Rapid7, Inc.

Thank you for standing by. I'd like to welcome everyone to the Rapid7 second quarter 2024 earnings 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'd like to ask a question during this time, simply press star and the number one on your telephone keypad. If you'd like to withdraw your questions, Press star one again. Thank you. I would now like to turn the call over to Elizabeth Schwach, Director of Investor Relations at Rapid7. Please go ahead.

Thank you, Operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's second quarter 2024 financial and operating results, in addition to our financial outlook for the third 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 law. 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, and financial guidance for the third 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 May 8, 2024, our most recent annual report on Form 10-K on February 26, 2024, 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 on 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, and our prepared comments are 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?

Hello, and welcome to everyone joining us on our second quarter 2024 earnings call. As previewed a few weeks ago, Rapid7 ended the second quarter with $816 million of ARR, which is in line with our expectations and represents 9% growth over the prior year. Growth was led by our threat detection response business as customers continue to prioritize their ability to efficiently monitor security data across their full environment while extending their teams with our deep security expertise. The strongest demand was for our consolidated threat complete offerings, which drove over 40% of new ARR in the quarter. As we progress through the second quarter, the underlying market dynamics we've highlighted as tailwinds to our business continue to support our broad strategic plan. Computer practice trainers are increasingly struggling to manage visibility into their complete IT environment. Current market offerings don't tackle these challenges effectively or economically, with the latter factor being particularly difficult for mainstream enterprises. As we continue to advance key investments around innovation this year, these are the core customer challenges we remain focused on solving. Rapid7 is investing to build the strongest security operations ecosystem for mainstream enterprises, supported by a leading data platform for contextualizing risk across fragmented, complex environments. Over the past year, we've been strategically reorienting our company towards an integrated data platform focusing on the highest value workloads in cloud and detection response and building out a more efficient go-to-market motion. We firmly believe that providing visibility across a customer's risk environment by integrating traditional vulnerability management with a broad set of cloud security solutions and pairing that with a world-class DNR stock efficacy in one place gives customers a more effective solution and overall better security outcomes at the price value they're seeking. Our strategic plan is to capture this opportunity while optimizing our business for better long-term growth. In order to meet these strategic objectives, we started this year by sharing our intentional and targeted efforts around three key areas. Detection of spots innovation, our partner ecosystem, and mainstream cloud security adoption. We've spoken to these critical areas on the last few earning calls, and today I'm pleased to update you on the progress we made in each and every last one of them. Our first area of focus is innovation to deliver world-class detection response experience to our customers. Rapid7 has taken a deliberate approach in this market over the last few years, and we continue to invest in extending our capabilities with a committed focus on delivering the integrations, features, and usability that resonates most with mainstream enterprise customers. This overarching approach supports the steady growth we're seeing today in the following ways. The escalated frequency of ransomware attacks is driving security teams to favor solutions that monitor their full IT environments. We continue to focus investments towards expanding the breadth of alert coverage on our platform, which improves our ability to monitor and manage more third-party security data on our platform and sets Rapid7 apart from our peers in SIEM and the XDR space. Rapid7 also stands out against point vendors that lack broad expertise and capabilities across security operations. Our ability to offer an integrated platform to solve adjacent security concerns like full visibility into hybrid attack service delivers better security outcomes and more compelling economic value. And lastly, we are one of the few detection and response platforms that gives customers a seamless extension of their own security teams by using our managed services and the extensive expertise that comes along with it, we continue to invest in the efficiency and scale of our stock, including leveraging AI and analytics to make these teams more effective. Our second key area of focus this year is our partner ecosystem, which continues to increase in importance as we scale and prioritize efficient demand generation. Investing in our growing services and partner ecosystem to increase our capacity for service delivery as well as provide a strong source of efficient demand generation will help us deliver more sustainable and profitable growth. Sales pipeline generated across our strategic partners grew 15% year over year in the second quarter, which was an acceleration from Q1. Our team is seeing traction broadly as we continue to emphasize our MSSP partnerships, key channel relationships, and increasingly engage with customers in marketplaces like AWS. Our Comcast business partnership is progressing nicely and will serve as a steady driver of scale for our detection and response business. Customer buying behavior continues to shift towards the hyperscaler marketplaces, and our ability to support this has doubled the volume of deals that we have closed year-to-date on AWS marketplaces. Furthermore, we're gaining mindshare and momentum with our top channel partners, which is helping to support stronger pipeline growth and remains a growth opportunity for Rapid7. Our last key area, and the one that I'm most excited about today, is our focus on leading mainstream cloud security adoption. To give some context to the unique challenges and opportunities in this space, it's helpful to remember that many security teams don't exactly know what their IT environments look like. While this knowledge is foundational to protecting those environments, mastery of the customer type surface is limited by data collection, which tends to be expensive and challenging. especially as it relates to securing cloud security environments. Because there are multiple sources of data to integrate, we are lowering the barrier to visibility by allowing customers to secure their attack surface by integrating diverse sets of security data, including network identity and cloud telemetry, together on the Rapid7 command platform. This leads me to the announcement you may have heard and seen yesterday. We introduced our new command platform in Black Hat. Fully integrated platform extends our traditional insight capabilities by allowing customers to integrate more of their critical security data in one place, whether that data comes from Apex 7 or other providers, giving security operations teams greater visibility that they can trust. Our flagship exposure command offering aims to provide integrated risk visibility across the full attack surface at optimal cost effectiveness. This single unified view can help customers understand What does my complete environment look like and what are my biggest exposures is the core of our new exposure command offering. The hybrid attack surface clarity offered by exposure command across both traditional and cloud environments is now built into our vulnerability management and improved suite of robust CNAP capabilities for an integrated threat-based approach to risk reduction. Exposure command is boistered by our recent acquisition of Noetic, which provides an integrated, high-confidence view of assets across the attack surface. We believe that the Noetic technology and their top-notch team will be crucial pieces of Rapid7's broader offering, and we're thrilled to have them on board. Starting officially this week, the Rapid7 team will be executed on the following opportunities for our company and our customers related to Exposure Command. First, the opportunity to drive meaningful expansion from our existing Insight VM base to Exposure Command. with frictionless upsell offers for customers looking to unlock better attack service visibility and expand into the cloud. Second, we expect this new platform offering can enhance retention, not only through Exposure Command, but by offering additional attack surface management functionality as part of the existing VM offering at a minimal uplift. Third, Exposure Command adds a second flagship land offering with disruptive market pricing to position us strongly in competitive deals and to help us expand the market to new mainstream customers. We believe there are many underserved mainstream customers that lack visibility into their broader environments, in part due to the complexity and cost structure for existing CNAP offers. And finally, we believe accelerating cloud security adoption via exposure command will further support DNR growth. As customers know well, you can't effectively monitor and respond to threats without visibility into your attack surface. and having visibility into your full environment is a driver for greater urgency around monitoring and responding to threats. As we look ahead, we believe that the long-term investments we are prioritizing this year in the three critical areas I just described, supporting the ,, building our partner ecosystem, and accelerating mainstream cloud adoption, will ultimately deliver the best security outcomes and the strongest economic value for our customers. We remain steadfast. and our commitment to enhancing value for our shareholders, and we are working to capture upside and opportunity through our focused strategic plan. We're currently in the market with our two flagship offerings, exposure command and detection response, to address the highest priority areas of spending within security operations. We continue to innovate on our underlying product capabilities and improve our land and expand motions to meet customers' needs in the existing market. We're confident that our recently streamlined leadership organization focused on profitability and efficient growth and a clear strategy to provide leading security operations platform to mainstream enterprise customers will support long-term growth for Rapid7. 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.