Rapid7, Inc.

begin the introduction and turn on the prerecord. As a reminder, this line here will be open and anything that is said will be heard into your webcast and your conference. We are going to go live in five, four, three. Good afternoon. My name is Krista and I'll be your conference operator today. At this time, I would like to welcome everyone to the RAPID 7 fourth quarter earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. And if you would like to withdraw your question, again, press star one. Thank you. I would now like to turn the conference over to Elizabeth Chuak, Director of Investor Relations. Elizabeth, you may begin.

Thank you, Operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's fourth quarter and full year 2023 financial and operating results, in addition to our financial outlook for the first quarter and full fiscal year 2024. With me on the call today are Corey Thomas, our CEO, and Tim Adams, 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. During this call, we may make statements related to our business that are considered 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, strategy, business plans, restructuring plans, and financial guidance for the first quarter and full year 2024, 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 quarterly report, on Form 10-Q filed on November 6, 2023, and in the subsequent reports that we file 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 can be found in today's earnings press release and on our website at investors.rapid7.com. At times, in our prepared remarks or in responses 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 update these metrics in the future. With that, I'd like to turn the call over to our CEO, Corey Thomas.

Corey? Good afternoon, and thank you to everyone joining us on today's call. Rapid7 had a strong close to 2023. Ended the year with $806 million in ARR, growing 13% over the prior year while delivering revenue, operating income, and free cash flow above our guided ranges. Sustained customer demand for our platform offerings, anchored by our detection and response in cloud security solutions, and improvements in execution supported a strong top-line finish to the year. At the same time, our focus on operating efficiency and streamlining our cost structure drove $84 million of free cash flow in the year, exceeding our target and reflecting nearly 500 basis points of free cash flow margin expansion over the prior year. As we look back at the last year, there are a few highlights that stand out. First, we continue to drive product innovation across our Insight platform. We've further elevated our market-leading capabilities and our compelling customer value proposition with advancements in areas like AI-driven cloud anomaly detection. We exited the year with a scale security operations platform that extends over the fragmented attack surface, covering strategic workloads across detection response, cloud native security, or CNAP, and vulnerability management. Secondly, our Salesforce successfully reoriented towards our platform consolidation solutions to meet customers' most pressing needs, while navigating larger and longer deal cycles with conversion rates that improved as the year went on. Our package offerings gained steady traction throughout 2023 and now constitute roughly $100 million in ARR, driven by a healthy contribution from both landing new customers and upgrading existing customers. We have reflected the deal size and conversion dynamics of our growing package mix into our forward expectations for seasonality, given the ongoing success of our consolidation value proposition. And lastly, we right-sized our cost structure to build a foundation for efficient growth. This was a critical initial step that positions us to be able to drive efficient growth in our business over time. A great example of our progress in 2023 is illustrated by a new customer win in the fourth quarter. A publicly traded media company with a maturing security program was extensively evaluating new solutions and looking to consolidate multiple vendors across their security operations center or SOC. The large and complex nature of the company's digital footprint and their lean team, combined with Rapid7's ability to work better together with their endpoint provider, made us stand out against legacy SIEM competitors. This customer chose Rapid7 for three main reasons. The breadth of our cloud-native platform, our ability to consolidate critical capabilities across multiple SecOps categories, including SIEM or XDR and VM, And lastly, our ease of adoption and integrations with other security vendors. We displaced a competitor with our Manage Direct Complete consolidated offering, securing a multi-year deal worth over half a million dollars in ARR. We believe the progress we made in 2023 sets us up well to win market share, accelerate growth, and be a leading security platform consolidator in the next few years. Looking forward, we see 2024 as a critical year to accelerate our platform differentiation by driving focused investments to lead in mainstream cloud security adoption, drive security productivity with AI, extend our service and partner ecosystem to deliver sustainable and efficient growth going forward. We are delivering this strategic execution against a backdrop of stable yet noisy demand environment. Amidst this backdrop, We are leaning into our areas of strategic focus and building our security operations platform for acceleration. We're investing and innovating in areas where we see substantial demand over a multi-year horizon and where there's a clear opportunity to elevate our customer value proposition and the services ecosystem that supports it. We're making deliberate investments to build the strongest managed stock ecosystem and deliver a leading data platform that contextualizes risk across a fragmented, complex environment. Here are the four key areas where we are focused on and investing in as we build our leadership position in the extended stock. The first is on integrating and contextualizing more data across the digital attack surface, particularly as security teams are managing data across traditional and cloud environments. Easier consolidation of data on our Insight platform allows customers to apply the best operational context to their security programs. The breadth and quality of our platform features are strong, and our internal stock has years of expertise and data to better understand the attacker. In 2024, we're focused on elevating the customer experience with a better, more integrated Rapid7 technology platform to support fragmented IT environments. The second area of investment will be around driving cloud security adoption in mainstream enterprises. As security programs mature, lean teams with significant resource constraints increasingly need to secure their cloud environments. We believe the majority of cloud security buyers in the coming years will look different from the typical buyer we've historically seen. We are focused on delivering CNAP solutions that are simple to use, affordable, and integrated into our broader security operations platform. And our packaging and distribution is being fine-tuned for our mainstream enterprise customers. We're also extending our capabilities building on the solid traction in cloud security posture management to be a leader in cloud detection and response. The third area of focus is the use of AI for improving security operations. Our AI-powered SOC continues to drive our leadership in managed detection response, one of the areas of highest growth in customer demand within security operations. We are focused on using machine learning and large language models, or LLMs, to improve our SecOps coverage and detections in multiple areas, including anomalous activity monitoring, analyst workflows, and quality assurance. In addition, we're working on leveraging LLMs to drive efficiency and accelerate response times. We're building and refining these capabilities inside our SOC and managed delivery ecosystem to help get product innovations to market faster. And we'll continue to expand on these AI capabilities with a focus on productivity and efficiency all while safeguarding our customers' data. Lastly, we will be investing in our services and partner ecosystem with an emphasis on growing key channel relationships, accelerating our MSSP partnerships, and increasingly engaging with customers and marketplaces like AWS. As we look out at the rest of the year, Rapid7 has a compelling opportunity to build better, more connected customer experiences across our platform. We believe that the foundational work we're doing will position us to drive market share gains and higher doable growth over the medium to long term. At the same time, we're focused on optimizing for efficient growth and remain laser focused on scaling free cash flow. Consistent with our previous commentary, we expect to generate at least $160 million in free cash flow in 2024. Looking towards our overall financial outlook for the year, as we process a healthy finish to 2023, Balanced with our expectation for a continuation of the recent stable demand backdrop, we remain focused on providing a high confidence range for our 2024 financial outlook, which Tim will detail in his remarks. We're focused on making deliberate platform and services investments to reaccelerate and drive durable long-term growth. We're optimizing around our technology and distribution channels, which we believe will position us for the best multi-year growth outlook. With that, thank you for joining us on the call today. I'll now turn the call over to our CFO, Tim Adams, to share additional detail on our financial results and outlook.