Rapid7, Inc.

Good afternoon and welcome to RAPID 7's first quarter 2023 earnings call. All participants are in a listen-only mode. After the speaker's presentation, we will conduct a question and answer session. To ask a question, you'll need to press star followed by the number one on your telephone keypad. As a reminder, this conference call is being recorded. I would now like to turn the call over to Sunil Shah, Vice President, Investor Relations. Thank you. Please go ahead.

Thank you, Operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's first quarter 2023 financial and operating results, in addition to our financial outlook for the second quarter and full fiscal year 2023. With me on the call today are Corey Thomas, our CEO, and Tim Adams, our CFO. We've distributed our earnings press release over the wire and it's 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. During this call, we may make statements related to our business that are considered forward-looking under federal securities laws. These statements remain pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and include statements related to the company's positioning, strategy, business plans, and financial guidance for the second quarter and full year 2023, 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 future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent annual report on Form 10-K, filed on February 24, 2023, 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 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 and our website at investors.rapid7.com. 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 quarterly results. Please be advised that this additional detail may be one time in nature, and we may or may not update these metrics in the future. With that, I'd like to turn the call over to our CEO, Corey Thomas. Corey.

Thank you, Sunil. And hello to everyone on the call today. Thank you for joining us this afternoon on our first quarter 2023 earnings call. I am pleased to report that Rapid7 started the year with strong momentum as we work to deliver customers a comprehensive security operations platform at the most compelling economic value. Faster than expected traction, from our threat-complete and cloud risk-complete consolidation offerings, which together represented over 20% of new ARR in the first quarter, supported steady customer demand for our Insight platform, driving 16% year-over-year growth in ARR to $728 million. Revenue and operating income both exceeded our expectations as customers gravitate towards our security operations solutions and as we manage the business for profitable growth. The customer spending environment in the first quarter was broadly in line with our expectations shared on the February earnings call. Despite ongoing complexity in customer budgets, including elevated levels of deal inspection, we saw strong underlying demand for our Insight platform to start the year. Our solutions solve a critical set of needs for security teams who are working through a complex threat landscape, constraints on talent, and worsening consequences from cybersecurity incidents. While overall demand trends were consistent with our expectations, I'm pleased to share that our teams are demonstrating the ability to execute in an environment with higher budget scrutiny and ongoing macroeconomic uncertainty. A few positive themes continue to resonate in our business throughout the first quarter. The first is that we're benefiting from a clear customer preference for consolidated security offerings. There is a persistent and crucial need to gain visibility and assess risk across traditional and cloud environments. And security teams are laser focused on improving both the effectiveness and efficiency of their programs while maximizing their budget dollars. Our solutions lean into this dynamic by offering best-in-class automated capabilities across cloud security, detection response, and vulnerability management, while being delivered through new and differentiated pricing and packaging models. As a result of this approach, we are at times seeing less competition for critical capabilities given the unique scope of our offerings, which in many cases, customers aren't able to consolidate on a single platform with other vendors. These dynamics highlight our unique competitive position as we look to capture greater wallet share in a consolidating security operations market. As customers gravitate towards vendor consolidation and our sales team ramps up on the new offerings, we are seeing the clear benefit in ASPs for our threat-complete and cloud risk-complete deals, which average more than two times our overall ASPs in the first quarter. our marketing enablement efforts around these offerings were largely competed in the first quarter. And so far, over one third of our sellers have sold at least one of our consolidation offerings. Another theme that continued in the first quarter was a growing traction with our differentiated cloud security solutions. Insight CloudSec provided customers real-time visibility into their cloud environments with a breadth of features, including posture management, agentless cloud vulnerability assessment, workload protection, cloud detection response, and automated remediation. The ability to bring these capabilities onto a cohesive platform offering is increasingly resonating with customers, particularly as usability and time to value have long been core differentiators for Rapid7. Cloud security has evolved over the last few years from a niche complex market into the one we see today, where mainstream enterprises show increasing demand for solutions that can solve their cloud challenges in an accessible, efficient, and automated fashion. Our approach to the market through a consolidated platform focused on accessibility and ease of use is making cloud security more accessible to a broader customer base. In addition, Cloud Risk Complete packages the breadth and depth of our top ranked cloud technology alongside our enterprise grade vulnerability management, which provides visibility to traditional environments. This comprehensive risk visibility across cloud and hybrid environments combined with the compelling package pricing structure is driving a strong value proposition for organizations of all sizes. A great example of the value we're bringing to customers through Cloud Risk Complete is a recent six-figure ARR deal with a mid-cap technology company. The customer was unhappy with their vulnerability management provider and searching for a replacement standalone VM solution. Our sellers were able to expand the conversation to include cloud security and application security as part of our new Cloud Risk Complete package offering. Rapid Sevens robust product features combined with real-time event-driven data harvesting stood out as competitive differentiators, as well as our ability to unite vulnerability data with cloud security data for more actionable alerts and more automated remediation. Ultimately, our sellers were able to bring together the customer's on-premise and cloud security teams to win this deal by combining three silo solutions into a unified platform with a single cost-efficient contract. Another first quarter example of our expanding value proposition for customers is a six-figure ARR deal with a regional healthcare company. The customer was struggling to use a legacy SIM solution managed by MSSP due to the complexity of the data and reports, as well as the quality of the alerts. They needed a way to identify user behavior in one unified way. and to find automated solutions that reduced manual work. Our managed detection response offering combined with Insight Connect automation allowed us to win the deal based on strong underlying technology amplified by the security expertise of our best in class SOC analyst. As part of our continued focus and commitment to customers, I'm thrilled to welcome Larry D'Angelo to Rapid7 as our Chief Customer Officer. This is a newly created role that oversees our sales organization and all of our customer success teams across advisory, onboarding, and support. Larry has extensive background at various software companies and private equity firms. And some of you may remember that he served as chief sales officer for LogMeIn for over eight years, helping the company scale from $100 million to $1.4 billion in revenues. We're excited to have Larry on our team and believe that customers will benefit from having a cohesive customer organization to support their growth throughout the end-to-end customer lifecycle. As we look out over the remainder of the year, we are encouraged by the underlying demand for our cloud-native insight platform, our ability to execute in a tighter budgetary environment, and our unique position in the customer-driven consolidation wave for security operations solutions. We're on track to meet our growth and profitability targets for 2023 and believe we're well positioned for long-term growth as we execute on our strategic vision to bring Rapid7 to the center of customer security operations programs. As we refine our go-to-market strategy and invest to support innovation, we are focused on delivering better security outcomes to the large market opportunity in front of us while maintaining a deliberate focus on expanding the efficiency and profitability of our business. With that, thank you for joining us on the call today. I will now turn the call over to our CFO, Tim Adams, to share additional detail on our financial results and outlook. Tim?