Rapid7, Inc.

Good day, and thank you for standing by. Welcome to the Rapid 7 third quarter 2021 earnings conference call. At this time, all participants are in 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 will need to throw one on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star zero. I would now like to hand the conference over to your speaker today, Sunil Shah. Vice President, Investor Relations. Please go ahead.

Thank you, Operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's third quarter 2021 financial and operating results, in addition to our financial outlook for the fourth quarter and full fiscal year 2021. With me on the call today are Corey Thomas, our CEO, and Jeff Kulowski, our CFO. We've distributed our earnings press release over the wire and 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 November 10, 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 Allegation Reform Act of 1995 and include statements related to the company's positioning, our future goals and financial guidance for the fourth quarter and full year 2021, 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-Q 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 comments 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 this 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 third quarter 2021 earnings results call. I'm thrilled to report that Rapid7 delivered a milestone quarter, exceeding $500 million in ARR for the first time. Accelerated demand for our security transformation solutions, coupled with sustained growth in vulnerability management and our recent insights acquisition drove Q3 Indian ARR to $550 million, growth of 38% year over the prior year and growth of over 30% organically, driven by strong contribution from both our land and expanded engines in the quarter. was driven by strong customer interest for the expanding set of capabilities on our Insight platform and solid execution on the part of our Rapid 17. Moreover, we have been pleased with the early reception from our customers to the recent addition of Insight's threat intelligence offering. Our third quarter results also demonstrate how we're delivering on our customer mission while balancing our dual mandate to drive durable growth, and expand profitability and free cash flow as we scale. Alongside our accelerated ARR growth, we delivered over 150 basis points of year-over-year operating margin expansion during the third quarter, even as we absorbed our largest ever acquisition to date. Jeff will share more details on our strong operating results in his remarks and how it positions us to continue investing behind our growth engine while delivering on our growth and profitability framework. But before we step into those details, I'd like to spend a few moments sharing with you how Rapid7 is working to help customers achieve better security outcomes in a rapidly evolving threat landscape. Organizations of all sizes are investing aggressively in scaling the digital experiences they must deliver to their customers, employees, and partners in today's distributed economy. However, as they embrace these broad digital initiatives, they are increasingly faced with critical challenge of managing a dynamic cyber risk profile across the internal, cloud, and external footprint. As we speak with customers and prospects on a day-to-day basis, many are struggling with the same set of questions. How do I gain visibility to the threats and vulnerabilities in my environment and better manage my risk profile? How do I identify and respond to attacks happening in my environment? And how do I improve my security team's productivity to drive better security efficacy and an increasingly tight cybersecurity talent market. These questions are at the core of today's security operations challenges and the expanded security achievement gap that I spoke with you about earlier this year. To solve this challenge, many customers we engage are seeking a more holistic approach to monitoring the threats and vulnerabilities in their environment, as well as detecting and responding to attacks across their internal and external digital footprints. As I shared at our investor day in March, Rapid7 is leading the charge by delivering some of the most advanced capabilities around security analytics and automation unified on an integrated platform that are also massively accessible to a wider audience of enterprise and mid-market organizations. This is how we're disrupting the market by enabling customers to marry advanced capabilities with high efficiency and productivity to achieve better security outcomes for their stakeholders. A great example of how customers are leveraging this value was a six-figure deal in the quarter with a multi-billion dollar general contracting firm. This customer was looking to build a more effective detection and response program after experiencing a security incident with their existing solution. They wanted a comprehensive solution, but one that would also drive improved efficiency for their modest-sized security team. As an existing Insight VM customer, they were excited about how quickly and easily they could stand up and integrate additional Insight platform solutions. When coupled with the depth of our detection and response capabilities and the critical value our automation offerings brought to their team, it became clear to them that few competitors could match the combined efficiency and efficacy of our platform. As a result, this customer chose to expand their relationship with Rapid7 as a trusted security partner, adding Insight IAR with our enhanced endpoint telemetry and network traffic analysis add-ons, as well as Insight Connect for automation to provide a more comprehensive visibility across their environment and the ability to more quickly respond to incidents. This is a great validation of Rapid7's vision and approach towards our extended detection response strategy. which is to help customers minimize the seams and gaps that exist in their technology environments through our natively integrated insight platform. Our approach is built on the premise that to have effective security, you have to have broad visibility across your environment. This is why we have invested aggressively over the years to become a leader in enabling that visibility. The core of what Rapid7 does is collect fragmented data across the technology environment, endpoint data, deep cloud data, vulnerability data, APIs, logs, network data, fast data, all collected and aggregated natively on our Insight platform. This allows us to look at risk more holistically across the environment to not just detect attacks, but to perform the forensics and analysis across the environment and ultimately drive remediation with our automation framework. Increasingly, today's attackers are exploiting the data gaps and themes that exist in customers' fragmented security ecosystem. This has led to an increasing focus on an extended approach to detecting and responding to threats in the environment to reduce visibility gaps to introduce that risk. Rapid7's core differentiation is this pervasive end-to-end data collection that allows us to deliver leading security analytics and automation that enables customers to more effectively assess risk, detect attacks, and drive remediation across their environments. We're seeing this focus on more holistic risk visibility reflected in our engagement with customers. A good example of this was an international enterprise customer who had an interesting platform journey with us leading up to their purchase of our recently introduced IDR Ultimate package. Let me take a moment to step you through that journey. Despite having a market-leading STEM solution, this customer was lacking full coverage of their environment. So they engaged with us early in the year in an effort to achieve the detection response value they were seeking. At the same time, they were preparing to replace their existing VM solution. Our cohesive SecOps platform vision and the idea of a single trusted security partner resonated with them. And so they actually ended up purchasing Insight VM first, demonstrating our ability to meet them where they were in their SecOps journey. Around this time, they were also beginning their cloud security journey and exploring leading solutions for this. The combination of our best-in-class CloudSec capabilities and our native integration with Insight VM on our platform put us ahead of the pack, and so they purchased Insight CloudSec early in Q3. By the time they were ready to make a detection and response decision later in Q3, The integrated platform experience positioned IDR as the clear frontrunner. With IDR Ultimate, our best IDR tier, they were able to gain more full coverage of their environment while also reducing data gaps by tapping into our extended capabilities, including enhanced endpoint data for more comprehensive forensics analysis and automation for increased efficiency and accelerated response over time. In each part of this customer journey, our complete platform vision was a key value driver for the customer, not to mention a competitive difference here. And they are now leveraging a large portion of our Insight platform as they approach seven figures in total ARR. Over time, we believe the winners in this space will be those that can provide this type of extended approach to reducing fragmentation and increasing visibility in our customers' technology environments as we continue to invest in delivering this on our Insight platform. Most recently, our acquisition of Insight amplifies our platform and XDR vision by layering on external attack surface visibility, further minimizing zines and elevating each of our vulnerability management, detection response, and cloud security capabilities across our Insight platform. Turning now to a brief update on progress towards our enduring goal. First, we continue to lead the charge in enabling customers to transform their SecOps practices around the cloud. You've seen us successfully extend the core capabilities of our Insight platform, both organically and through strategic acquisitions to help customers effectively scale their security operations. Our strong and accelerating customer growth as we approach 10,000 customers is a great validation of our progress in meeting customers where they are in their SecOps journey with an expanded set of market-leading capabilities. Second, we're investing to accelerate our platform distribution engine through enhanced pricing and packaging for products like IDR, but also by making it easier for customers to seamlessly expand on the Insight platform through natively integrated experiences. This success is delivering a best-in-class platform experience, continuing to drive ongoing expansion in customer wallet share, as demonstrated by our ARR to over $55,000. And third, we remain focused on driving long-term operating leverage and cash flow scale while investing for growth. This is evidenced by our strong cash generation and operating margin expansion, even as we continue to invest in innovation and absorb our recent insights acquisition. In closing, it's clear that organizations across the world are undergoing significant digital transformation amidst an escalating cyber threat landscape. Our team is investing to deliver a highly differentiated and more holistic approach to security analytics and automation that better enables customers to bring security transformation alongside their digital investments. We believe this will remain a long-term demand driver for our business as we continue on our mission to make the best in security operations achievable for all. With that, thank you all, and now I will turn the call over to our CFO, Jeff Galowski.