Rapid7, Inc.

Good day, and thank you for standing by, and welcome to the Q1 2021 Rapid7 Earnings Conference Call. At this time, all participants are on a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you need to press star 1 on your telephone. If you require any further assistance, please press star then 0. I would now like to introduce your host, Sunil Shah, VP Investor Relations. You may begin.

Thank you, Operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's first quarter 2021 financial and operating results, in addition to our financial outlook for the second quarter and full fiscal year 2021. With me on the call today are Corey Thomas, our CEO, and Jess Kulowski, our CFO. We have distributed our earnings press release over the wire, and it is now posted on our website at investors.rapid7.com, along with the updated company presentation and financial metrics file. This call is being broadcast live via webcast, and following the call, an audio replay will be available at investors.rapid7.com until May 13, 2021. During this call, we may make statements related to our business that are forward-looking under federal securities laws. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements related to the company's positioning, our future goals, and financial guidance for the second quarter and full year 2021 and and the assumptions underlying such goals and guidance. These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. Actual outcomes and results may differ materially from the expectations contained in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on Form 10-K and in the subsequent reports that we filed with the SEC. The information provided on this conference call should be considered in light of such risks. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. Rapid7 does not assume any obligation to update the information presented on this conference call except to the extent required by applicable law. Our commentary today will primarily be in non-GAAP terms, and reconciliations between our historical GAAP and non-GAAP results and guidance can be found in today's earnings press release. At times, in our prepared remarks or in response to your questions, we may offer incremental metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that the additional detail may be one time in nature, and we may or may not provide an update in the future on these metrics. With that, I'd like to turn the call over to our CEO, Corey Thomas. Corey?

Thank you, Sunil, and good afternoon, everyone. Thank you all for joining us for our first quarter 2021 earnings results call. I'm thrilled to report a strong start to the year for Rapid7 as we accelerated year-over-year ARR growth to 30% while demonstrating strong free cash flow dynamics in our business. We continue to execute against our goal of delivering best-in-class security that meets customers where they are in their SecOps journey. Our performance in the quarter was driven by accelerating momentum and security transformation solutions, coupled with durable growth and our vulnerability management offerings. These results are a great validation of the vision we laid out at our recent investor day and demonstrate ongoing progress in our effort to help customers close their security achievement gap. Our strong start to the year also positions us to deliver a notable raise to our full-year ARR outlook which Jeff will cover in his remarks. I'll begin today with some perspective on how we're executing against our core strategy to drive durable growth while scaling profitability, then share a brief update on our innovation and goals before turning it to Jeff to detail our financial results and guidance. In March, we shared with you the incredibly exciting journey about how Rapid7's Insight platform is helping customers all over the world accelerate their pace of innovation securely. Customers are facing a fundamentally new dynamic as COVID exacerbates what was already a rapid pace of adoption for digital and remote experiences, cloud technologies, and SaaS consumption. Amidst this technology acceleration, we're finding that customers are challenged to manage a growing risk footprint across their enterprise. In fact, many are seeing a widening gap between the risk that they can effectively manage and the risk born from this rapid pace of innovation. As a result, customers are turning to Rapid7's Insight platform to help close the security achievement gap. We're delivering for our customers with a focus not just on industry-leading and forward-leaning capabilities, but with a unique focus on world-class accessibility for our technology platform. This combination of best-in-class capability and accessibility is the magic formula that makes Rapid7 so successful and is what enables us to continually disrupt the market. The accelerating demand we've seen for our detection and response offering in recent quarters demonstrates our success in disrupting the market. Customers are increasingly turning to IDR because of its ability to deliver market-leading technology coupled with best-in-class usability and top-to-value that ultimately helps them achieve better security outcomes. I'm pleased to report that this vision is resonating with customers not just within our Insight Platform pillars of detection and response, vulnerability risk management, and cloud security, but also across them. In March, our Chief Innovation Officer, Lee Weiner, spoke about our focus on delivering a unified StackOps experience in the cloud. It's clear that customers are beginning to see the better together value of our integrated best-in-class platform suite and experience. We continue to grow our mix of multi-product customers. And in fact, seven of our top 10 deals this quarter included multiple platform customers. A great validation of this trend was a six-figure deal in the quarter with an enterprise consumer goods company who purchased our Insight One platform offer. Insight One is one way we're lowering barriers to broad-based platform adoption by making it easier for customers to purchase all of our Insight products, Insight VM, Insight IDR, Insight AppSec, and Insight Connect, to deliver a unified SecOps experience. This customer initially came to us looking for detection-based SIM with advanced user behavior analytics capabilities. But upon seeing how seamlessly our Insight products work together, they chose to unify on Insight One, displacing existing point vendors in the process. We remain in the early days for this platform opportunity, but are excited about our progress to date and see sustainable paths to execute it against the four durable growth drivers that Jeff shared with you at our investor day. Let me take a moment to update you on how our first quarter results demonstrate progress across all four of these growth drivers. First, our platform opportunity. The growing urgency to secure cloud and digital investments is driving strong demand for our insight platform today. Our COO, Andrew Burton, spoke in March about how we're working to make it easier for customers to consume more capabilities across our Insight platform. This is highlighted by a recent six-figure deal with one of the largest domestic energy suppliers in the UK. This existing Lapid7 customer was lacking security visibility and coverage across their total infrastructure footprint as they expanded into the cloud. Additionally, after recognizing what was possible from a small Insight Connect deployment. They wanted to automate everything they could. As a result, this customer grew into a larger platform deal, adding on Divi Cloud while expanding their existing VM, DNR, and automation coverage, positioning Rapid7 as one of their most critical security partners. This is yet another example of how our expanding product set is driving deeper engagement with our customers. Which leads to our second growth driver, our land and expand engine. We remain very early in penetrating our $420,000 average size customer opportunity. During the first quarter, we saw strong execution with accelerated growth in our upsell and cross-sell motions as we expand within our existing customer base. This drove ongoing strength in our ARR per customer, which grew 17% year over year to eclipse the $50,000 milestone for the first time. Our platform value is resonating with customers, and we see a long runway for growth here. Third, our focus on growing high-value customers. We had a great start to the year that saw us accelerate customer growth during Q1. We added over 200 net new customers in the quarter and ended with over 8,900 customers globally, still early as it relates to penetrating our overall customer market opportunity. Moreover, total customer growth is only part of our story as our high-value platform customers grew faster than total customers and continue to grow as a percentage of the base. And finally, our international growth opportunity. We have a long runway for international growth given our best-in-class products, our focus on accessibility, and more greenfield opportunities internationally. VEM remains a core growth driver during the first quarter, and we saw an accelerating trend in our security transformation solutions internationally. We continue to invest in our international teams, and growth in international ARR once again outpaced total ARR growth. So, as you can see, we have multiple paths to deliver our long-term growth objectives, and I'm pleased to share strong execution across the board as we begin 2021. Of note, we're executing on these growth drivers while also ramping profitability and scaling pre-cash flow. We remain on track to deliver on our growth and profitability framework this year. I'd like to highlight that these strong results are rooted in Rapid7's longstanding commitment to technology investment and innovation. We are investing aggressively to remain on the leading edge of making the best in security operations available to all. Let me share a brief update on some of our current initiatives. We continue to invest in scaling enterprise readiness and detection response, building upon recent enhancements to network and endpoint with newer capabilities that enhance role-based access and improve alert customization and tuning for sophisticated security teams. But innovation is not a siloed effort. At Rapid7, we have always valued the collective wisdom of the security research community. And I'm so excited to welcome the Velociraptor team and the open source community to the Rapid7 family. What we've learned in the SIEM market is that it's not enough just to collect data and detect threats, but rather the response is increasingly more important in today's dynamic threat landscape. Our recent announced acquisition of Velociraptor moves us another step forward in helping customers better respond to threats and attacks by leveraging Velociraptor's leading community-driven digital forensics and incident response technology to monitor malicious activity across endpoints. We continue to push the envelope in VM with our recent integration to Kubernetes container environments that allow customers to aggregate container and traditional asset information and enables a live container visibility. Looking ahead, we're also advancing our cloud capabilities as we unify traditional VM asset risk visibility with cloud configuration insights from DIVI Cloud to provide more holistic infrastructure risk visibility that improves risk intelligence for better remediation outcomes. Turning to cloud security, our ongoing effort to integrate ALSI's Kubernetes Central Container Security technology accelerates our path to delivering an integrated cloud native security platform that combines best-in-class CSPM, cloud identity management, and now cloud workload protection. Combining risk assessment, runtime monitoring, and threat detection in the cloud is a critical component for ourselves and our customer security roadmaps, which is why we continue to invest heavily in cloud security. Overall, we're excited about our Insight Platform Innovation Pipeline as we work to make the best in security operations accessible to all. I'll conclude my remarks today with a brief review of our enduring goals. Our ongoing investment in delivering a unified SecOps experience in the cloud is resonating with customers, driving progress on our first goal to be a leader in enabling customers to transform their security operations around the cloud. Second, our effort to lower barriers to broad-based insight platform adoption is delivering on our goal of accelerating our platform distribution engine. This can be seen by our strong results in ARR growth, customer growth, and ARR per customer during the first quarter. And finally, our balanced execution demonstrated by strong top-line growth coupled with underlying leverage in our business is enabling us to deliver on our third goal of scaling profitably while investing for growth. In closing, Rapid7 remains focused on securing the digital experience on behalf of our customers, meeting them where they are in their SecOps journey by delivering a unified platform experience with best-in-class capabilities alongside world-class accessibility. I want to thank our entire team for all of their contributions in working to help our customers close their security achievement gap. Thank you all, and I will now turn the call over to our CFO, Jeff Golowski. Jeff?