Sign in
RI

Rapid7, Inc. (RPD)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 revenue and non-GAAP operating income exceeded prior guidance, while ARR growth slowed to 4% YoY to $837.2M; management cited lengthening sales cycles and budget caution, especially in U.S. mid-market, and expects ARR to improve in 2H 2025 .
  • Detection & Response (D&R) remains the growth engine (now >50% of ARR, mid-teens growth), offset by pressure in traditional vulnerability management; several seven‑figure D&R deals slipped from March into April but largely closed thereafter .
  • Guidance reset: FY25 ARR lowered/widened to $850–$880M, FY25 revenue to $853–$863M; FY25 non‑GAAP operating income maintained at $125–$135M; FY25 FCF cut to $125–$135M; Q2 revenue guided to $211–$213M and EPS $0.43–$0.46 .
  • Strategic catalysts: launch of MDR for Enterprise (customizable for complex environments), Intelligence Hub in Command Platform, and India SOC/innovation center expansion to improve scale and efficiency .

What Went Well and What Went Wrong

What Went Well

  • D&R momentum: Over half of ARR now from D&R with mid‑teens growth; persistent demand and managed MDR representing >75% of D&R .
  • Operational discipline: Non‑GAAP operating income of $32.4M and adjusted EBITDA of $38.9M; total non‑GAAP gross margin expanded to 75% .
  • International strength: Rest of world revenue grew 10% YoY to $52.3M (25% mix), supporting resiliency and diversification .
  • Management quote: “We are executing with increased focus and urgency… We believe these steps position us for improved ARR in the second half of the year and beyond.” — Corey Thomas, CEO .

What Went Wrong

  • ARR below plan: Ending ARR $837.2M (+4% YoY) missed internal expectations due to VM pressure and delayed new deals amid cautious spending .
  • North America softness: NA revenue flat YoY in Q1; pressure pronounced in U.S. mid‑market and sectors like healthcare, education, and state/local .
  • Risk & exposure management headwinds: Ongoing negative growth in traditional VM and slower-than-expected upgrade velocity to Exposure Command .

Financial Results

P&L, Profitability, Cash Flow (quarterly comparisons)

MetricQ3 2024Q4 2024Q1 2025
Total Revenue ($M)$214.654 $216.261 $210.253
Product Subscriptions Rev ($M)$205.593 $206.328 $203.935
Professional Services Rev ($M)$9.061 $9.933 $6.318
GAAP Gross Margin (%)71% 70% 72%
Non-GAAP Gross Margin (%)74% 73% 75%
Non-GAAP Operating Income ($M)$43.952 $39.995 $32.353
Adjusted EBITDA ($M)$50.083 $46.310 $38.898
GAAP Diluted EPS ($)$0.22 $0.03 $0.03
Non-GAAP Diluted EPS ($)$0.66 $0.48 $0.49
Cash from Operations ($M)$43.969 $63.773 $29.757
Free Cash Flow ($M)$38.502 $58.842 $24.677

Revenue Mix by Geography (quarterly)

MetricQ3 2024Q4 2024Q1 2025
North America Revenue ($M)$163.730 $163.014 $157.945
Rest of World Revenue ($M)$50.924 $53.247 $52.308

KPIs (ARR and customer metrics)

KPIQ3 2024Q4 2024Q1 2025
ARR ($M)$823.104 $839.819 $837.220
Customers (#)11,619 11,727 11,685
ARR per Customer ($K)$70.8 $71.6 $71.6

Actuals vs Wall Street Consensus and Guidance (Q1 2025)

MetricPrior Year (Q1 2024)Q1 2025 ActualConsensus (Q1 2025)vs Consensus
Revenue ($M)$205.101 $210.253 $207.929*Beat
Non-GAAP Diluted EPS ($)$0.55 $0.49 $0.344*Beat

Values with asterisk (*) retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious Guidance (as of Q4 2024)Current Guidance (as of Q1 2025)Change
ARR ($M)FY 2025$870–$890 $850–$880 Lowered and widened
Revenue ($M)FY 2025$860–$870 $853–$863 Lowered
Non-GAAP Operating Income ($M)FY 2025$125–$135 $125–$135 Maintained
Non-GAAP Diluted EPS ($)FY 2025$1.72–$1.85 $1.78–$1.91 Raised
Free Cash Flow ($M)FY 2025~$135 $125–$135 Lowered
Revenue ($M)Q2 2025N/A$211–$213 New
Non-GAAP Operating Income ($M)Q2 2025N/A$30–$32 New
Non-GAAP Diluted EPS ($)Q2 2025N/A$0.43–$0.46 New
Weighted Avg Diluted Shares (M)Q2 2025N/A75.3 New

Management rationale: lower ARR from slower upgrade velocity and macro caution; profitability intact due to cost discipline; FCF adjusted for billings/collections under lower ARR outlook .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2024 and Q4 2024)Current Period (Q1 2025)Trend
AI/technology initiativesCommand Platform launched; Vector Command; expanded detections; AI-driven SIEM recognized in IDC assessments Intelligence Hub added; MDR for Enterprise launched; AI leveraged in SOC for efficiency Expanding AI footprint and customization
Macro/tariffsStable customer spending in Q4; international strength Lengthening cycles; mid-market caution; sector pressures; tariff and cost concerns noted by customers More cautious; broader variability
Product performanceD&R double-digit growth; ~$400M ARR; Exposure Command pipeline building D&R mid-teens growth; VM negative growth; upgrade cycle slower than expected D&R resilient; VM pressured
Regional trendsInternational revenue +14% in Q4; 25% mix; NA slower International +10% in Q1; NA flat; Europe healthy, U.S. mid-market weaker International outperforms
Regulatory/legalFedRAMP “In Process” for InsightGovCloud Continued government engagement; India events and dialogues Building public sector opportunity
R&D execution / cost structurePlan to invest ~$30M in 2025; India SOC/innovation center to scale India GCC open; efficiency and margin leverage via AI and talent On track; operational leverage emerging

Management Commentary

  • “Detection and response continued as the core growth driver of our business… This business now represents over half of our total ARR and maintained mid-teens growth” — Corey Thomas .
  • “Our risk and exposure management business… missed our expectations with continued growth deceleration” — Corey Thomas .
  • “Operating income for the first quarter was $32 million and above our guided range… Adjusted EBITDA was $39 million… non‑GAAP EPS was $0.49” — Tim Adams .
  • “We are lowering and widening our full year ARR range to $850 million to $880 million… and adjusting our full year free cash flow guidance to $125 million to $135 million” — Tim Adams .
  • “We launched MDR for Enterprise… delivering broad visibility and coverage with deep customization” — Rapid7 product announcement .

Q&A Highlights

  • Upgrade cycle pacing: Exposure Command upgrades constrained by mid‑market budgets; focus on packaging/pricing and partner enablement to accelerate migrations .
  • D&R deal slippage: Several large Q1 D&R deals in education/retail slipped into April and largely closed; Q2 ARR expected to be modestly up, with 2H weighting for FY25 .
  • Competitive landscape: Integrated exposure management strategy vs traditional VM; aim to make customers stickier via platform consolidation and MDR cross‑sell .
  • Regional/sector color: Strength in larger enterprises and Europe; pressure in healthcare, education, state/local; D&R projects still closing despite scrutiny .
  • India SOC efficiency: AI and automation in SOC are primary margin drivers; India expansion also supports time‑zone coverage and international growth .

Estimates Context

  • Q1 2025 beats: Revenue $210.253M vs $207.929M*; non‑GAAP diluted EPS $0.49 vs $0.344* — both above consensus. Management also said revenue and operating income were above guided ranges .
  • Q2 2025 guidance vs Street: Revenue $211–$213M vs $212.058M*; EPS $0.43–$0.46 vs $0.443* — essentially in‑line at midpoints .
  • FY 2025 Street vs guidance: Revenue consensus $857.561M* vs guidance $853–$863; EPS consensus $2.053* vs guidance $1.78–$1.91 — Street slightly above management’s updated range .

Values with asterisk (*) retrieved from S&P Global.

Key Takeaways for Investors

  • D&R resilience and platform stickiness remain the cornerstone; prioritize evidence of continued mid‑teens D&R growth and conversion of slipped large deals as near‑term support for the stock .
  • Watch upgrade velocity in risk/exposure: faster migrations to Exposure Command are the swing factor for ARR reacceleration in 2H; monitor packaging/pricing changes and partner‑led motion .
  • Profitability intact: Non‑GAAP OI guidance maintained despite ARR reset; FCF range modestly reduced — supports medium‑term thesis around leverage from AI and India SOC .
  • International mix rising: ROW growth outpaces NA; continued strength in Europe/APAC and enterprise customers can offset U.S. mid‑market caution .
  • New MDR for Enterprise and Intelligence Hub are catalysts to expand TAM and deal sizes; track enterprise wins and attach of AI capabilities across Command .
  • Valuation sensitivity to ARR narrative: Given Street’s FY25 consensus above guidance, estimate revisions may drift lower unless upgrade velocity improves; focus on 2H milestones and ARR trajectory .
  • Near‑term trading: Expect volatility around ARR commentary and macro headlines; upside scenarios tied to demonstrated Exposure Command upgrades and incremental MDR enterprise wins .