Cybersecurity software maker Rapid7 (NASDAQ:RPD) reported results in line with analysts' expectations in Q1 CY2024, with revenue up 12% year on year to $205.1 million. On the other hand, next quarter's revenue guidance of $204 million was less impressive, coming in 2.7% below analysts' estimates. It made a non-GAAP profit of $0.55 per share, improving from its profit of $0.16 per share in the same quarter last year.
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Rapid7 (RPD) Q1 CY2024 Highlights:
- Revenue: $205.1 million vs analyst estimates of $204 million (small beat)
- EPS (non-GAAP): $0.55 vs analyst estimates of $0.54 (2.2% beat)
- Revenue Guidance for Q2 CY2024 is $204 million at the midpoint, below analyst estimates of $209.6 million
- The company dropped its revenue guidance for the full year from $852 million to $833 million at the midpoint, a 2.2% decrease
- Gross Margin (GAAP): 70.3%, up from 69.4% in the same quarter last year
- Free Cash Flow of $27.53 million, down 54.3% from the previous quarter
- Annual Recurring Revenue: $807.2 million at quarter end, up 10.9% year on year
- Customers: 11,462, down from 11,526 in the previous quarter
- Market Capitalization: $2.88 billion
Founded in 2000 with the idea that network security comes before endpoint security, Rapid7 (NASDAQ:RPD) provides software as a service that helps companies understand where they are exposed to cyber security risks, quickly detect breaches and respond to them.
Vulnerability ManagementThe demand for cybersecurity is growing as more and more businesses are moving their data and processes into the cloud, which along with a major increase in employees working remotely, has increased their exposure to attacks and malware. Additionally, the growing array of corporate IT systems, applications and internet connected devices has increased the complexity of network security, all of which has substantially increased the demand for software meant to protect data breaches.
Sales GrowthAs you can see below, Rapid7's revenue growth has been strong over the last three years, growing from $117.5 million in Q1 2021 to $205.1 million this quarter.
This quarter, Rapid7's quarterly revenue was once again up 12% year on year. However, the company's revenue actually decreased by $167,000 in Q1 compared to the $6.43 million increase in Q4 CY2023. Taking a closer look we can a similar revenue decline in the same quarter last year, which could suggest that the business has seasonal elements. Regardless, this situation is worth monitoring as management is guiding for a further revenue drop in the next quarter.
Next quarter's guidance suggests that Rapid7 is expecting revenue to grow 7.1% year on year to $204 million, slowing down from the 13.7% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 9.3% over the next 12 months before the earnings results announcement.
Customer Growth Rapid7 reported 11,462 customers at the end of the quarter, a decrease of 64 from the previous quarter, suggesting that the company's customer acquisition momentum is slowing. Rapid7 updated its customer count methodology in Q1 2021, which is the reason for the related drop in the number of customers.
Key Takeaways from Rapid7's Q1 Results We struggled to find many strong positives in these results. While this quarter's revenue and EPS narrowly topped Wall Street's estimates, its full-year revenue guidance fell short and its free cash flow was down 54.3% from the previous quarter. Overall, this was a subpar quarter for Rapid7. The company is down 4% on the results and currently trades at $44 per share.