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Rapid7 Announces Third Quarter 2021 Financial Results

  • Annualized recurring revenue (ARR) of $550.0 million, an increase of 38% year-over-year
  • Revenue of $139.9 million, up 33% year-over-year; Products revenue of $131.1 million, up 33% year-over-year
  • Total customer growth of 17% year-over-year
  • Total ARR per customer growth of 18% year-over-year

BOSTON, Nov. 03, 2021 (GLOBE NEWSWIRE) -- Rapid7, Inc. (Nasdaq: RPD), a leading provider of security analytics and automation, today announced its financial results for the third quarter of 2021.

“Rapid7 delivered milestone results during the third quarter as we ended the period with $550 million in ARR, growth of 38% over the prior year. This performance was driven by accelerating demand for our security transformation solutions and sustained growth in vulnerability management, coupled with our recent acquisition of IntSights,” said Corey Thomas, Chairman and CEO of Rapid7.

“We remain focused on helping customers navigate an increasingly complex security landscape with an expanding set of capabilities on our Insight Platform, and have been pleased with the early customer reception to our recent addition of threat intelligence capabilities. Our third quarter results clearly demonstrate how we are delivering on our customer mission while executing against our dual mandate to drive durable growth while expanding profitability and free cash flow over time.”

Third Quarter 2021 Financial Results and Other Metrics

 Three Months Ended September 30,
 2021 2020 % Change
 (dollars in thousands)
Annualized recurring revenue$550,044  $398,725  38%
Number of customers (1) 9,909  8,442  17%
ARR per customer (1)$55.5  $47.2  18%
(1) Number of customers and ARR per customer are based on our new customer count methodology provided at our virtual investor day on March 10, 2021. Prior period amounts have been revised to conform with these modified definitions, which are also provided in the Non-GAAP Financial Measures and Other Metrics section below.


 Three Months Ended September 30,
 2021 2020 % Change
 (in thousands, except per share data)
Products revenue$131,149   $98,559   33%
Professional services revenue8,745   6,516   34%
Total revenue$139,894   $105,075   33%
      
North America revenue$112,337   $87,612   28%
Rest of world revenue27,557   17,463   58%
Total revenue$139,894   $105,075   33%
      
GAAP gross profit$96,424   $74,047    
GAAP gross margin69 % 70 %  
Non-GAAP gross profit$102,838   $77,613    
Non-GAAP gross margin74 % 74 %  
      
GAAP loss from operations$(34,315)  $(17,916)   
GAAP operating margin(25)% (17)%  
Non-GAAP income from operations$5,733   $2,444    
Non-GAAP operating margin4 % 2 %  
      
GAAP net loss$(37,700)  $(25,541)   
GAAP net loss per share, basic and diluted$(0.67)  $(0.50)   
Non-GAAP net income$3,443   $25    
Non-GAAP net income per share, basic$0.06   $0.00    
Non-GAAP net income per share, diluted$0.06   $0.00    
      
Adjusted EBITDA$9,911   $5,791    
      
Net cash provided by operating activities$19,448   $11,078    
Free cash flow$14,327   $6,449    

For additional details on the reconciliation of non-GAAP measures and certain other business metrics to their nearest comparable GAAP measures, please refer to the accompanying financial data tables included in this press release.

Recent Business Highlights

  • In October 2021, Rapid7 launched Project Doppler, a free and simple tool that allows organizations of any size to quickly gain insights into their external attack surface. Project Doppler was developed to enable customers to leverage data from Rapid7’s existing security research projects including Project Sonar, which scans the internet to identify exposures, and Project Heisenberg, a globally-distributed honeypot network that monitors for potentially malicious activity.
  • In October 2021, Rapid7 announced plans to expand its US presence with a new office in Tampa, Florida, to support the company's long term growth objectives across engineering, development, support, and other operational business roles.
  • In September 2021, Rapid7 announced that it issued a notice of redemption for the remaining $45.4 million in aggregate principal amount of its outstanding convertible senior notes due 2023.

Fourth Quarter and Full-Year 2021 Guidance

Rapid7 anticipates annualized recurring revenue, revenue, non-GAAP (loss) income from operations, non-GAAP net loss per share and free cash flow to be in the following ranges:

Fourth Quarter and Full-Year 2021 Guidance (in millions, except per share data)
        
 Fourth Quarter 2021 Full-Year 2021
Annualized recurring revenue  Approximately $586
Revenue$144.9to$146.5  $528.7
to$530.3 
Year-over-year growth28%to29%  28%to29% 
Non-GAAP (loss) income from operations$(6.7)  $7.0 
Non-GAAP net loss per share$(0.18)  $(0.07) 
Weighted average shares outstanding, basic57.0  55.2 
Free cash flow  Approximately $25.0

The guidance provided above is forward-looking in nature. Actual results may differ materially. See the cautionary note regarding “Forward-Looking Statements” below. Guidance for the fourth quarter and full-year 2021 does not include any potential impact of foreign exchange gains or losses. The guidance provided above is based on a number of assumptions, estimates and expectations as of the date of this press release and, while presented with numerical specificity, this guidance is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond Rapid7's control and are based upon specific assumptions with respect to future business decisions or economic conditions, some of which may change. Rapid7 undertakes no obligation to update guidance after this date.

Non-GAAP guidance excludes estimates for stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs, and certain other items. Rapid7 has provided a reconciliation of each non-GAAP guidance measure to the most comparable GAAP measures in the financial statement tables included in this press release. The reconciliation does not reflect any items that are unknown at this time, such as litigation-related expenses, which we are not able to predict without unreasonable effort due to their inherent uncertainty.

Conference Call and Webcast Information

Rapid7 will host a conference call today, November 3, 2021, to discuss its results at 4:30 p.m. Eastern Time. The call will be accessible by telephone at 877-357-4230 (domestic) or 629-228-0721 (international). The call will also be available live via webcast on Rapid7's website at https://investors.rapid7.com. A telephone replay of the conference call will be available at 855-859-2056 or 404-537-3406 (access code 7158634) until November 10, 2021. A webcast replay will be available at https://investors.rapid7.com.

About Rapid7

Rapid7 (Nasdaq: RPD) is advancing security with visibility, analytics, and automation delivered through our Insight Platform. Our solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks. Over 9,900 customers rely on Rapid7 technology, services, and research to improve security outcomes and securely advance their organizations. For more information, visit our website, check out our blog, or follow us on Twitter.

Non-GAAP Financial Measures and Other Metrics

To supplement our consolidated financial statements, which are prepared and presented in accordance with generally accepted accounting principles in the United States, or GAAP, we provide investors with certain non-GAAP financial measures and other metrics, which we believe are helpful to our investors. We use these non-GAAP financial measures and other metrics for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We also use certain non-GAAP financial measures as performance measures under our executive bonus plan. We believe that these non-GAAP financial measures and other metrics provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.

While our non-GAAP financial measures are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, you should review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not rely on any single financial measure to evaluate our business.

Non-GAAP Financial Measures

We disclose the following non-GAAP financial measures: non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) per share, adjusted EBITDA and free cash flow. We also disclose non-GAAP gross margin and non-GAAP operating margin derived from these financial measures.

We define non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt discount and issuance costs and certain other items such as acquisition-related expenses, litigation-related expenses and induced conversion expense. Non-GAAP net income (loss) per basic and diluted share is calculated as non-GAAP net income (loss) divided by the weighted average shares used to compute net income (loss) per share, with the number of weighted average shares decreased to reflect the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes.

We believe these non-GAAP financial measures are useful to investors in assessing our operating performance due to the following factors:

Stock-based compensation expense. We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense. We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.

Amortization of acquired intangible assets. We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the intangible assets are valued at the time of acquisition and are amortized over several years after the acquisition.

Amortization of debt discount and issuance costs. The expense for the amortization of debt discount and debt issuance costs related to our convertible senior notes and revolving credit facility is a non-cash item, and we believe the exclusion of this interest expense provides a more useful comparison of our operational performance in different periods.

Induced conversion expense. In conjunction with the first quarter of 2021 partial repurchase of our 1.25% convertible senior notes due 2023, we incurred an induced conversion expense of $2.7 million. We exclude induced conversion expense because this amount is not indicative of the performance of, or trends in, our business and neither is comparable to the prior period nor predictive of future results.

Litigation-related expenses. We exclude certain litigation-related expenses consisting of professional fees and related costs incurred by us related to significant litigation outside the ordinary course of business. We believe it is useful to exclude such expenses because we do not consider such amounts to be part of our ongoing operations.

Acquisition-related expenses. We exclude acquisition-related expenses as costs that are unrelated to the current operations and neither are comparable to the prior period nor predictive of future results. Our acquisition-related expenses for the three and nine months ended September 30, 2021 include $9.0 million of tax expense related to the sale of acquired intellectual property through an intercompany transaction related to the Alcide acquisition.

Anti-dilutive impact of capped call transaction. Our capped calls transactions are intended to offset potential dilution from the conversion features in our convertible senior notes. Although we cannot reflect the anti-dilutive impact of the capped call transactions under GAAP, we do reflect the anti-dilutive impact of the capped call transactions in non-GAAP net income (loss) per diluted share, when applicable, to provide investors with useful information in evaluating our financial performance on a per share basis.

Adjusted EBITDA (non-GAAP). Adjusted EBITDA is a non-GAAP measure that we define as net loss before (1) interest income, (2) interest expense, (3) other income (expense), net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, and (8) certain other items. We believe that the use of adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods.

Free Cash Flow. Free cash flow is a non-GAAP measure that we define as net cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business and an important part of the compensation provided to our employees.

Other Metrics

Annualized Recurring Revenue (ARR). ARR is defined as the annual value of all recurring revenue related contracts in place at the end of the period. ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or replace these items. ARR is not a forecast of future revenue and can be impacted by contract start and end dates and renewal rates, and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of operations.

Number of Customers. We define a customer as any entity that has an active Rapid7 recurring revenue contract as of the specified measurement date, excluding InsightOps and Logentries only customers with a contract value less than $2,400 per year.

ARR per Customer. We define ARR per customer as ARR divided by the number of customers at the end of the period.

Cautionary Language Concerning Forward-Looking Statements

This press release includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, the statements regarding our financial guidance for the fourth quarter and full-year 2021, the assumptions underlying such guidance and the timing of global economic recovery and the anticipated impact of COVID-19 on our guidance, business, financial condition, and results of operations. Our use of the words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “will” and similar expressions are intended to identify forward-looking statements. The events described in our forward-looking statements are subject to a number of risks and uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements. Risks that could cause or contribute to such differences include, but are not limited to, risks arising from the ongoing COVID-19 pandemic, fluctuations in our quarterly results, failure to meet our publicly announced guidance or other expectations about our business, our rapid growth and ability to sustain our revenue growth rate, the ability of our products and professional services to correctly detect vulnerabilities, our customers renewal of their subscriptions with us, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, our sales cycles, our ability to integrate acquired companies, our ability to operate in compliance with applicable laws as well as other risks and uncertainties set forth in the “Risk Factors” section of our most recent Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission (the “SEC”) on August 5, 2021 and in the subsequent reports that we file with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those expressed in any forward-looking statements we may make. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.

Investor contact:

Sunil Shah
Vice President, Investor Relations
investors@rapid7.com
(617) 865-4277

Press contact:

Caitlin O'Connor
Senior Public Relations Manager
press@rapid7.com
(857) 990-4240

RAPID7, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands)

  September 30, 2021 December 31, 2020
Assets    
Current assets:    
Cash and cash equivalents $227,104   $173,617  
Short-term investments 77,145   138,839  
Accounts receivable, net 96,775   111,599  
Deferred contract acquisition and fulfillment costs, current portion 25,863   21,536  
Prepaid expenses and other current assets 27,079   27,844  
Total current assets 453,966   473,435  
Long-term investments 5,364   10,124  
Property and equipment, net 49,034   53,114  
Operating lease right-of-use assets 62,105   67,178  
Deferred contract acquisition and fulfillment costs, non-current portion 48,548   43,103  
Goodwill 515,297   213,601  
Intangible assets, net 115,746   44,296  
Other assets 10,820   8,271  
Total assets $1,260,880   $913,122  
Liabilities and Stockholders’ Equity (Deficit)    
Current liabilities:    
Accounts payable $7,514   $3,860  
Accrued expenses 57,975   61,677  
Operating lease liabilities, current portion 9,395   9,612  
Deferred revenue, current portion 316,045   278,585  
Convertible senior notes, current portion, net 44,804     
Other current liabilities 809     
Total current liabilities 436,542   353,734  
Convertible senior notes, non-current portion, net 811,068   378,586  
Operating lease liabilities, non-current portion 69,418   75,737  
Deferred revenue, non-current portion 27,905   31,365  
Other long-term liabilities 20,950   2,164  
Total liabilities 1,365,883   841,586  
Stockholders’ equity (deficit):    
Common stock 564   522  
Treasury stock (4,764)  (4,764) 
Additional paid-in-capital 591,529   692,603  
Accumulated other comprehensive (loss) income (929)  454  
Accumulated deficit (691,403)  (617,279) 
Total stockholders’ equity (deficit) (105,003)  71,536  
Total liabilities and stockholders’ equity (deficit) $1,260,880   $913,122  


RAPID7, INC.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)

 Three Months Ended September 30, Nine Months Ended September 30,
 2021 2020 2021 2020
Revenue:       
Products$131,149   $98,559   $359,581   $278,538  
Professional services8,745   6,516   24,185   19,789  
Total revenue139,894   105,075   383,766   298,327  
Cost of revenue:       
Products36,497   25,196   99,315   69,569  
Professional services6,973   5,832   19,753   18,254  
Total cost of revenue43,470   31,028   119,068   87,823  
Total gross profit96,424   74,047   264,698   210,504  
Operating expenses:       
Research and development43,880   28,509   112,265   78,831  
Sales and marketing63,041   48,448   174,264   141,552  
General and administrative23,818   15,006   57,527   43,589  
Total operating expenses130,739   91,963   344,056   263,972  
Loss from operations(34,315)  (17,916)  (79,358)  (53,468) 
Other income (expense), net:       
Interest income84   87   302   1,343  
Interest expense(2,962)  (7,328)  (11,415)  (16,707) 
Other income (expense), net(299)  143   (1,217)  (94) 
Loss before income taxes(37,492)  (25,014)  (91,688)  (68,926) 
Provision for income taxes208   527   10,021   1,005  
Net loss$(37,700)  $(25,541)  $(101,709)  $(69,931) 
Net loss per share, basic and diluted$(0.67)  $(0.50)  $(1.86)  $(1.38) 
Weighted-average common shares outstanding, basic and diluted55,976,671   51,293,210   54,743,538   50,707,553  


RAPID7, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)

 Three Months Ended September 30, Nine Months Ended September 30,
 2021 2020 2021 2020
Cash flows from operating activities:       
Net loss$(37,700)  $(25,541)  $(101,709)  $(69,931) 
Adjustments to reconcile net loss to cash provided by operating activities:       
Depreciation and amortization9,745   5,928   23,513   16,347  
Amortization of debt discount and issuance costs1,095   5,206   2,886   12,213  
Stock-based compensation expense29,196   17,128   73,872   46,921  
Deferred income taxes      3,924     
Induced conversion expense      2,740     
Other209   921   1,655   1,981  
Change in operating assets and liabilities:       
Accounts receivable10,706   2,393   23,522   13,228  
Deferred contract acquisition and fulfillment costs(4,319)  (2,284)  (9,772)  (5,278) 
Prepaid expenses and other assets2,697   (421)  3,091   1,352  
Accounts payable3,408   1,785   2,079   1,922  
Accrued expenses3,038   4,358   (4,554)  (3,079) 
Deferred revenue2,169   1,540   24,389   (10,456) 
Other liabilities(796)  65   3,593   (915) 
Net cash provided by operating activities19,448   11,078   49,229   4,305  
Cash flows from investing activities:       
Business acquisition, net of cash acquired(306,000)  (55)  (358,420)  (125,826) 
Purchases of property and equipment(2,164)  (3,170)  (4,835)  (7,125) 
Capitalization of internal-use software costs(2,957)  (1,459)  (7,162)  (4,407) 
Purchases of investments   (59,451)  (59,308)  (108,710) 
Sales/maturities of investments36,900   9,000   124,838   155,599  
Other investments(1,500)     (3,000)    
Net cash used in investing activities(275,721)  (55,135)  (307,887)  (90,469) 
Cash flows from financing activities:       
Proceeds from issuance of convertible senior notes, net of issuance costs paid(416)  (701)  585,024   222,799  
Purchase of capped calls related to convertible senior notes      (76,020)  (27,255) 
Payments of debt issuance costs   (163)     (411) 
Payments for repurchase of convertible senior notes      (184,649)    
Payments related to business acquisitions(9,687)  (150)  (12,118)  (150) 
Taxes paid related to net share settlement of equity awards(4,701)  (2,534)  (11,372)  (5,984) 
Proceeds from employee stock purchase plan4,809   3,736   9,276   7,082  
Proceeds from stock option exercises749   2,491   3,279   6,219  
Net cash (used in) provided by financing activities(9,246)  2,679   313,420   202,300  
Effects of exchange rates on cash, cash equivalents and restricted cash(556)  461   (849)  160  
Net (decrease) increase in cash, cash equivalents and restricted cash(266,075)  (40,917)  53,913   116,296  
Cash, cash equivalents and restricted cash, beginning of period493,605   280,626   173,617   123,413  
Cash, cash equivalents and restricted cash, end of period$227,530   $239,709   $227,530   $239,709  


RAPID7, INC.    
GAAP to Non-GAAP Reconciliation (Unaudited)    
(in thousands, except share and per share data) 

 Three Months Ended September 30, Nine Months Ended September 30,
 2021 2020 2021 2020
GAAP gross profit$96,424   $74,047   $264,698   $210,504  
Add: Stock-based compensation expense11,604   1,132   4,970   3,194  
Add: Amortization of acquired intangible assets24,810   2,434   10,471   6,267  
Non-GAAP gross profit$102,838   $77,613   $280,139   $219,965  
Non-GAAP gross margin73.5 % 73.9 % 73.0 % 73.7 %
        
GAAP gross profit - Products$94,652   $73,363   $260,266   $208,969  
Add: Stock-based compensation expense1,073   730   3,291   2,013  
Add: Amortization of acquired intangible assets4,810   2,434   10,471   6,267  
Non-GAAP gross profit - Products$100,535   $76,527   $274,028   $217,249  
Non-GAAP gross margin - Products76.7 % 77.6 % 76.2 % 78.0 %
        
GAAP gross profit - Professional services$1,772   $684   $4,432   $1,535  
Add: Stock-based compensation expense531   402   1,679   1,181  
Non-GAAP gross profit - Professional services$2,303   $1,086   $6,111   $2,716  
Non-GAAP gross margin - Professional services26.3 % 16.7 % 25.3 % 13.7 %
        
GAAP loss from operations$(34,315)  $(17,916)  $(79,358)  $(53,468) 
Add: Stock-based compensation expense129,196   17,128   73,872   46,921  
Add: Amortization of acquired intangible assets25,567   2,581   11,524   6,556  
Add: Acquisition-related expenses35,180      7,211   1,138  
Add: Litigation-related expenses4105   651   459   1,629  
Non-GAAP income from operations$5,733   $2,444   $13,708   $2,776  
        
GAAP net loss$(37,700)  $(25,541)  $(101,709)  $(69,931) 
Add: Stock-based compensation expense129,196   17,128   73,872   46,921  
Add: Amortization of acquired intangible assets25,567   2,581   11,524   6,556  
Add: Acquisition-related expenses35,180      16,176   1,138  
Add: Litigation-related expenses4105   651   459   1,629  
Add: Amortization of debt discount and issuance costs1,095   5,206   2,886   12,213  
Add: Induced conversion expense      2,740     
Non-GAAP net income (loss)$3,443   $25   $5,948   $(1,474) 
        
Reconciliation of net income (loss) per share, basic       
GAAP net loss per share, basic$(0.67)  $(0.50)  $(1.86)  $(1.38) 
Non-GAAP adjustments to net loss0.73   0.50   1.97   1.35  
Non-GAAP net income (loss) per share, basic$0.06   $0.00   $0.11   $(0.03) 
        
Reconciliation of net income (loss) per share, diluted       
GAAP net loss per share, diluted$(0.67)  $(0.50)  $(1.86)  $(1.38) 
Non-GAAP adjustments to net loss0.73   0.50   1.96   1.35  
Non-GAAP net income (loss) per share, diluted$0.06   $0.00   $0.10   $(0.03) 


Weighted average shares used in GAAP per share calculation, basic and diluted55,976,671  51,293,210  54,743,538  50,707,553 
        
Weighted average shares used in non-GAAP per share calculation:       
Basic55,976,671  51,293,210  54,743,538  50,707,553 
Diluted58,376,992  53,894,202  57,181,646  50,707,553 
        
1 Includes stock-based compensation expense as follows:       
Cost of revenue$1,604  $1,132  $4,970  $3,194 
Research and development14,549  6,818  31,784  17,852 
Sales and marketing6,348  4,506  18,132  12,529 
General and administrative6,695  4,672  18,986  13,346 
        
2 Includes amortization of acquired intangible assets as follows:       
Cost of revenue$4,810  $2,434  $10,471  $6,267 
Sales and marketing587  31  793  143 
General and administrative170  116  260  146 
        
3 Includes acquisition-related expenses as follows:       
Research and development$40  $  $40  $ 
Sales and marketing153    275   
General and administrative4,987    6,896  1,138 
Provision for income taxes    8,965   
        
4 Includes litigation-related expenses as follows:       
General and administrative$105  $651  $459  $1,629 


RAPID7, INC.
Reconciliation of Net Loss to Adjusted EBITDA (Unaudited)
(in thousands)

 Three Months Ended September 30, Nine Months Ended September 30,
 2021 2020 2021 2020
GAAP net loss$(37,700)  $(25,541)  $(101,709)  $(69,931) 
Interest income(84)  (87)  (302)  (1,343) 
Interest expense2,962   7,328   11,415   16,707  
Other (income) expense, net299   (143)  1,217   94  
Provision for income taxes208   527   10,021   1,005  
Depreciation expense3,155   2,706   9,202   8,121  
Amortization of intangible assets6,590   3,222   14,311   8,226  
Stock-based compensation expense29,196   17,128   73,872   46,921  
Acquisition-related expenses5,180      7,211   1,138  
Litigation-related expenses105   651   459   1,629  
Adjusted EBITDA$9,911   $5,791   $25,697   $12,567  


RAPID7, INC.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (Unaudited)
(in thousands)

 Three Months Ended September 30, Nine Months Ended September 30,
 2021 2020 2021 2020
Net cash provided by operating activities$19,448   $11,078   $49,229   $4,305  
Less: Purchases of property and equipment(2,164)  (3,170)  (4,835)  (7,125) 
Less: Capitalized internal-use software costs(2,957)  (1,459)  (7,162)  (4,407) 
Free cash flow$14,327   $6,449   $37,232   $(7,227) 


Fourth Quarter and Full-Year 2021 Guidance
GAAP to Non-GAAP Reconciliation    
(in millions, except per share data)

 Fourth Quarter Full-Year
 2021 2021
Reconciliation of GAAP to non-GAAP (loss) income from operations:   
Anticipated GAAP loss from operations$(42.8)  $(122.2) 
Add: Anticipated stock-based compensation expense30.3   104.2  
Add: Anticipated amortization of acquired intangible assets5.8   17.3  
Add: Anticipated acquisition-related expenses   7.2  
Add: Anticipated litigation-related expenses   0.5  
Anticipated non-GAAP (loss) income from operations$(6.7)  $7.0  
    
Reconciliation of GAAP to non-GAAP net loss:   
Anticipated GAAP net loss$(47.7)  $(149.3) 
Add: Anticipated stock-based compensation expense30.3   104.2  
Add: Anticipated amortization of acquired intangible assets5.8   17.3  
Add: Anticipated acquisition-related expenses   16.2  
Add: Anticipated litigation-related expenses   0.5  
Add: Anticipated amortization of debt issuance costs1.6   4.5  
Add: Anticipated induced conversion expense   2.7  
Anticipated non-GAAP net loss$(10.0)  $(3.9) 
    
Anticipated GAAP net loss per share, basic and diluted$(0.84)  $(2.70) 
Anticipated non-GAAP net loss per share, basic and diluted$(0.18)  $(0.07) 
    
Weighted average shares used in per share calculation, basic and diluted57.0   55.2  

The reconciliation does not reflect any items that are unknown at this time, such as litigation-related expenses, which we are not able to predict without unreasonable effort due to their inherent uncertainty. As a result, the estimates shown for Anticipated GAAP loss from operations, Anticipated GAAP net loss and Anticipated GAAP net loss per share are expected to change.

 Full-Year 2021
Reconciliation of net cash provided by operating activities to free cash flow: 
Net cash provided by operating activities$43.5  
Purchases of property and equipment(8.0) 
Capitalized internal-use software costs(10.5) 
Free cash flow$25.0