in nature, and is inherently subject to significant business, economic and competitive 20 Table of Contents uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions or economic conditions, some of which may change.
In order to protect our unpatented proprietary technologies and processes, we rely on trade secret laws and confidentiality agreements with our employees, consultants, channel partners, vendors and others. Despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, reverse engineer or otherwise obtain and use them.
In order to protect our unpatented proprietary technologies and processes (including our Command Platform), we rely on trade secret laws and confidentiality agreements with our employees, consultants, channel partners, vendors and others. Despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, reverse engineer or otherwise obtain and use them.
If our products or service offerings fail to detect vulnerabilities or threats for any reason, we may incur significant costs, the attention of our key personnel could be diverted, our customers may delay or withhold payment to us or elect not to renew or other significant customer relations problems may arise.
If our products or service offerings fail to detect vulnerabilities or threats for any reason, we may incur significant costs, the attention of our key personnel could be diverted, our customers may delay or withhold payment to us or elect not to renew or other significant customer relations problems may 27 Table of Contents arise.
Negative conditions in the general economy in either the United States or abroad, including conditions resulting from financial and credit market fluctuations, changes in economic policy, inflation, foreign currency exchange rate fluctuations, trade uncertainty, including changes in tariffs, sanctions, international treaties, and other trade restrictions, the occurrence of a natural disaster, outbreaks of epidemics or pandemics such as COVID-19, political unrest and social strife, including acts of terrorism, armed conflicts, such as the one between Russia and Ukraine and the Israel-Hamas conflict, have caused and could continue to cause a decrease in corporate spending on security offerings or information technology in general and negatively affect the rate of growth of our business.
Negative conditions in the general economy in either the United States or abroad, including conditions resulting from financial and credit market fluctuations, changes in economic policy, inflation, foreign currency exchange rate fluctuations, trade uncertainty, including changes in tariffs, sanctions, international treaties, and other trade restrictions, the occurrence of a natural disaster, outbreaks of epidemics or pandemics such as COVID-19, political unrest and social strife, including acts of terrorism, armed conflicts, such as the one between Russia and Ukraine and the ongoing conflicts in the Middle East, have caused and could continue to cause a decrease in corporate spending on security offerings or information technology in general and negatively affect the rate of growth of our business.
In addition, in order for our products to achieve their functional potential, our products must effectively integrate into our customers’ IT infrastructures, which have different specifications, utilize varied protocol standards, deploy products from multiple different vendors and contain multiple layers of products that have been added over time.
In addition, in order for our products (including our Command Platform) to achieve their functional potential, our products must effectively integrate into our customers’ IT infrastructures, which have different specifications, utilize varied protocol standards, deploy products from multiple different vendors and contain multiple layers of products that have been added over time.
If our channel partners choose to place greater emphasis on products of their own or those offered by our competitors or do not effectively market and sell our products and service offerings, our ability to grow our business and sell our products and service offerings, particularly in key international markets, may be adversely affected.
If our channel partners choose to place greater emphasis on products of their own or those offered by our competitors or do not effectively market and sell our products and service offerings (including our Command Platform), our ability to grow our business and sell our products and service offerings, particularly in key international markets, may be adversely affected.
Disclosing the source code of our proprietary 25 Ta ble of Contents software could also make it easier for cyber attackers and other third parties to discover vulnerabilities in or to defeat the protections of our products, which could result in our products failing to provide our customers with the security they expect.
Disclosing the source code of our proprietary 25 Table of Contents software could also make it easier for cyber attackers and other third parties to discover vulnerabilities in or to defeat the protections of our products, which could result in our products failing to provide our customers with the security they expect.
While we intend to continue iterating our 17 Ta ble of Contents approach to ensure we are balancing the needs of the business with the desires of our people, we may face difficulty in hiring and retaining our workforce as a result of this shift to have greater in-office attendance.
While we intend to continue iterating our approach to 17 Table of Contents ensure we are balancing the needs of the business with the desires of our people, we may face difficulty in hiring and retaining our workforce as a result of this shift to have greater in-office attendance.
Although we expect that our current cash and cash equivalent balances, including the proceeds of our offering of convertible senior notes in September 2023, together with cash flows that are generated from operations and availability under our revolving credit facility, will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if the economic conditions of the general economy or industries in which we operate worsen from present levels, our business operations and financial results could be adversely affected. 14 Ta ble of Contents Macroeconomic events and conditions, such as those discussed above, may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including risks associated with our guidance, our customers, our potential customers, our market opportunity, renewals and sales cycle, among others.
Although we expect that our current cash and cash equivalent balances, including the proceeds of our offering of convertible senior notes in September 2023, together with cash flows that are generated from operations, will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if the economic conditions of the general economy or industries in which we operate worsen from present levels, our business operations and financial results could be adversely affected. 14 Table of Contents Macroeconomic events and conditions, such as those discussed above, may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including risks associated with our guidance, our customers, our potential customers, our market opportunity, renewals and sales cycle, among others.
Additionally, for the years ended December 31, 2023, 2022 and 2021, 11%, 10% and 10%, respectively, of our revenue was generated in foreign currencies. Accordingly, changes in exchange rates may have an adverse effect on our business, operating results and financial condition.
Additionally, for the years ended December 31, 2024, 2023 and 2022, 13%, 11% and 10%, respectively, of our revenue was generated in foreign currencies. Accordingly, changes in exchange rates may have an adverse effect on our business, operating results and financial condition.
Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or 28 Ta ble of Contents disruption to our information technology systems (including our products) or the third-party information technology systems that support us and our services.
Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products) or the third-party information technology systems that support us and our services.
Any of these events could have a material adverse effect on our reputation and our business, and financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business or operations; inability to process personal data; inability to operate in specific jurisdictions; limitations in our ability to develop our products and professional services; management's time and other resource expenditures; adverse publicity; and revisions to our operations.
Any of these events could have a material adverse effect on our reputation and our business, and financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business or operations; inability to process personal data; inability to operate in specific jurisdictions; limitations in our ability to develop our products and service offerings; management's time and other resource expenditures; adverse publicity; and revisions to our operations.
Since shares of our common stock were sold in our initial public offering (“IPO”), in July 2015 at a price of $16.00 per share, our stock price has ranged from an intraday low of $9.05 to an intraday high of $145.00 through February 16, 2024.
Since shares of our common stock were sold in our initial public offering (“IPO”), in July 2015 at a price of $16.00 per share, our stock price has ranged from an intraday low of $9.05 to an intraday high of $145.00 through February 25, 2025.
We may have exposure to greater than anticipated tax liabilities. 26 Ta ble of Contents We are subject to U.S. federal, state, local and sales taxes in the United States and foreign income taxes, withholding taxes and transaction taxes in numerous foreign jurisdictions.
We may have exposure to greater than anticipated tax liabilities. 26 Table of Contents We are subject to U.S. federal, state, local and sales taxes in the United States and foreign income taxes, withholding taxes and transaction taxes in numerous foreign jurisdictions.
Limitation of liability provisions in our standard terms and conditions and our other agreements may not 27 Ta ble of Contents adequately or effectively protect us from any claims related to errors or defects in our solutions, including as a result of federal, state or local laws or ordinances or unfavorable judicial decisions in the United States or other countries.
Limitation of liability provisions in our standard terms and conditions and our other agreements may not adequately or effectively protect us from any claims related to errors or defects in our solutions, including as a result of federal, state or local laws or ordinances or unfavorable judicial decisions in the United States or other countries.
Foreign Corrupt Practices Act, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell or provide our solutions in certain foreign markets, and the risks and costs of non-compliance; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, and irregularities in, financial statements; • the potential for political unrest, acts of terrorism, hostilities or war; • management communication and integration problems resulting from cultural differences and geographic dispersion; • costs associated with language localization of our products; • increased exposure to climate change, natural disasters, acts of war (including the Russia-Ukraine war and the Israel-Hamas conflict), terrorism, epidemics, or pandemics and other health crises, including the ongoing COVID-19 pandemic; and • costs of compliance with multiple and possibly overlapping tax structures.
Foreign Corrupt Practices Act, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell or provide our solutions in certain foreign markets, and the risks and costs of non-compliance; • heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, and irregularities in, financial statements; • the potential for political unrest, acts of terrorism, hostilities or war; • management communication and integration problems resulting from cultural differences and geographic dispersion; • costs associated with language localization of our products; • increased exposure to climate change, natural disasters, acts of war (including the Russia-Ukraine war and the ongoing conflicts in the Middle East), terrorism, epidemics, or pandemics and other health crises; and • costs of compliance with multiple and possibly overlapping tax structures.
However, for the years ended December 31, 2023, 2022 and 2021 we incurred 17%, 16% and 15%, respectively, of our expenses outside of the United States in foreign currencies, primarily the British pound sterling and euro, principally with respect to salaries and related personnel expenses associated with our sales and research and development operations.
However, for the years ended December 31, 2024, 2023 and 2022, we incurred 19%, 17% and 16%, respectively, of our expenses outside of the United States in foreign currencies, primarily the British pound sterling and euro, principally with respect to salaries and related personnel expenses associated with our sales and research and development operations.
Any patents that may issue in the future from our pending or future patent applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers. We have registered the “Rapid7,” “Nexpose” and “Metasploit” names and logos in the United States and certain other countries.
Any patents 23 Table of Contents that may issue in the future from our pending or future patent applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers. We have registered the “Rapid7,” “Nexpose” and “Metasploit” names and logos in the United States and certain other countries.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became 36 Ta ble of Contents an “interested” stockholder.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder.
Any of the foregoing provisions could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
Any of the foregoing provisions could limit the opportunity for our stockholders to receive a 36 Table of Contents premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.
However, if changes in our ownership occur in the future, our ability to use our NOLs may be further limited. For these reasons, we may not be able to utilize a material portion of the NOLs, even if we achieve profitability.
However, if changes in our ownership occur in the future, our ability to use our NOLs may be further limited. For these reasons, we may not be able to utilize a material portion of the NOLs.
Further, we and our subsidiaries may incur substantial additional indebtedness in the future, subject to the restrictions contained in our revolving credit facility and any future debt instruments existing at the time, some of which may be secured indebtedness.
Further, we and our subsidiaries may incur substantial additional indebtedness in the future (some of which may be secured indebtedness), subject to the restrictions contained in any future debt instruments existing at the time.
In developing this guidance, our management must make certain assumptions and judgments about our future performance. Some of those key assumptions relate to the impact of macroeconomic pressures on our business and the timing 20 Ta ble of Contents and scope of economic recovery globally, which are inherently difficult to predict.
In developing this guidance, our management must make certain assumptions and judgments about our future performance. Some of those key assumptions relate to the impact of macroeconomic pressures on our business and the timing and scope of economic recovery globally, which are inherently difficult to predict.
The market for SecOps solutions is highly fragmented, intensely competitive and constantly evolving. We compete with an array of established and emerging security software and services vendors. With the introduction of new technologies and market entrants, we expect the competitive environment to remain intense going forward.
The market for SecOps solutions, including our Command Platform, is highly fragmented, intensely competitive and constantly evolving. We compete with an array of established and emerging security software and services vendors. With the introduction of new technologies and market entrants, we expect the competitive environment to remain intense going forward.
Our hybrid working model and use of service providers with remote working arrangements also subjects us to heightened operational risks.
Our hybrid working model and use of service providers with remote working arrangements also subject us to heightened operational risks.
While extortion payments may alleviate the negative impact of a ransomware attack, we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments.
While extortion payments may alleviate the negative impact of a ransomware attack, we may be unwilling or unable to make such payments due to, for 28 Table of Contents example, applicable laws or regulations prohibiting such payments.
For the years ended December 31, 2023, 2022 and 2021, we derived approximately 62%, 57% and 52%, respectively, of our revenue from sales of products and service offerings through channel partners, and the percentage of revenue derived from channel partners may increase in future periods.
For the years ended December 31, 2024, 2023 and 2022, we derived approximately 68%, 62% and 57%, respectively, of our revenue from sales of products and service offerings through channel partners, and the percentage of revenue derived from channel partners may increase in future periods.
Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it 35 Ta ble of Contents more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions.
Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our new or current product offerings, our pricing, the effects of economic conditions, including due to a global economic slowdown, inflation, foreign currency exchange rate fluctuation, the Russia-Ukraine war, the Israel-Hamas conflict and any global economic uncertainty and financial market disruptions, competitive offerings, our customers' perception of their exposure, or alterations or reductions in their spending levels.
Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our new or current product offerings, our pricing, the effects of economic conditions, including due to a global economic slowdown, inflation, foreign currency exchange rate fluctuation, the Russia-Ukraine war, the ongoing conflicts in the Middle East and any global economic uncertainty and financial market disruptions, competitive offerings, our customers' perception of their exposure, or alterations or reductions in their spending levels.
As a result of the Restructuring Plan, we have incurred and may continue to incur additional costs in the short-term, including cash expenditures for employee transition, notice period and severance payments, employee benefits, and related facilitation costs as well as non-cash expenditures related to acceleration of vesting of share-based awards.
As a result of the Restructuring Plan, we have incurred and may continue to incur additional costs in the short term, including cash expenditures for employee transition, notice period and severance payments, employee benefits, related facilitation costs non-cash expenditures related to acceleration of vesting of share-based awards and other significant one-time costs.
For the years ended December 31, 2023, 2022 and 2021, operations located outside of North America generated 22%, 21% and 19%, respectively, of our revenue. Our growth strategy is dependent, in part, on our continued international expansion.
For the years ended December 31, 2024, 2023 and 2022, operations located outside of North America generated 24%, 22% and 21%, respectively, of our revenue. Our growth strategy is dependent, in part, on our continued international expansion.
Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable performance of our products and network infrastructure. Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable performance of our products and network infrastructure.
Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable performance of our products and network infrastructure, including our Command Platform. Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable performance of our products and network infrastructure, including our Command Platform.
This creates some uncertainty as to the effective legal frameworks and our obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. Preparation for and compliance with these obligations requires us to devote significant resources (including, without limitation, financial and time-related resources).
This creates some uncertainty as to the effective legal frameworks and our obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. Preparation for and compliance with these obligations require us to devote significant resources (including, without limitation, financial and time- 29 Table of Contents related resources).
Data Privacy Framework (followed on October 2023 with the adoption of an adequacy decision in the UK for the UK-U.S. Data Bridge).
Data Privacy 30 Table of Contents Framework (followed on October 2023 with the adoption of an adequacy decision in the UK for the UK-U.S. Data Bridge).
Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations. If we (or third 29 Ta ble of Contents parties upon whom we rely) fail, or are perceived to have failed, to address and comply with data privacy and security obligations, we could face significant consequences.
Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations. If we (or third parties upon whom we rely) fail, or are perceived to have failed, to address and comply with data privacy and security obligations, we could face significant consequences.
In addition, our facilities and those of our third-party data centers and hosting providers are vulnerable to damage or interruption from human error, intentional bad acts, pandemics, earthquakes, hurricanes, floods, fires, war (including the Russia-Ukraine war and the Israel-Hamas conflict), terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events.
In addition, our facilities and those of our third-party data centers and hosting providers are vulnerable to damage or interruption from human error, intentional bad acts, pandemics, earthquakes, hurricanes, floods, fires, war (including the Russia-Ukraine war and the ongoing conflicts in the Middle East), terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events.
The occurrence of a public health crisis, climate change, natural disaster, power failure, war (including the Russia-Ukraine war and the Israel-Hamas conflict) or an act of terrorism, vandalism or other misconduct, a decision by a third party to close a facility on which we rely without adequate notice, or other unanticipated 34 Ta ble of Contents problems could result in lengthy interruptions in provision or delivery of our products, potentially leaving our customers vulnerable to cyber attacks.
The occurrence of a public health crisis, climate change, natural disaster, power failure, war (including the Russia-Ukraine war and the ongoing conflicts in the Middle East) or an act of terrorism, vandalism or other misconduct, a decision by a third party to close a facility on which we rely without adequate notice, or other unanticipated problems could result in lengthy interruptions in provision or delivery of our products, potentially leaving our customers vulnerable to cyber attacks.
Achieving the anticipated benefits of past or future acquisitions will depend in part upon whether we can integrate acquired operations, products and technology in a timely and cost-effective manner and successfully market and sell these as new product offerings, or as new features within our existing offerings.
Achieving the anticipated benefits of past or future acquisitions will depend in part upon whether we can integrate acquired operations, products and technology in a timely and cost-effective manner and successfully market and sell these as new product offerings, or as new features within our existing offerings. For example, on July 3, 2024, we acquired Noetic Cyber, Inc.
More specifically, certain of our products, in particular our cloud-based products, are hosted on cloud providers such as Amazon Web Services, which provides us with computing and storage capacity.
More specifically, certain of our products, in particular our cloud-based products, are hosted on cloud providers, which provides us with computing and storage capacity.
The exchange rate between the U.S. dollar and foreign currencies has fluctuated substantially in recent years and may fluctuate in the future, including as a result of geopolitical factors such as the Israel-Hamas conflict, which has impacted the exchange rate between the U.S. dollar and the Israeli New Shekel.
The exchange rate between the U.S. dollar and foreign currencies has fluctuated substantially in recent years and may fluctuate in the future, including as a result of geopolitical factors such as the ongoing conflicts in the Middle East including Israel and the surrounding region, which has impacted the exchange rate between the U.S. dollar and the Israeli New Shekel.
Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our financial performance may be harmed, and we may not achieve or maintain profitability in the future.
Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our financial performance may be harmed, and we may not maintain profitability in the future. Prolonged economic uncertainties or downturns could adversely affect our business.
The Restructuring Plan included the reduction of our workforce by approximately 16%. We may encounter challenges as a result of these restructuring efforts and our reduction in force that could prevent us from recognizing the intended benefits of the Restructuring Plan or otherwise adversely affect our business, results of operations and financial condition.
We may encounter challenges as a result of these restructuring efforts and our reduction in force that could prevent us from recognizing the intended benefits of the Restructuring Plan or otherwise adversely affect our business, results of operations and financial condition. As of March 31, 2024, the execution of the Restructuring Plan was completed.
Any decline in our customer renewals or failure to convince customers to expand their use of our subscription offerings could adversely affect our future operating results. Our subscription offerings are sold on a term basis.
Our business and growth depend substantially on customers renewing and expanding their subscriptions with us. Any decline in our customer renewals or failure to convince customers to expand their use of our subscription offerings could adversely affect our future operating results. Our subscription offerings are sold on a term basis.
In September 2023, concurrently with the issuance of the 2029 Notes, we used $201.0 million of the proceeds from the issuance of the 2029 Notes to repurchase and retire $184.0 million aggregate principal amount of the 2025 Notes. In addition, we may also incur indebtedness under our revolving credit facility.
In September 2023, concurrently with the issuance of the 2029 Notes, we used $201.0 million of the proceeds from the issuance of the 2029 Notes to repurchase and retire $184.0 million aggregate principal amount of the 2025 Notes.
We are likely to recognize the costs associated with these increased investments earlier than some of the anticipated benefits and the return on these investments may be lower, or may develop more slowly, than we expect, which could adversely affect our operating results. 19 Ta ble of Contents We may be unable to rapidly and efficiently adjust our cost structure in response to significant revenue declines, which could adversely affect our operating results.
We are likely to recognize the costs associated with these increased investments earlier than some of the anticipated benefits and the return on these investments may be lower, or may develop more slowly, than we expect, which could adversely affect our operating results.
We have posted a net loss in each year since inception, including net losses of $149.3 million, $124.7 million and $146.3 million in the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $1.0 billion.
Prior to 2024, we had posted a net loss in each year since inception, including net losses of $152.8 million and $124.7 million in the years ended December 31, 2023 and 2022, respectively. As of December 31, 2024, we had an accumulated deficit of $988.0 million.
In connection with the Restructuring Plan, we permanently closed certain idle office spaces in Plano, Texas, Los Angeles, California and Toronto, Canada, which resulted in an impairment loss of $3.6 million recorded in 2023.
For example, in connection with the Restructuring Plan, we permanently closed certain idle office spaces in Plano, Texas, Los Angeles, California and Toronto, Canada, which resulted in an impairment loss of $3.6 million recorded in 2023. These additional cash and non-cash expenditures could have the effect of reducing our operating margins.
If we cannot implement and maintain a valid mechanism for cross-border personal data transfers, we 30 Ta ble of Contents may face increased exposure to regulatory actions, substantial fines and injunctions against processing (including prohibitions on transferring personal data out of the EU and UK).
If we cannot implement and maintain a valid mechanism for cross-border personal data transfers, we may face increased exposure to regulatory actions, substantial fines and injunctions against processing (including prohibitions on transferring personal data out of the EU and UK). This may also reduce demand for our services from companies subject to European Data Protection Laws.
This may also reduce demand for our services from companies subject to European Data Protection Laws. Loss of our ability to import personal data from Europe may also require us to increase our data processing capabilities in Europe at significant expense.
Loss of our ability to import personal data from Europe may also require us to increase our data processing capabilities in Europe at significant expense.
You should not rely on our prior quarterly or annual periods performance as any indication of our future growth. 13 Ta ble of Contents We have not been profitable historically and may not achieve or maintain profitability in the future.
You should not rely on our prior quarterly or annual periods performance as any indication of our future growth. 13 Table of Contents We have not been profitable historically and may not maintain profitability in the future. For the year ended December 31, 2024, we have achieved net income of $25.5 million.
As of December 31, 2023, the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holder. Whether the Notes will be convertible following the year ended December 31, 2023, will depend on the future satisfaction of a conversion condition.
Whether the 2027 Notes or the 2029 Notes will be convertible following the year ended December 31, 2024 will depend on the future satisfaction of a conversion condition.
To safeguard these rights, we rely on a combination of patent, trademark, copyright and trade secret laws and contractual protections in the United States and other jurisdictions, all of which provide only limited protection and may not now or in the future provide us with a competitive advantage. 23 Ta ble of Contents We cannot assure you that any patents will issue from any patent applications, that patents that issue from such applications will give us the protection that we seek or that any such patents will not be challenged, invalidated, or circumvented.
To safeguard these rights, we rely on a combination of patent, trademark, copyright and trade secret laws and contractual protections in the United States and other jurisdictions, all of which provide only limited protection and may not now or in the future provide us with a competitive advantage.
Transitional climate change risks that result from a shift to a low-carbon economy may subject us to increased regulations, reporting requirements, standards, or expectations regarding the environmental impacts of our business and untimely or inaccurate disclosure could adversely affect our reputation, business or financial performance.
Transitional climate change risks that result from a shift to a low-carbon economy may subject us to increased regulations, reporting requirements, standards, or expectations regarding the environmental impacts of our business and untimely or inaccurate disclosure could adversely affect our reputation, business or financial performance. 34 Table of Contents All of the aforementioned risks may be exacerbated if our disaster recovery plans or the disaster recovery plans established for our third-party data centers and hosting providers prove to be inadequate.
From the year ended December 31, 2019 to the year ended December 31, 2023, our revenue grew from $326.9 million to $777.7 million and our headcount grew from 1,544 to 2,228 employees. Our future growth is dependent upon our ability to continue to meet the expanding needs of our customers and to attract new customers.
From the year ended December 31, 2020 to the year ended December 31, 2024, our revenue grew from $411.5 million to $844.0 million and our headcount grew from 1,847 to 2,413 employees. Our future growth is dependent upon our ability to continue to meet the expanding needs of our customers and to attract new customers.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.
We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations. The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.
Our ability to use net operating losses to offset future taxable income may be subject to certain limitations. As of December 31, 2023, we had federal and state net operating loss carryforwards (“NOLs”), of $346.5 million and $293.5 million, respectively, available to offset future taxable income, a portion of which expires in various years beginning in 2024 if not utilized.
As of December 31, 2024, we had federal and state net operating loss carryforwards (“NOLs”) of $265.6 million and $306.0 million, respectively, available to offset future taxable income, a portion of which expires in various year s beginning in 2024 if not utilized.
Actions that we are taking to restructure our business in alignment with our strategic priorities may not be as effective as anticipated. In August of 2023, our Board approved the Restructuring Plan designed to improve operational efficiencies, reduce operating costs and better align the Company’s workforce with current business needs, top strategic priorities, and key growth opportunities.
In August of 2023, our Board approved a restructuring plan that was designed to improve operational efficiencies, reduce operating costs and better align the Company’s workforce with current business needs, top strategic priorities, and key growth opportunities (the “Restructuring Plan”). The Restructuring Plan included the reduction of our workforce by approximately 16%.
For example, on March 14, 2023, we acquired Minerva Labs Ltd., a leading provider of anti-evasion and ransomware prevention technology. The integration of any acquisition may prove to be difficult due to the necessity of coordinating geographically separate organizations and integrating personnel with disparate business backgrounds and accustomed to different corporate cultures and business operations and internal systems.
(“Noetic”), a provider of cyber attack surface management technology. The integration of any acquisition may prove to be difficult due to the necessity of coordinating geographically separate organizations and integrating personnel with disparate business backgrounds and accustomed to different corporate cultures and business operations and internal systems.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeDespite our efforts, we cannot eliminate all risks from cybersecurity threats or incidents, or provide assurances that we have not experienced an undetected cybersecurity incident.
Biggest changeManagement, including the CSO and our information security tea m, regularly update the Audit Committee o n the Company’s cybersecurity program, including cybersecurity vulnerabilities, risk, threats and incidents, and developments in the cybersecurity risk landscape. Despite our efforts, we cannot eliminate all risks from cybersecurity threats or incidents, or provide assurances that we have not experienced an undetected cybersecurity incident.
Our cybersecurity program, which is managed by our information security team, includes: • efforts to comply with prevailing cybersecurity standards; • regular risk assessments and annual penetration tests designed to help identify potential cybersecurity risks to our critical systems, networks, products, services, and our broader enterprise information technology environment; • a cybersecurity incident response plan and procedures for responding to cybersecurity threats and incidents; • a security operations team responsible for detection of, and response to, cybersecurity threats and incidents; • a third-party risk management process for third-party service providers, suppliers, and vendors; and • annual cybersecurity awareness training of our employees, including senior management.
Our cybersecurity program, which is managed by our information security team, includes: • efforts to comply with prevailing cybersecurity standards; • regular risk assessments, security assessments and penetration tests designed to help identify potential cybersecurity risks to our critical systems, networks, products, services, and our broader enterprise information technology environment; • a cybersecurity incident response plan and procedures for responding to cybersecurity threats and incidents; • a security operations team responsible for detection of, and response to, cybersecurity threats and incidents; • a third-party risk management process for third-party service providers, suppliers, and vendors; and • annual cybersecurity awareness training of our employees, including senior management.
Recognizing the complexity and evolving nature of cybersecurity threats, incidents and risks, we engage with a range of third-party experts, including cybersecurity penetration testers, consultants, and auditors in evaluating and supporting our risk management systems. Our collaboration with these third parties includes regular audits, threat assessments, and consultation on security enhancements.
Recognizing the complexity and evolving nature of cybersecurity threats, incidents and risks, we engage with a range of third-party experts, including cybersecurity penetration testers, consultants, and auditors in evaluating and supporting our risk management systems. Our collaboration with these third parties includes regular independent audits, threat assessments, and consultation on security enhancements.
Our cybersecurity risk management program is designed based on prevailing security standards and controls, such as NIST-800 and ISO 27001, and to continuously evaluate cybersecurity risks in alignment with our business objectives and operational needs.
Item 1C. Cybersecurity. At Rapid7, cybersecurity risk management is integrated into our overall enterprise risk management program and one pillar of our broader cybersecurity program. Our cybersecurity risk management program is designed based on prevailing security standards and controls, such as NIST-800 and ISO 27001, and to continuously evaluate cybersecurity risks in alignment with our business objectives and operational needs.
Our cybersecurity programs are under the 37 Ta ble of Contents direction of our Chief Security Officer (“CSO”), who receives reports from our information security team and monitors the prevention, detection, mitigation and remediation of cybersecurity incidents.
Our cybersecurity programs are under the 37 Table of Contents direction of our Chief Security Officer (“CSO”), who receives reports from our information security team and monitors the prevention, detection, mitigation and remediation of cybersecurity incidents. Our CSO and dedicated personnel are certified and experienced information systems security professionals and information security managers with decades of experience and industry certifications.
Removed
Item 1C. Cybersecurity. At Rapid7, cybersecurity risk management is integrated into our overall enterprise risk management program and is one of the pillars of our broader cybersecurity program.
Removed
Our CSO and dedicated personnel are certified and experienced information systems security professionals and information security managers with decades of experience and industry certifications. Management, including the CSO and our information security tea m, regularly update the Audit Committee o n the Company’s cybersecurity program, including cybersecurity vulnerabilities, risk, threats and incidents, and developments in the cybersecurity risk landscape.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe have additional U.S. offices including Arlington, Virginia, Austin, Texas, and Tampa, Florida. We also lease various international offices including in Belfast, Northern Ireland; Czech Republic; Dublin and Galway, Ireland; Germany; Melbourne, Australia; Reading, United Kingdom; Tel Aviv, Israel; and Singapore. We believe that our current facilities are suitable and adequate to meet our current needs.
Biggest changeWe have additional U.S. offices including in Arlington, Virginia, Austin, Texas, and Tampa, Florida. We also lease various international offices including in Belfast, Northern Ireland; Prague, Czech Republic; Dublin and Galway, Ireland; Germany; Melbourne, Australia; Reading, United Kingdom; Tel Aviv, Israel; and Singapore. We believe that our current facilities are suitable and adequate to meet our current needs.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. 39 Ta ble of Contents December 31, 2018 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Rapid7, Inc. $ 100.00 $ 179.78 $ 289.35 $ 377.70 $ 109.05 $ 183.25 Nasdaq Global Market Composite 100.00 133.93 197.79 146.70 69.59 68.16 Nasdaq Computer 100.00 148.27 233.26 296.23 192.48 315.60 Recent Sales of Unregistered Securities None.
Biggest changeThe comparisons in the graph below are based upon historical data and are not indicative of, nor intended to forecast, future performance of our common stock. 39 Table of Contents December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Rapid7, Inc. $ 100.00 $ 160.94 $ 210.09 $ 60.66 $ 101.93 $ 71.81 Nasdaq Global Market Composite 100.00 147.68 109.53 51.96 50.89 51.65 Nasdaq Computer 100.00 157.33 199.80 129.82 212.86 284.38 Recent Sales of Unregistered Securities None.
Market Information Our common stock is listed on the Nasdaq Global Market under the symbol “RPD.” As of December 31, 2023, there were 33 holders of record of our common stock, including Cede & Co., a nominee for The Depository Trust Company (“DTC”), which holds shares of our common stock on behalf of an indeterminate number of beneficial owners.
Market Information Our common stock is listed on the Nasdaq Global Market under the symbol “RPD.” As of December 31, 2024, there were 30 holders of record of our common stock, including Cede & Co., a nominee for The Depository Trust Company (“DTC”), which holds shares of our common stock on behalf of an indeterminate number of beneficial owners.
The following graph shows a comparison from December 31, 2018 through December 31, 2023 of the cumulative total return for an investment of $100 in our common stock, the Nasdaq Global Market and the Nasdaq Computer Index. Data for the Nasdaq Global Market and the Nasdaq Computer Index assume reinvestment of dividends.
The following graph shows a comparison from December 31, 2019 through December 31, 2024 of the cumulative total return for an investment of $100 in our common stock, the Nasdaq Global Market and the Nasdaq Computer Index. Data for the Nasdaq Global Market and the Nasdaq Computer Index assume reinvestment of dividends.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeFurther, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business and an important part of the compensation provided to our employees. 44 Ta ble of Contents The following tables reconcile GAAP gross profit to non-GAAP gross profit for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (in thousands) GAAP total gross profit $ 545,966 $ 470,734 $ 366,456 Stock-based compensation expense 10,700 10,367 6,491 Amortization of acquired intangible assets 18,386 18,493 15,373 Non-GAAP total gross profit $ 575,052 $ 499,594 $ 388,320 Year Ended December 31, 2023 2022 2021 (in thousands) GAAP gross profit – products $ 537,264 $ 465,323 $ 360,070 Stock-based compensation expense 8,202 7,562 4,357 Amortization of acquired intangible assets 18,386 18,493 15,373 Non-GAAP gross profit – products $ 563,852 $ 491,378 $ 379,800 Year Ended December 31, 2023 2022 2021 (in thousands) GAAP gross profit – professional services $ 8,702 $ 5,411 $ 6,386 Stock-based compensation expense 2,498 2,805 2,134 Non-GAAP gross profit – professional services $ 11,200 $ 8,216 $ 8,520 The following table reconciles GAAP loss from operations to non-GAAP income from operations for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (in thousands) GAAP loss from operations $ (80,733) $ (111,614) $ (120,065) Stock-based compensation expense 108,081 119,902 102,579 Amortization of acquired intangible assets 21,499 21,983 17,305 Acquisition-related expenses 363 — 7,211 Litigation-related expenses — 115 569 Impairment of long-lived assets 30,784 — — Restructuring expense 22,227 — — Non-GAAP income from operations $ 102,221 $ 30,386 $ 7,599 45 Ta ble of Contents The following table reconciles GAAP net loss to non-GAAP net (loss) income for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (in thousands, except share and per share data) GAAP net loss $ (149,260) $ (124,717) $ (146,334) Stock-based compensation expense 108,081 119,902 102,579 Amortization of acquired intangible assets 21,499 21,983 17,305 Acquisition-related expenses 363 — 16,176 Litigation-related expenses — 115 569 Amortization of debt issuance costs 4,138 4,085 3,982 Induced conversion expense 53,889 — 2,740 Change in fair value of derivative assets 15,511 — — Impairment of long-lived assets 30,784 — — Restructuring expense 22,227 — — Non-GAAP net (loss) income $ 107,232 $ 21,368 $ (2,983) Interest expense of convertible senior notes (1) 2,667 1,500 — Numerator for non-GAAP earnings per share calculation $ 109,899 $ 22,868 $ (2,983) Weighted average shares used in GAAP earnings per share calculation, basic 60,756,087 58,552,065 55,270,998 Dilutive effect of convertible senior notes (1) 10,429,891 5,803,831 — Dilutive effect of employee equity incentive plans (2) 916,134 1,251,725 — Weighted average shares used in non-GAAP earnings per share calculation, diluted 72,102,112 65,607,621 55,270,998 Non-GAAP net income (loss) per share: Basic $ 1.76 $ 0.36 $ (0.05) Diluted $ 1.52 $ 0.35 $ (0.05) (1) We use the if-converted method to compute diluted earnings per share with respect to our Notes.
Biggest change(2) For the year ended December 31, 2024, restructuring expense was recorded within general and administrative expense in our consolidated statement of operations. 45 Table of Contents The following table reconciles GAAP net income (loss) to non-GAAP net income for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 (in thousands, except share and per share data) GAAP net income (loss) $ 25,526 $ (152,815) $ (124,717) Stock-based compensation expense 107,961 111,636 119,902 Amortization of acquired intangible assets 19,951 21,499 21,983 Acquisition-related expenses 751 363 — Litigation-related expenses — — 115 Amortization of debt issuance costs 4,447 4,138 4,085 Induced conversion expense — 53,889 — Change in fair value of derivative assets — 15,511 — Impairment of long-lived assets — 30,784 — Restructuring expense (190) 22,227 — Discrete tax items 4,692 — — Non-GAAP net income $ 163,138 $ 107,232 $ 21,368 Interest expense of convertible senior notes (1) 6,285 2,667 1,500 Numerator for non-GAAP earnings per share calculation $ 169,423 $ 109,899 $ 22,868 Weighted average shares used in GAAP earnings per share calculation, basic 62,607,583 60,756,087 58,552,065 Dilutive effect of convertible senior notes (1) 11,183,611 10,429,891 5,803,831 Dilutive effect of employee equity incentive plans (2) 576,068 916,134 1,251,725 Weighted average shares used in non-GAAP earnings per share calculation, diluted 74,367,262 72,102,112 65,607,621 Non-GAAP net income per share: Basic $ 2.61 $ 1.76 $ 0.36 Diluted $ 2.28 $ 1.52 $ 0.35 (1) We use the if-converted method to compute diluted earnings per share with respect to our Notes.
Operating Activities Operating activities provided $104.3 million of cash and cash equivalents for the year ended December 31, 2023, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments.
Operating activities provided $104.3 million of cash and cash equivalents for the year ended December 31, 2023, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments.
Investing Activities Investing activities used $178.8 million of cash for the year ended December 31, 2023, consisting of $126.4 million in purchases of investments, net of sales and maturities, $34.8 million of cash paid for the acquisition of Minerva, $15.9 million for capitalization of internal-use software costs, $4.4 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $2.7 million in proceeds from other investments.
Investing activities used $178.8 million of cash for the year ended December 31, 2023, consisting of $126.4 million in purchases of investments, net of sales and maturities, $34.8 million of cash paid for the acquisition of Minerva, $15.9 million for capitalization of internal-use software costs, and $4.4 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $2.7 million in proceeds from other investments.
Non-GAAP net income (loss) per basic and diluted share is calculated as non-GAAP net income (loss) divided by the weighted average shares used to compute net income (loss) per share, with the number of weighted average shares decreased, when applicable, to reflect the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes.
Non-GAAP net income per basic and diluted share is calculated as non-GAAP net income divided by the weighted average shares used to compute net income per share, with the number of weighted average shares decreased, when applicable, to reflect the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes.
The expense for the amortization of debt issuance costs related to our convertible senior notes and revolving credit facility is a non-cash item and we believe the exclusion of this interest expense provides a more useful comparison of our operational performance in different periods. • Induced conversion expense.
The expense for the amortization of debt issuance costs related to our convertible senior notes and our former revolving credit facility is a non-cash item and we believe the exclusion of this interest expense provides a more useful comparison of our operational performance in different periods. • Induced conversion expense.
Non-GAAP Financial Results To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per share, adjusted EBITDA and free cash flow.
Non-GAAP Financial Results To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, adjusted EBITDA and free cash flow.
When software licenses are purchased, maintenance and support and content subscription, as applicable, is bundled with the license for the term period. Professional Services We generate professional service revenue from the sale of deployment and training services related to our products, incident response services and security advisory services.
When software licenses are purchased, maintenance and support and content subscription, as applicable, are bundled with the license for the term period. Professional Services We generate professional service revenue from the sale of deployment and training services related to our products, incident response services and security advisory services.
Products We generate products revenue from the sale of (1) cloud-based subscriptions, (2) managed services offerings, which utilize our products and (3) software licenses with related maintenance and support and content subscription, as applicable. Software license revenue consists of revenues from term licenses.
Product Subscriptions We generate product subscriptions revenue from the sale of (1) cloud-based subscriptions, (2) managed services offerings, which utilize our products and (3) software licenses with related maintenance and support and content subscription, as applicable. Software license revenue consists of revenues from term licenses.
Interest Income Interest income consists primarily of interest income on our cash and cash equivalents and our short and long-term investments. Interest Expense Interest expense consists primarily of contractual interest expense, amortization of debt issuance costs related to our convertible senior notes and revolving credit facility and induced conversion expense.
Interest Income Interest income consists primarily of interest income on our cash and cash equivalents and our short and long-term investments. Interest Expense Interest expense consists primarily of contractual interest expense, amortization of debt issuance costs related to our convertible senior notes and our former revolving credit facility, and induced conversion expense.
We define non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income (loss) and non-GAAP net income (loss) per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs and certain other items such as acquisition-related expenses, impairment of long-lived assets, Restructuring Expense, induced conversion expense, change in the fair value of derivative assets and litigation-related expenses.
We define non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income (loss) and non-GAAP net income per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs and certain other items such as acquisition-related expenses, litigation-related expenses, impairment of long-lived assets, induced conversion expense, change in the fair value of derivative assets, restructuring expense and discrete tax items.
We define adjusted EBITDA as net loss before (1) interest income, (2) interest expense, (3) other income (expense), net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, (8) acquisition-related expenses, (9) litigation-related expenses, (10) impairment of long-lived assets and (11) restructuring expense.
We define adjusted EBITDA as net income (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, (8) acquisition-related expenses, (9) litigation-related expenses, (10) impairment of long-lived assets and (11) restructuring expense.
On an if converted basis, for the year ended December 31, 2023, the 2029 Notes and 2027 Notes were dilutive and the 2025 Notes were anti-dilutive and for the year ended December 31, 2022, the 2025 Notes were dilutive and the 2027 Notes were anti-dilutive.
On an if-converted basis, for the year ended December 31, 2024, the 2029 Notes, 2027 Notes and 2025 Notes were dilutive, for the year ended December 31, 2023, the 2029 Notes and 2027 Notes were dilutive and the 2025 Notes were anti-dilutive, and for the year ended December 31, 2022, the 2025 Notes were dilutive and the 2027 Notes were anti-dilutive.
Annualized Recurring Revenue (“ARR”) is defined as the annual value of all recurring revenue related to contracts in place at the end of the period. 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.
Annualized Recurring Revenue (“ARR”) is defined as the annual value of all recurring revenue related to 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.
Sales and Marketing Expense Sales and marketing expense consists of personnel costs for our sales and marketing team, including salaries and other payroll related costs, commissions, including amortization of deferred commissions, bonuses and stock-based compensation. Additional expenses include marketing activities and promotional events, travel and entertainment, training costs, amortization of certain intangible assets and allocated overhead costs.
Sales and Marketing Expense Sales and marketing expense consists of personnel costs for our sales and marketing team, including salaries and other payroll related costs, commissions, including amortization of capitalized commissions, bonuses and stock-based compensation. Additional expenses include marketing activities and promotional events, travel and entertainment, training costs, amortization of certain intangible assets and allocated overhead costs.
Comparison of the Year Ended December 31, 2022 and 2021 We have elected not to include a discussion of our consolidated results for 2022 compared to 2021 in this report in reliance upon Instruction 1 to Item 303(b) of Regulation S-K.
Comparison of the Year Ended December 31, 2023 and 2022 We have elected not to include a discussion of our consolidated results for 2023 compared to 2022 in this report in reliance upon Instruction 1 to Item 303(b) of Regulation S-K.
Refer to Note 19, Restructuring , in the Notes to our Consolidated Financial Statements for further details on our Restructuring Plan.
Refer to Note 19, Restructuring , in the Notes to our condensed consolidated financial statements for further details on our Restructuring Plan.
Also included in cost of products are software license fees, cloud computing costs and internet connectivity expenses directly related to delivering our products, amortization of contract fulfillment costs, as well as amortization of certain intangible assets including internally developed software.
Also included in cost of product subscriptions are software license fees, cloud computing costs and internet connectivity expenses directly related to delivering our products, amortization of contract fulfillment costs, as well as amortization of certain intangible assets including internally developed software.
ARR is not a forecast of future revenue, which 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. We use ARR and believe it is useful to investors as a measure of the overall success of our business.
ARR is not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates and does not include revenue reported as professional services revenue in our consolidated statement of operations. We use ARR and believe it is useful to investors as a measure of the overall success of our business.
See Non-GAAP Financial Results below for further information on non-GAAP income from operations and a reconciliation of non-GAAP income from operations to the comparable GAAP financial measure. Free Cash Flow . Free cash flow is a non-GAAP measure that we define as cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs.
See “Non-GAAP Financial Results” below for further information on non-GAAP income from operations and a reconciliation of non-GAAP income from operations to the comparable GAAP financial measure. Free Cash Flow . Free cash flow is a non-GAAP measure that we define as cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs.
We believe these non-GAAP financial measures are useful to investors in assessing our operating performance due to the following factors: • Stock-based compensation expense. We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense.
We believe these non-GAAP financial measures are useful to investors in assessing our operating performance due to the following factors: 43 Table of Contents • Stock-based compensation expense. We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense.
We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures. See Non-GAAP Financial Results below for a reconciliation of non-GAAP free cash flow to the comparable GAAP financial measure. Annualized Recurring Revenue and Growth.
We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures. See “Non-GAAP Financial Results” below for a reconciliation of non-GAAP free cash flow to the comparable GAAP financial measure. Annualized Recurring Revenue and Growth.
Our revenue was not concentrated with any individual customer and no customer represented more than 1% of our revenue for the years ended December 31, 2023, 2022 or 2021.
Our revenue was not concentrated with any individual customer and no customer represented more than 1% of our revenue for the years ended December 31, 2024, 2023 or 2022.
Our Managed Threat Complete Offering is offered on a managed service basis, generally pursuant to one or multi-year agreements. In the years ended December 31, 2023, 2022 and 2021, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 95%, 94% and 92%, respectively, of total revenue.
Our Managed Threat Complete Offering is offered on a managed service basis, generally pursuant to one or multi-year agreements. In the years ended December 31, 2024, 2023 and 2022, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 96%, 95% and 94%, respectively, of total revenue.
We monitor non-GAAP income from operations and non-GAAP operating margin, non-GAAP financial measures, to analyze our financial results. We believe non-GAAP income from operations and non-GAAP operating margin are useful to investors, as supplements to U.S.
We monitor non-GAAP income from operations and non-GAAP operating margin, which are both non-GAAP financial measures, to analyze our financial results. We believe non-GAAP income from operations and non-GAAP operating margin are useful to investors, as supplements to U.S.
Cost of Revenue Our total cost of revenue consists of the costs of products and professional services, as noted below. In addition, cost of revenue includes overhead costs for depreciation, facilities, IT, information security, and recruiting. Our IT overhead costs include IT personnel compensation costs and costs associated with our IT infrastructure.
Cost of Revenue Our total cost of revenue consists of the costs of product subscriptions and professional services, as noted below. In addition, cost of revenue includes overhead costs for depreciation, facilities, IT, information security, and recruiting. Our IT overhead costs include IT personnel compensation costs and costs associated with our IT infrastructure.
These factors were offset by an $18.5 million increase in deferred contract acquisition and fulfillment costs, a $14.0 million increase in accounts receivable, a $4.1 million increase in prepaid expenses and a $1.3 million decrease in other liabilities , which each had a negative impact on operating cash flow.
These factors were offset by an $18.5 million increase in deferred contract acquisition and fulfillment costs, a $14.0 million 54 Table of Contents increase in accounts receivable, a $4.1 million increase in prepaid expenses and a $1.3 million decrease in other liabilities, which each had a negative impact on operating cash flow.
We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the intangible assets are valued at the time of acquisition and are amortized over several years after the acquisition. 43 Ta ble of Contents • Amortization of debt issuance costs.
We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the intangible assets are valued at the time of acquisition and are amortized over several years after the acquisition. • Amortization of debt issuance costs.
We expect our gross margins to fluctuate over time depending on the factors described above. Operating Expenses Operating expenses consist of research and development, sales and marketing, general and administrative expenses, impairment of long-lived assets and restructuring. Operating expenses include overhead costs for depreciation, facilities, IT, information security and recruiting.
We expect our gross margins to fluctuate over time depending on the factors described above. Operating Expenses Operating expenses consist of research and development, sales and marketing, general and administrative expenses, and restructuring. Operating expenses include overhead costs for depreciation, facilities, IT, information security and recruiting.
In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results.
In addition, there are limitations in using non-GAAP financial measures 44 Table of Contents because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results.
Financing Activities Financing activities provided $79.6 million for the year ended December 31, 2023, which consisted primarily of $292.1 million in proceeds from the issuance of the 2029 Notes, net of issuance costs paid of $7.9 million, $17.5 million in proceeds from the 55 Ta ble of Contents settlement of the 2023 Capped Calls, $11.3 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (“ESPP”) and $3.1 million in proceeds from the exercise of stock options, partially offset by $200.0 million for the repurchase and conversion of the 2025 Notes, $36.6 million for the purchase of the 2029 Capped Calls, $5.6 million in withholding taxes paid for the net share settlement of equity awards and $2.3 million in payments related to the acquisition of IntSights.
Financing activities provided $79.6 million for the year ended December 31, 2023, which consisted primarily of $292.1 million in proceeds from the issuance of the 2029 Notes, net of issuance costs paid of $7.9 million, $17.5 million in proceeds from the settlement of the 2023 Capped Calls, $11.3 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 ESPP and $3.1 million in proceeds from the exercise of stock options, partially offset by $200.0 million for the repurchase and conversion of the 2025 Notes, $36.6 million for the purchase of the 2029 Capped Calls, $5.6 million in withholding taxes paid for the net share settlement of equity awards and $2.3 million in payments related to the acquisition of IntSights.
Our capped calls transactions are intended to offset potential dilution from the conversion features in our convertible senior notes.
Our capped call transactions are intended to offset potential dilution from the conversion features in our convertible senior notes.
Our Business Model We offer our products through a variety of delivery models to meet the needs of our diverse customer base, including: 41 Ta ble of Contents • Cloud-based subscriptions, which provide our software capabilities to our customers through cloud access and on a subscription basis.
Our Business Model We offer our products through a variety of delivery models to meet the needs of our diverse customer base, including: • Cloud-based subscriptions, which provide our software capabilities to our customers through cloud access and on a subscription basis.
GAAP 42 Ta ble of Contents measures, in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance and allowing for greater transparency with respect to metrics used by our management in its financial and operational decision-making.
GAAP measures, in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance and allowing for greater transparency with respect to metrics used by our management in its financial and operational decision-making.
Impairment of Long-Lived Assets Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Impairment of long-lived assets $ 30,784 $ — $ 30,784 100.0 % % of revenue 4.0 % — % Impairment of long-lived assets expense increased by $30.8 million in 2023 compared to 2022, due to an impairment charge recorded after a triggering event related to a change in usage of certain idle office space at our corporate headquarters in Boston, Massachusetts as well as idle office spaces located in Plano, Texas, Los Angeles, California and Toronto, Canada indicated that the carrying value of our right of use and other lease-related assets may not be fully recoverable.
Impairment of Long-Lived Assets Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Impairment of long-lived assets $ — $ 30,784 $ (30,784) 100.0 % % of revenue — % 4.0 % Impairment of long-lived assets expense of $30.8 million was recorded in the year ended 2023 after a triggering event related to a change in usage of certain idle office space at our corporate headquarters in Boston, Massachusetts as well as idle office spaces located in Plano, Texas; Los Angeles, California; and Toronto, Canada indicated that the carrying value of our right of use and other lease-related assets may not be fully recoverable.
We expect interest expense in the near term to represent contractual interest expense and amortization of debt issuance costs related to our convertible senior notes and revolving credit facility.
We expect interest expense in the near term to represent contractual interest expense and amortization of debt issuance costs related to our convertible senior notes.
When not regularly sold on a stand-alone basis, we estimate SSP for our products and services utilizing historical sales data, including discounts from list price. The historical data is aggregated and analyzed by geographic location and selling method to establish a median or average price.
When available, we use directly observable stand-alone transactions to determine SSP. When not regularly sold on a stand-alone basis, we estimate SSP for our products and services utilizing historical sales data, including discounts from list price. The historical data is aggregated and analyzed by geographic location and selling method to establish a median or average price.
This discussion can be found in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on February 24, 2023.
This discussion can be found in our Annual Report on Form 10-K for the year ended December 31, 2023, which was filed with the SEC on February 26, 2024.
We periodically review the carrying amount of 56 Ta ble of Contents deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit.
We periodically review the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit.
All overhead costs are allocated based on relative headcount. 47 Ta ble of Contents Cost of Products Cost of products consists of personnel and related costs for our content, support, managed service and cloud operations teams, including salaries and other payroll related costs, bonuses, stock-based compensation and allocated overhead costs.
All overhead costs are allocated based on relative headcount. 47 Table of Contents Cost of Product Subscriptions Cost of product subscriptions consists of personnel and related costs for our content, support, managed service and cloud operations teams, including salaries and other payroll related costs, bonuses, stock-based compensation and allocated overhead costs.
As the threat landscape continues to grow in complexity, customers are demonstrating demand for integrated expertise to support them in effectively managing their security technologies. The convergence of these key trends – security consolidation, integrated cloud security, and expertise driven outcomes – are the foundation of what we view as the new extended SOC.
As the threat landscape continues to grow in complexity, customers are demonstrating demand for integrated expertise to support them in effectively managing their security technologies. The convergence of these key trends – security consolidation, integrated cloud security, and expertise driven outcomes – are the foundation of what our customers require for the modern SOC.
Our customers span a wide variety of industries such as technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, education, real estate, transportation, government and professional services. As of December 31, 2023, we had over 11,500 customers in 151 countries, including 40% of the Fortune 100.
Our customers span a wide variety of industries such as technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, education, real estate, transportation, government and professional services. As of December 31, 2024, we had over 11,700 customers in 147 countries, including 43% of the Fortune 100.
The $90.4 million increase in revenue from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of the continued growth of our existing customer base. Revenue from new customers represents the revenue recognized from the customer's initial purchase.
The $60.2 million increase in revenue from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of the continued growth 50 Table of Contents of our existing customer base. Revenue from new customers represents the revenue recognized from the customer's initial purchase.
We determine SSP of our products and services based on our overall pricing objectives using all information reasonably available to us, taking into consideration market conditions and other factors, including the geographic locations of our customers, negotiated discounts from price lists and selling method (i.e., partner or direct). When available, we use directly observable stand-alone transactions to determine SSP.
We determine SSP of our products and services based on our overall pricing objectives using all information reasonably available to us, taking into consideration market conditions and other factors, including the geographic locations of our customers, negotiated discounts from price lists and selling method (i.e., 55 Table of Contents partner or direct).
Our foreseeable cash needs, in addition to our recurring operating expenses, include our expected capital expenditures to support expansion of our infrastructure and workforce, office facilities lease obligations, purchase commitments, including our cloud infrastructure services (including with Amazon Web Services (“AWS”)), potential future acquisitions of technology businesses and any election we make to redeem our convertible senior notes.
Our foreseeable cash needs, in addition to our recurring operating expenses, include our expected capital expenditures to support expansion of our infrastructure and workforce, office facilities lease obligations, purchase commitments, including our cloud infrastructure services, potential future acquisitions of technology businesses and any election we make to redeem our convertible senior notes, including our 2025 Notes which mature on May 1, 2025.
We believe these key metrics are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and also because they are used by institutional investors and the analyst community to help evaluate the health of our business: Year Ended December 31, 2023 2022 2021 (dollars in thousands) Total revenue $ 777,707 $ 685,083 $ 535,404 Year-over-year growth 13.5 % 28.0 % 30.1 % Non-GAAP income from operations $ 102,221 $ 30,386 $ 7,599 Non-GAAP operating margin 13.1 % 4.4 % 1.4 % Free cash flow $ 84,034 $ 40,677 $ 35,053 As of December 31, 2023 2022 (dollars in thousands) Annualized recurring revenue (“ARR”) $ 805,670 $ 714,231 Year-over-year growth 12.8 % 19.2 % Number of customers 11,526 10,929 Year-over-year growth 5.5 % 6.3 % ARR per customer $ 69.9 $ 65.4 Year-over-year growth 7.0 % 12.2 % Total Revenue and Growth .
We believe these key metrics are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and also because they are used by institutional investors and the analyst community to help evaluate the health of our business: Year Ended December 31, 2024 2023 2022 (dollars in thousands) Total revenue $ 844,007 $ 777,707 $ 685,083 Year-over-year growth 8.5 % 13.5 % 28.0 % Non-GAAP income from operations $ 163,508 $ 102,221 $ 30,386 Non-GAAP operating margin 19.4 % 13.1 % 4.4 % Free cash flow $ 154,083 $ 84,034 $ 40,677 As of December 31, 2024 2023 (dollars in thousands) Annualized recurring revenue (“ARR”) $ 839,819 $ 805,670 Year-over-year growth 4.2 % 12.8 % Number of customers 11,727 11,526 Year-over-year growth 1.7 % 5.5 % ARR per customer $ 71.6 $ 69.9 Year-over-year growth 2.5 % 7.0 % 42 Table of Contents Total Revenue and Growth .
Cash provided by operating activities reflected our net loss of $124.7 million, offset by a decrease in our net operating assets of $39.5 million and non-cash charges of $163.4 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, amortization of debt issuance costs and other non-cash charges.
Cash provided by operating activities reflected our net income of $25.5 million and a decrease in our net operating assets and liabilities of $10.4 million, offset by non-cash charges of $156.6 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, amortization of debt issuance costs and other non-cash charges.
Financing activities provided $7.4 million of cash in 2022, which consisted primarily of $11.9 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (“ESPP”) and $3.3 million in proceeds from the exercise of stock options, partially offset by $7.5 million in withholding taxes paid for the net share settlement of equity awards and $0.3 million in payments related to the acquisition of Velocidex.
Financing Activities Financing activities provided $5.6 million for the year ended December 31, 2024, which consisted primarily of $9.2 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (“ESPP”) and $1.6 million in proceeds from the exercise of stock options, partially offset by $4.7 million in withholding taxes paid for the net share settlement of equity awards and $0.5 million in payments related to the acquisition of Noetic.
We exclude acquisition-related expenses that are unrelated to the current operations and neither are comparable to the prior period nor predictive of future results. • Change in fair value of derivative assets.
We exclude acquisition-related expenses, including accretion expense associated with contingent consideration, as costs that are unrelated to the current operations and are neither comparable to the prior period nor predictive of future results. • Change in fair value of derivative assets.
Restructuring Expense Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Restructuring $ 22,227 $ — $ 22,227 100.0 % % of revenue 2.9 % — % Restructuring expense increased by $22.2 million in 2023 compared to 2022, due to restructuring charges consisting of employee transition, notice period and severance payments and employee benefits and related facilitation costs related to our Restructuring Plan.
Restructuring Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Restructuring $ — $ 22,227 $ (22,227) 100.0 % % of revenue — % 2.9 % Restructuring expense of $22.2 million was recorded in the year ended 2023 as a result of restructuring charges consisting of employee transition, notice period and severance payments and employee benefits and related facilitation costs related to our Restructuring Plan.
Other Income (Expense), Net Other income (expense), net consists primarily of the change in fair value of derivative assets and unrealized and realized gains and losses related to changes in foreign currency exchange rates. Provision for Income Taxes Provision for income taxes consists of domestic and foreign taxes on income and withholding taxes.
Other Income (Expense), Net 48 Table of Contents Other income (expense), net consists primarily of the change in fair value of derivative assets and unrealized and realized gains and losses related to changes in foreign currency exchange rates.
We define a customer as any entity that has an active Rapid7 recurring revenue contract as of the specified measurement date, excluding only InsightOps and Logentries customers with a contract value less than $2,400 per year. ARR per Customer . ARR per customer is defined as ARR divided by the number of customers at the end of the period.
We define a customer as any entity that has an active Rapid7 recurring revenue contract as of the specified measurement date, excluding customers of only InsightOps or Logentries that have a contract value of less than $2,400 per year. ARR per Customer .
(2) We use the treasury method to compute the dilutive effect of employee equity incentive plan awards. 46 Ta ble of Contents The following table reconciles GAAP net loss to adjusted EBITDA for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (in thousands) Net loss $ (149,260) $ (124,717) $ (146,334) Interest income (10,177) (1,813) (365) Interest expense 64,700 10,982 14,292 Other (income) expense, net 14,522 1,522 1,921 (Benefit from) provision for income taxes (518) 2,412 10,421 Depreciation expense 14,047 13,571 12,342 Amortization of intangible assets 31,892 27,467 21,159 Stock-based compensation expense 108,081 119,902 102,579 Acquisition-related expenses 363 — 7,211 Litigation-related expenses — 115 569 Impairment of long-lived assets 30,784 — — Restructuring expense 22,227 — — Adjusted EBITDA $ 126,661 $ 49,441 $ 23,795 The following table reconciles net cash provided by operating activities to free cash flow for the years ended December 31, 2023, 2022 and 2021: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 104,278 $ 78,204 $ 53,917 Less: Purchases of property and equipment (4,366) (20,382) (9,010) Less: Capitalized internal-use software costs (15,878) (17,145) (9,854) Free cash flow $ 84,034 $ 40,677 $ 35,053 Components of Results of Operations Revenue We generate revenue primarily from selling products and professional services through a variety of delivery models to meet the needs of our diverse customer base.
(2) We use the treasury method to compute the dilutive effect of employee equity incentive plan awards. 46 Table of Contents The following table reconciles GAAP net income (loss) to adjusted EBITDA for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 (in thousands) GAAP net income (loss) $ 25,526 $ (152,815) $ (124,717) Interest income (21,063) (10,177) (1,813) Interest expense 10,963 64,700 10,982 Other expense, net 3,680 14,522 1,522 Provision for (benefit from) income taxes 15,929 (518) 2,412 Depreciation expense 11,059 14,047 13,571 Amortization of intangible assets 33,834 31,892 27,467 Stock-based compensation expense 107,961 111,636 119,902 Acquisition-related expenses 751 363 — Litigation-related expenses — — 115 Impairment of long-lived assets — 30,784 — Restructuring expense (190) 22,227 — Adjusted EBITDA $ 188,450 $ 126,661 $ 49,441 The following table reconciles net cash provided by operating activities to free cash flow for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 171,670 $ 104,278 $ 78,204 Less: Purchases of property and equipment (3,425) (4,366) (20,382) Less: Capitalized internal-use software costs (14,162) (15,878) (17,145) Free cash flow $ 154,083 $ 84,034 $ 40,677 Components of Results of Operations Revenue We generate revenue primarily from selling products and professional services through a variety of delivery models to meet the needs of our diverse customer base.
We exclude non-ordinary course restructuring expenses related to the Restructuring Plan because we do not believe these charges are indicative of our core operating performance and we believe the exclusion of the restructuring expense provides a more useful comparison of our performance in different periods. • Anti-dilutive impact of capped call transaction.
We exclude non-ordinary course restructuring expenses related to the Restructuring Plan, which we completed during fiscal year 2024, because we do not believe these charges are indicative of our core operating performance and we believe the exclusion of the restructuring expense provides a more useful comparison of our performance in different periods. • Discrete tax items.
We maintain a substantially full valuation allowance for domestic and certain foreign deferred tax assets, including net operating loss carryforwards and tax credits.
Provision for (Benefit from) Income Taxes Provision for (benefit from) income taxes consists of domestic and foreign taxes on income and withholding taxes. We maintain a substantially full valuation allowance for domestic and certain foreign deferred tax assets, including net operating loss carryforwards and tax credits.
Our focus is to be the leading provider of integrated security solutions for the extended SOC by providing risk and threat management within the context of overall security. We market and sell our products and professional services to organizations of all sizes globally, including mid-market businesses, enterprises, non-profits, educational institutions and government agencies.
Our focus is to be the leading provider of integrated security operations solutions by providing exposure and threat management that leverages our ability to give customers command of their attack surface. We market and sell our products and professional services to organizations of all sizes globally, including mid-market businesses, enterprises, non-profits, educational institutions and government agencies.
If we are unable to raise additional capital on terms satisfactory to us when we require it, our business, operating results and financial condition could be adversely affected. 54 Ta ble of Contents Cash Flows The following table shows a summary of our cash flows for the years ended December 31, 2023 and 2022: Year Ended December 31, 2023 2022 2021 (in thousands) Cash, cash equivalents and restricted cash at beginning of period $ 207,804 $ 165,017 $ 173,617 Net cash provided by operating activities 104,278 78,204 53,917 Net cash used in investing activities (178,754) (39,988) (325,378) Net cash provided by financing activities 79,597 7,416 264,133 Effects of exchange rates on cash, cash equivalents and restricted cash 1,202 (2,845) (1,272) Cash, cash equivalents and restricted cash at end of period $ 214,127 $ 207,804 $ 165,017 Uses of Funds Our historical uses of cash have primarily consisted of cash used for operating activities such as expansion of our sales and marketing operations, research and development activities and other working capital needs, as well as cash used for business acquisitions and purchases of property and equipment, including leasehold improvements for our facilities.
Cash Flows The following table shows a summary of our cash flows for the years ended December 31, 2024, 2023 and 2022: Year Ended December 31, 2024 2023 2022 (in thousands) Cash, cash equivalents and restricted cash at beginning of period $ 214,127 $ 207,804 $ 165,017 Net cash provided by operating activities 171,670 104,278 78,204 Net cash used in investing activities (46,522) (178,754) (39,988) Net cash provided by financing activities 5,582 79,597 7,416 Effects of exchange rates on cash, cash equivalents and restricted cash (2,756) 1,202 (2,845) Cash, cash equivalents and restricted cash at end of period $ 342,101 $ 214,127 $ 207,804 Uses of Funds Our historical uses of cash have primarily consisted of cash used for operating activities such as expansion of our sales and marketing operations, research and development activities and other working capital needs, as well as cash used for business acquisitions and purchases of property and equipment, including leasehold improvements for our facilities.
In conjunction with the third quarter of 2023 partial repurchase of our 2025 Notes, we incurred a non-cash induced conversion expense of $53.9 million. We exclude induced conversion expense because this amount is not indicative of the performance of, or trends in, our business and neither is comparable to the prior period nor predictive of future results. • Litigation-related expenses.
We exclude induced conversion expense because this amount is not indicative of the performance of or trends in, our business and neither is comparable to the prior period nor predictive of future results. • Litigation-related expenses.
The decrease in our net operating assets was primarily due to a $52.5 million increase in deferred revenue due to increased billings, a $8.0 million increase in accounts payable, an increase in accrued expenses of $3.7 million and a $2.4 million increase in other liabilities, which each had a positive impact on operating cash flow.
The change in our net operating assets and liabilities was primarily due to a $9.8 million decrease in accrued expenses, a $5.5 million increase in accounts receivable, a $0.8 million decrease in deferred revenue and a $4.2 million increase in deferred contract acquisition and fulfillment costs, which each had a negative impact on operating cash flow.
Our Managed Vulnerability Management, Managed Detection and Response, and Managed Application Security products are offered on a managed service basis, pursuant to one or multi-year agreements. • Licensed on-premise software consists of term licenses. When licensed on-premise software is purchased, maintenance and support and content subscriptions, as applicable, are bundled with the license for the term period.
Our Managed Vulnerability Management, Managed Detection and Response, and Managed Application Security products are offered on a managed service basis, pursuant to one or multi-year agreements. 41 Table of Contents • Licensed on-premise software, which consists of term licenses.
Factors that could cause or contribute to these differences include those under “Risk Factors” included in Part I, Item 1A or in other parts of this Annual Report on Form 10-K.
Factors that could cause or contribute to these differences include those under “Risk Factors” included in Part I, Item 1A or in other parts of this Annual Report on Form 10-K. Overview Rapid7 is a global cybersecurity software and service provider on a mission to create a safer digital world by making cybersecurity simpler and more accessible.
In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all.
In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all. If we are unable to raise additional capital on terms satisfactory to us when we require it, our business, operating results and financial condition could be adversely affected.
We believe that our existing cash and cash equivalents, our investments, our available borrowings under our Credit Agreement and cash generated by operating activities will be sufficient to meet our operating and capital requirements for at least the next 12 months.
To date, we have financed our operations primarily through private and public equity financings, issuance of convertible senior notes and through cash generated by operating activities. We believe that our existing cash and cash equivalents, our investments and cash generated by operating activities will be sufficient to meet our operating and capital requirements for at least the next 12 months.
Operating Expenses Research and Development Expense Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Research and development $ 176,776 $ 189,970 $ (13,194) (6.9) % % of revenue 22.7 % 27.7 % Research and development expense decreased by $13.2 million in 2023 compared to 2022, primarily due to a $14.2 million decrease in personnel costs, inclusive of a $11.9 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to the Restructuring Plan, and a $2.5 million decrease in other expenses.
Operating Expenses Research and Development Expense Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Research and development $ 173,126 $ 177,937 $ (4,811) (2.7) % % of revenue 20.5 % 22.9 % Research and development expense decreased by $4.8 million in 2024 compared to 2023, primarily due to a $6.1 million decrease in personnel costs, inclusive of a $1.6 million decrease in stock-based compensation expense, resulting from an overall decrease in headcount primarily due to the Restructuring Plan, and a $3.0 million decrease due to a write-off of a capitalized internal-use software project in the prior period.
Investing activities used $40.0 million of cash in 2022, consisting of $20.4 million in capital expenditures to purchase computer equipment and leasehold improvements, $17.1 million for capitalization of internal-use software costs, $1.5 million of investment purchases, net of sales and maturities, and $1.0 million of other investments.
Investing Activities Investing activities used $46.5 million of cash for the year ended December 31, 2024, consisting of $37.3 million of cash paid for the acquisition of Noetic, $14.2 million for capitalization of internal-use software costs, and $3.4 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $8.0 million in sales and maturities of investments, net of purchases and $0.4 million in proceeds from other investments.
These factors were partially offset by a $15.9 million increase in deferred contract acquisition and fulfillment costs, a $9.0 million increase in accounts receivable and a $2.2 million increase in prepaid expenses and other assets, which each had a negative impact on operating cash flow.
These factors were offset by a $4.3 million increase in other liabilities, a $2.8 million decrease in prepaid expenses and a $2.8 million increase in accounts payable, which each had a positive impact on operating cash flow.
Our IT overhead costs include IT personnel compensation costs and costs associated with our IT infrastructure. All overhead costs are allocated based on relative headcount. Research and Development Expense Research and development expense consists of personnel costs for our research and development team, including salaries and other payroll related costs, bonuses and stock-based compensation.
Research and Development Expense Research and development expense consists of personnel costs for our research and development team, including salaries and other payroll related costs, bonuses and stock-based compensation. Additional expenses include third-party infrastructure costs, travel and entertainment, consulting and professional fees for third-party development resources as well as allocated overhead costs.
Interest Expense Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Interest expense $ (64,700) $ (10,982) $ (53,718) 489.1 % % of revenue (8.3) % (1.6) % Interest expense increased by $53.7 million in 2023 compared to 2022, primarily due to $53.9 million of induced conversion expense incurred in conjunction with the partial repurchase of the 2025 Notes. 53 Ta ble of Contents Other Income (Expense), Net Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Other income (expense), net $ (14,522) $ (1,522) $ (13,000) 854.1 % % of revenue (1.9) % (0.2) % Other income (expense), net increased by $13.0 million in 2023 compared to 2022, due to a $15.5 million expense for the change in fair value of derivative assets related to our 2023 Capped Calls settlement and a decrease in realized and unrealized foreign currency gains, primarily related to the euro and British pound sterling.
Other Expense, Net Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Other expense, net $ (3,680) $ (14,522) $ 10,842 (74.7) % % of revenue (0.4) % (1.9) % Other expense, net decreased by $10.8 million in 2024 compared to 2023, due to a $15.5 million expense in the prior period for the change in fair value of derivative assets related to our settlement of the capped call transactions that we entered into in connection with the issuance of our 1.25% convertible senior notes due 2023 (“the 2023 Capped Calls”) and a decrease in realized and unrealized foreign currency gains, primarily related to the Euro and British Pound Sterling.
This increase was partially offset by a decrease of $1.7 million in marketing and advertising expenses and a $0.7 million decrease in other expenses. 52 Ta ble of Contents General and Administrative Expense Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) General and administrative $ 84,276 $ 84,969 $ (693) (0.8) % % of revenue 10.8 % 12.4 % General and administrative expense decreased by $0.7 million in 2023 compared to 2022, primarily due to a $2.8 million increase in professional fees, partially offset by a $1.9 million decrease in other expenses.
General and Administrative Expense Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) General and administrative $ 86,002 $ 85,340 $ 662 0.8 % % of revenue 10.2 % 11.0 % General and administrative expense increased by $0.7 million in 2024 compared to 2023, primarily due to a $1.2 million increase in professional fees related to legal and corporate advisory services, partially offset by a $0.5 million decrease in other expenses.
Based on our history of losses, we expect to maintain this substantially full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized. 49 Ta ble of Contents Results of Operations Year Ended December 31, 2023 2022 2021 (in thousands) Consolidated Statement of Operations Data: Revenue: Products $ 740,168 $ 647,535 $ 500,843 Professional services 37,539 37,548 34,561 Total revenue 777,707 685,083 535,404 Cost of revenue: (1) Products 202,904 182,212 140,773 Professional services 28,837 32,137 28,175 Total cost of revenue 231,741 214,349 168,948 Operating expenses: (1) Research and development 176,776 189,970 160,779 Sales and marketing 312,636 307,409 247,453 General and administrative 84,276 84,969 78,289 Impairment of long-lived assets 30,784 — — Restructuring 22,227 — — Total operating expenses 626,699 582,348 486,521 Loss from operations (80,733) (111,614) (120,065) Interest income 10,177 1,813 365 Interest expense (64,700) (10,982) (14,292) Other income (expense), net (14,522) (1,522) (1,921) Loss before income taxes (149,778) (122,305) (135,913) (Benefit from) provision for income taxes (518) 2,412 10,421 Net loss $ (149,260) $ (124,717) (146,334) (1) Cost of revenue and operating expenses include stock-based compensation expense and depreciation and amortization expense as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Stock-based compensation expense: Cost of revenue $ 10,700 $ 10,367 $ 6,491 Research and development 38,022 49,940 46,622 Sales and marketing 29,325 31,217 23,828 General and administrative 30,034 28,378 25,638 Total stock-based compensation expense $ 108,081 $ 119,902 $ 102,579 Year Ended December 31, 2023 2022 2021 (in thousands) Depreciation and amortization expense: Cost of revenue $ 31,447 $ 26,520 $ 21,484 Research and development 4,217 $ 4,133 3,566 Sales and marketing 7,801 $ 7,742 6,277 General and administrative 2,474 $ 2,643 2,174 Total depreciation and amortization expense $ 45,939 $ 41,038 $ 33,501 50 Ta ble of Contents The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue: Year Ended December 31, 2023 2022 2021 Consolidated Statement of Operations Data: Revenue: Products 95.2 % 94.5 % 93.5 % Professional services 4.8 5.5 6.5 Total revenue 100.0 100.0 100.0 Cost of revenue: Products 26.1 26.6 26.3 Professional services 3.7 4.7 5.3 Total cost of revenue 29.8 31.3 31.6 Operating expenses: Research and development 22.7 27.7 30.0 Sales and marketing 40.2 44.9 46.2 General and administrative 10.8 12.4 14.6 Impairment of long-lived assets 4.0 — — Restructuring 2.9 — — Total operating expenses 80.6 85.0 90.8 Loss from operations (10.4) (16.3) (22.4) Interest income 1.3 0.3 0.1 Interest expense (8.3) (1.6) (2.7) Other income (expense), net (1.9) (0.2) (0.4) Loss before income taxes (19.3) (17.8) (25.4) Provision for income taxes (0.1) 0.4 1.9 Net loss (19.2) % (18.2) % (27.3) % Comparison of the Year Ended December 31, 2023 and 2022 Revenue Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Revenue: Products $ 740,168 $ 647,535 $ 92,633 14.3 % Professional services 37,539 37,548 (9) — % Total revenue $ 777,707 $ 685,083 $ 92,624 13.5 % Total revenue increased by $92.6 million in 2023 compared to 2022 and consisted of a $2.2 million increase in revenue from new customers and a $90.4 million increase in revenue from existing customers.
Results of Operations Year Ended December 31, 2024 2023 2022 (in thousands) Consolidated Statement of Operations Data: Revenue: Product subscriptions $ 808,906 $ 740,168 $ 647,535 Professional services 35,101 37,539 37,548 Total revenue 844,007 777,707 685,083 Cost of revenue: (1) Product subscriptions 225,547 203,140 182,212 Professional services 25,488 28,906 32,137 Total cost of revenue 251,035 232,046 214,349 Operating expenses: (1) Research and development 173,126 177,937 189,970 Sales and marketing 298,809 313,661 307,409 General and administrative 86,002 85,340 84,969 Impairment of long-lived assets — 30,784 — Restructuring — 22,227 — Total operating expenses 557,937 629,949 582,348 Income (loss) from operations 35,035 (84,288) (111,614) Interest income 21,063 10,177 1,813 Interest expense (10,963) (64,700) (10,982) Other expense, net (3,680) (14,522) (1,522) Income (loss) before income taxes 41,455 (153,333) (122,305) Provision for (benefit from) income taxes 15,929 (518) 2,412 Net income (loss) $ 25,526 $ (152,815) (124,717) (1) Cost of revenue and operating expenses include stock-based compensation expense and depreciation and amortization expense as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Stock-based compensation expense: Cost of revenue $ 12,208 $ 11,005 $ 10,367 Research and development 37,566 39,183 49,940 Sales and marketing 28,718 30,350 31,217 General and administrative 29,469 31,098 28,378 Total stock-based compensation expense $ 107,961 $ 111,636 $ 119,902 49 Table of Contents Year Ended December 31, 2024 2023 2022 (in thousands) Depreciation and amortization expense: Cost of revenue $ 33,140 $ 31,447 $ 26,520 Research and development 3,312 4,217 4,133 Sales and marketing 6,707 7,801 7,742 General and administrative 1,734 2,474 2,643 Total depreciation and amortization expense $ 44,893 $ 45,939 $ 41,038 The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue: Year Ended December 31, 2024 2023 2022 Consolidated Statement of Operations Data: Revenue: Product subscriptions 95.8 % 95.2 % 94.5 % Professional services 4.2 4.8 5.5 Total revenue 100.0 100.0 100.0 Cost of revenue: Product subscriptions 26.7 26.1 26.6 Professional services 3.0 3.7 4.7 Total cost of revenue 29.7 29.8 31.3 Operating expenses: Research and development 20.5 22.9 27.7 Sales and marketing 35.4 40.3 44.9 General and administrative 10.2 11.0 12.4 Impairment of long-lived assets — 4.0 — Restructuring — 2.9 — Total operating expenses 66.1 81.1 85.0 Income (loss) from operations 4.2 (10.9) (16.3) Interest income 2.5 1.3 0.3 Interest expense (1.3) (8.3) (1.6) Other expense, net (0.4) (1.9) (0.2) Income (loss) before income taxes 5.0 (19.7) (17.8) Provision for (benefit from) income taxes 1.9 (0.1) 0.4 Net income (loss) 3.1 % (19.6) % (18.2) % Comparison of the Year Ended December 31, 2024 and 2023 Revenue Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Revenue: Product subscriptions $ 808,906 $ 740,168 $ 68,738 9.3 % Professional services 35,101 37,539 (2,438) (6.5) % Total revenue $ 844,007 $ 777,707 $ 66,300 8.5 % Total revenue increased by $66.3 million in 2024 compared to 2023 and consisted of a $6.1 million increase in revenue from new customers and a $60.2 million increase in revenue from existing customers.
Sales and Marketing Expense Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Sales and marketing $ 312,636 $ 307,409 $ 5,227 1.7 % % of revenue 40.2 % 44.9 % Sales and marketing expense increased by $5.2 million in 2023 compared to 2022, primarily due to a $7.6 million increase in personnel costs, net of a $1.7 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to the Restructuring Plan.
Sales and Marketing Expense Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Sales and marketing $ 298,809 $ 313,661 $ (14,852) (4.7) % % of revenue 35.4 % 40.3 % Sales and marketing expense decreased by $14.9 million in 2024 compared to 2023, primarily due to a $15.9 million decrease in personnel costs, inclusive of a $1.6 million decrease in stock-based compensation expense, resulting from an overall decrease in headcount primarily due to the Restructuring Plan, a decrease of $1.8 million in advertising expenses, a $1.4 million decrease 51 Table of Contents in professional fees and a $4.0 million decrease in other expenses.
Operating activities provided $78.2 million of cash in 2022, which reflects continued growth in revenue partially offset by our continued investments in our operations and a net benefit from changes in working capital items.
Operating Activities Operating activities provided $171.7 million of cash and cash equivalents for the year ended December 31, 2024, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments.
There was no add-back of interest expense or additional dilutive shares related to the Notes where the effect was anti-dilutive.
There was no add-back of interest expense or additional dilutive shares related to the Notes where the effect was anti-dilutive. Adjustments for interest expense, if applicable, on our convertible notes for purposes of calculating non-GAAP earnings per share are made gross of any tax impact.
Additional expenses include travel and entertainment, professional fees, litigation-related expenses, insurance, acquisition-related expenses, amortization of certain intangible assets and allocated overhead costs.
General and Administrative Expense General and administrative expense consists of personnel costs for our executive, legal, human resources, and finance and accounting departments, including salaries and other payroll related costs, bonuses and stock-based compensation. Additional expenses include travel and entertainment, professional fees, litigation-related expenses, insurance, acquisition-related expenses, amortization of certain intangible assets and allocated overhead costs.
Liquidity and Capital Resources As of December 31, 2023, we had $213.6 million in cash and cash equivalents, $225.7 million in investments that have maturities ranging from one to thirteen months and an accumulated deficit of $1.0 billion. Since our inception, we have generated significant losses and we may generate losses for the foreseeable future.
Liquidity and Capital Resources As of December 31, 2024, we had $334.7 million in cash and cash equivalents, $224.3 million in investments that have maturities ranging from one to seventeen months and an accumulated deficit of $988.0 million. Our principal sources of liquidity are cash and cash equivalents, investments and cash flow provided by operating activities.
The increase in total revenue in 2023 compared to 2022 was comprised of $65.6 million generated from sales in North America and $27.0 million generated from sales from the rest of the world. 51 Ta ble of Contents Cost of Revenue Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Cost of revenue: Products $ 202,904 $ 182,212 $ 20,692 11.4 % Professional services 28,837 32,137 (3,300) (10.3) % Total cost of revenue $ 231,741 $ 214,349 $ 17,392 8.1 % Gross margin %: Products 72.6 % 71.9 % Professional services 23.2 % 14.4 % Total gross margin % 70.2 % 68.7 % Total cost of revenue increased by $17.4 million in 2023 compared to 2022, primarily due to a $10.0 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue, a $4.9 million increase in amortization expense for capitalized internally-developed software, a $2.3 million increase in personnel costs, inclusive of a $0.3 million increase in stock-based compensation expense, and a $0.1 million increase in other expenses.
Cost of Revenue Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Cost of revenue: Product subscriptions $ 225,547 $ 203,140 $ 22,407 11.0 % Professional services 25,488 28,906 (3,418) (11.8) % Total cost of revenue $ 251,035 $ 232,046 $ 18,989 8.2 % Gross margin %: Products 72.1 % 72.6 % Professional services 27.4 % 23.0 % Total gross margin % 70.3 % 70.2 % Total cost of revenue increased by $19.0 million in 2024 compared to 2023, primarily due to a $21.7 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue, and a $3.5 million increase in amortization expense for capitalized internally-developed software.
(Benefit From) Provision for Income Taxes Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) (Benefit from) provision for income taxes $ (518) $ 2,412 $ (2,930) (121.5) % % of revenue (0.1) % 0.4 % In 2023, the benefit from income taxes was $0.5 million, primarily due to changes in valuation allowance related to foreign entity deferred tax assets, compared to a provision for income taxes of $2.4 million in 2022.
Provision for (Benefit from) Income Taxes Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Provision for (benefit from) income taxes $ 15,929 $ (518) $ 16,447 NM % of revenue 1.9 % (0.1) % Provision for (benefit from) income taxes increased by $16.4 million in 2024 compared to 2023.
In today's rapidly evolving IT environment, customers are encountering escalating challenges due to the proliferation of cyberattacks leveraging artificial intelligence (“AI”), targeted automation, and a widening spectrum of attackers and techniques. To fortify their security posture, organizations will require greater visibility, advanced capabilities leveraging increased expertise, and integrated data to effectively anticipate, identify, and respond to exposure-led threats.
In today's rapidly evolving IT environment, customers are encountering escalating challenges due to the widening spectrum of attackers and techniques, including the proliferation of cyberattacks leveraging artificial intelligence (“AI”) and targeted automation. We empower security professionals to manage a modern attack surface through our best-in-class AI infused technology, leading-edge research, and broad, strategic expertise.
Total gross margin percentage increased in 2023 compared to 2022. The increase in products gross margin was driven by our ability to scale as our revenue continues to grow. The increase in professional services gross margin in 2023 compared to 2022 was primarily due to a decrease in personnel costs.
These increases were partially offset by a $5.4 million decrease in personnel costs resulting from a decrease in headcount primarily due to our Restructuring Plan and a $0.8 million decrease in other expenses. Total gross margin percentage increased in 2024 compared to 2023 primarily due to an increase in professional services gross margin due to a decrease in personnel costs.
Interest Income Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Interest income $ 10,177 $ 1,813 $ 8,364 461.3 % % of revenue 1.3 % 0.3 % Interest income increased by $8.4 million in 2023 compared to 2022, primarily due to an increase in interest rates.
Interest Income Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Interest income $ 21,063 $ 10,177 $ 10,886 107.0 % % of revenue 2.5 % 1.3 % Interest income increased by $10.9 million in 2024 compared to 2023, primarily due to higher interest income as a result of an increase in cash and cash equivalents and investments. 52 Table of Contents Interest Expense Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Interest expense $ (10,963) $ (64,700) $ 53,737 (83.1) % % of revenue (1.3) % (8.3) % Interest expense decreased by $53.7 million in 2024 compared to 2023, primarily due to a $53.9 million induced conversion charge recorded in fiscal year 2023 associated with the partial repurchase of the 2025 Notes.
Rapid7 extends and expands the expertise of the Security Operations Center (“SOC") across information security, cloud operations, development, and IT teams, enabling them to better understand the attacker and leverage that information to take control of their fragmented attack surface.
Rapid7 enables the Security Operations Center (“SOC”) to understand their fragmented attack surface with attacker perspective, allowing them to proactively secure their attack surface and better detect and respond to threats.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeHowever, because we classify our investments as available-for-sale securities, no gains or losses are recognized due to the changes in interest rates unless securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary.
Biggest changeHowever, because we classify our investments as available-for-sale securities, no gains or losses are recognized due to the changes in interest rates unless securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary. 56 Table of Contents The fair values of our convertible senior notes are subject to interest rate risk, market risk and other factors due to the conversion features of the notes.
As of December 31, 2023, the effect of a hypothetical 10% increase or decrease in interest rates would not have had a material impact on our financial statements. Inflation Risk We do not believe that inflation had a material effect on our business, financial condition or results of operations.
As of December 31, 2024, the effect of a hypothetical 10% increase or decrease in interest rates would not have had a material impact on our financial statements. Inflation Risk As of December 31, 2024, we do not believe that inflation had a material effect on our business, financial condition or results of operations.
The effect of a hypothetical 10% adverse change in foreign currency exchange rates on monetary assets and liabilities as of December 31, 2023 would not have been material to our financial condition or results of operations.
The effect of a hypothetical 10% adverse change in foreign currency exchange rates on monetary assets and liabilities as of December 31, 2024 would not have been material to our financial condition or results of operations.
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 57 Ta ble of Contents
If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations. 57 Table of Contents
For further information, see Note 9, Derivatives and Hedging Activities , in the Notes to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign currency rates.
For further information, see Note 10, Derivatives and Hedging Activities , in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign currency rates.
Interest Rate Risk As of December 31, 2023, we had cash and cash equivalents of $213.6 million consisting of bank deposits and money market funds and investments of $225.7 million consisting of U.S. government agencies and agency bonds. Our investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.
Interest Rate Risk As of December 31, 2024, we had cash and cash equivalents of $334.7 million consisting of bank deposits and money market funds and investments of $224.3 million consisting of U.S. government agencies. Our investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.
Based upon the quoted market price as of December 31, 2023, the fair values of our 2025 Notes, 2027 Notes and 2029 Notes were $50.5 million, $538.9 million and $333.4 million , respectively.
Based upon the quoted market price as of December 31, 2024, the fair values of our 2025 Notes, 2027 Notes and 2029 Notes were $45.2 million, $553.5 million and $284.1 million , respectively.
Removed
The fair values of our convertible senior notes are subject to interest rate risk, market risk and other factors due to the conversion features of the notes.

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