Rapid7, Inc.

Hello and welcome to the Rapid7 first quarter 2025 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. And if you would like to ask a question during this time, please press star 1 on your telephone keypad. I would now like to turn the conference over to Elizabeth Schwach, Head of Investor Relations at Rapid7. You may begin.

Thank you, Operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's first quarter 2025 financial and operating results, in addition to our financial outlook for the second quarter and full fiscal year 2025. 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 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 financial guidance for the second quarter and full year 2025 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 10Q filed today, May 12, 2025, and in the subsequent reports that we file with the FCC. 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. Rabbit 7 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 comments 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? Hello, and thank you to everyone joining us this afternoon. Rapid7 ended the first quarter with revenue and operating income above our guided ranges, while our ARR fell short of our expectations, ending at $837 million, with 4% year-over-year growth. During the quarter, we saw continued strength in the textual response, progress towards stabilizing our risk and exposure management business, and resilience in profitability and free cash flow. In a moment, I'll walk through the details of our performance, but first, I want to remind everyone of the expectations we shared on our last earnings call. We entered 2025 with a clear strategy and commitment to re-accelerate long-term growth and expand free cash flow over time. This strategy rests on three pillars. First, building on our skill and success in detection response, where we have strong customer demand and are well-positioned to sustain growth. Second, upgrading our large vulnerability management customer base to our exposure management platform, which will both increase retention and provide a valuable on-ramp to our DNR platform. And third, improving our underlying cost structure while continuing to innovate by leveraging our new operations center in India and streamlining our processes. In Q1, detection and response continued as the core growth driver of our business from both an ARR and product expansion perspective. This business now represents over half our total ARR and maintained mid-teens growth in the quarter. Our DNR performance would have been even better if not for a few seven-figure deals slipping into the second quarter, which have now since closed. However, our risk and exposure management business continued to see challenges, missing our expectations with continued growth deceleration. While exposure command continued to gain traction, this was offset by ongoing negative growth in our traditional affordability management offerings. A positive note, our investments to improve our cost structure remain on track, setting us up for profitability reacceleration in 2026. Our performance took place in a more challenging macro environment than we anticipated entering the year. We observed customers becoming increasingly cautious and measured about their investments, both in terms of what they purchased and when. Extended deal cycles have become more common across multiple sectors, and many organizations are actively evaluating vendors, reprioritizing budgets, and implementing tighter spending controls. These dynamics are particularly evident in the North American mid-market enterprise segment, which has experienced slower deal cycles. This customer segment is demonstrating greater scrutiny and tighter budget control, trends that are reflected more broadly as customers reassess their priorities and spending commitments. As we've seen in previous periods of economic uncertainty, the pressure is more pronounced in our risk and exposure management products, while our detection and response offerings continue to show resilience. Now let's examine our product-based performance in detail. Our detection response business continues to be our growth engine, anchored by strong momentum in our managed offering. We ended Q1 with over half of our ARR coming from detection response, growing in the mid-teens year over year. This growth is driven by persistent demand trends, particularly for MBR, which represents more than 75% of our DNR business. as customers seek enhanced visibility, broader coverage, and operational efficiency in managing an increasingly complex threat landscape. We believe the detection response market offers attractive and durable tailwinds, and we're still in the early innings of its development. We have spent years investing and laying the foundation to position ourselves to capitalize on this opportunity, and we continue to innovate and invest for growth. This includes our recently announced intelligence hub, which seamlessly integrates threat intelligence into our command platform experience and expanding our capabilities through our recently opened SOC and Innovation Center in India, which will scale over the coming quarters. These investments are helping us deliver services more efficiently while driving better customer outcomes. As organizations increasingly turn to Rapid7 to monitor and respond to threats across complex environments, our integrated platform and MDR expertise continues to stand out in a crowded marketplace. A great example is a first quarter competitive win with a mid-sized enterprise healthcare customer who consolidated their security stack with our managed threat complete solution. They were seeking broader visibility, greater automation, and reduced operational complexity, challenges we were uniquely positioned to address. Our differentiation was clear across several dimensions. Our managed XDR capabilities enable seamless third-party detection response through native integrations with their existing tools. Our AI-powered SIEM and log management offered unlimited ingestion and long-term retention, providing unmatched visibility. Our customizable analytics and automated alert triage streamlined their operations. And we delivered true defense in depth by correlating alerts across multiple sources, not just endpoints, creating a more robust security posture. This win was driven by our technology and strengthened by our partner collaboration and ability to support the customer's goals with speed and clarity. It exemplifies how our consolidated platform continues to drive success in highly competitive environments. With our proven brand, our track record, and the right capabilities to win, we remain excited about the future of this business and expect to continue to drive growth for Rapid7. Now, let's turn to our risk and exposure management business, which is where we experienced the most pressure during the first quarter. As we've shared in recent quarters, we are amid a deliberate shift. transitioning from a traditional standalone VM business to a consolidated, integrated approach to risk and exposure management. We believe customers increasingly need unified visibility across their attack surface with streamlined remediation and smarter risk prioritization. This is what Exposure Command delivers. bringing together vulnerability management, cloud-native application protection, and threat context into a cohesive experience by consolidating risk insights across hybrid environments, automating response workflows, and focusing teams on what truly matters, real, exploitable threats, while helping security teams efficiently secure their expanding attack surface. Our strategy to improve risk and exposure management is centered on driving adoption of exposure command across our VM customer base. And we continue to believe this will stabilize performance and ultimately position the business back to growth. We laid the right foundation in 2024 with our exposure command launch. And today we're actively working to transition our VM install base to this more modern integrated solution. While we've not yet made the full progress we hoped, we're resolute in our strategy, and the key consideration is around timing. The most significant variable in our near-term performance will be the velocity of the upgrade cycle and risk and exposure management. This is where we're focusing our efforts, accelerating migrations, enabling partners, and removing friction points to shorten time to upgrade in what is clearly a more competitive and measured environment. On the go-to-market side, we've completed initial partner and field enablement and are now refining our packaging and pricing to support clear customer paths and more streamlined upgrades. We also recognize the need to better communicate the strength of our CNAP capabilities, which remain a core differentiator, but are still underappreciated in the market. On the product side, we continue to invest in innovation, including several recent enhancements that expand coverage, improve automation, and reinforce our leadership in unified exposure management across hybrid environments. Now, turning to our outlook for the remainder of the year. We remain confident that our strategy can position Rapid7 for sustainable growth and expanding cash flow in the years ahead. Our detection response business continues to perform and remains the primary growth engine, for 2025 as we work to modernize our risk and exposure management platform and return that business to growth. That said, it's clear the environment is more dynamic and fluid than when we initially provided guidance in February. We're seeing greater variability in customer decision cycles, something we experienced firsthand with certain March deals slipping into April. And we recognize that broader policy and budget implications may take additional time to play out. Additionally, we've taken the opportunity to leverage the expertise and input from our new board members to help evaluate and enhance our guidance approach. Given the evolving backdrop and our slower start to the year, we're adjusting our ARR guidance by lowering the overall range and also widening the range to account for increased budgetary uncertainty. Importantly, we are maintaining our expectations for operating profitability, which is a reflection of the operating discipline, flexibility, and resiliency that we built into our model. As we look ahead, our focus remains clear and grounded in three strategic priorities. First, we will continue to drive industry-leading product innovation across both our growing DNR franchise and our established risk and exposure management business. Second, we remain committed to delivering successful outcomes for our customers, helping them navigate increasingly complex threat environments while ensuring clear returns to their security investments. And third, we're focused on driving profitable growth and strong cash generation, including through operational efficiency and continued leverage in our expanded partner ecosystems. Before I turn the call over to our CFO, Tim Adams, to discuss financials, I want to take a moment to welcome our newest addition to our board of directors, Wael Mohammed, Michael Burns, and Kevin Galligan. Each brings expertise that will support our efforts as we navigate a rapidly evolving landscape. We look forward to leveraging their experience to drive growth, enhance our industry leadership, and create value for all our shareholders. With that, I'll turn the call over to Tim to walk through the results in more detail.