Executive Summary

Q4 revenue was $216.3M (+5% YoY) with non‑GAAP EPS of $0.48; full‑year 2024 revenue was $844.0M (+9% YoY) and free cash flow reached $154.1M, at the high end of the outlook range .
Ending ARR rose to $839.8M (+4% YoY); customers reached 11,727 and ARR/customer ticked up to ~$71.6K, reflecting steady platform expansion despite a mixed demand backdrop .
Management guided FY2025 ARR to $870–$890M (+4–6%), revenue to $860–$870M (+2–3%), and FCF of ~$135M, while reinvesting up to ~$30M to accelerate MDR and Exposure Command, which tempers near‑term margin expansion but is aimed at reigniting growth in 2026 .
Key narrative: durable double‑digit growth in Detection & Response (D&R) with MDR as the anchor, an intentional pivot away from stand‑alone VM toward integrated exposure management (Exposure Command), and elongated, larger deal cycles that skew seasonality to 2H—important for near‑term trading setup .

What Went Well and What Went Wrong

What Went Well
- D&R momentum: “Our detection and response business remained a key pillar of strength, delivering double‑digit growth in 2024… now over $400 million in ARR,” with average ARR per D&R customer ~$100K, underscoring strong product‑market fit and expansion potential .
- Channel leverage: bookings are increasingly partner‑led; management cited booking “between 80% to 90% of our new ARR through the channel,” improving efficiency and reach, with Q3 noted at 90% through partners .
- Platform progress: Exposure Command gained early traction; pipeline and conversion rates encouraged management, with added integrations (Microsoft security telemetry, AWS coverage) and FedRAMP “In Process” supporting broader enterprise/federal opportunities .
What Went Wrong
- VM pressure and growth mix: management acknowledged secular pressure in traditional on‑prem VM and “moderately increased churn,” prompting a shift toward integrated exposure management; ARR growth of 4% YoY reflects this transition period .
- Margin headwinds mix: product gross margin was mid‑70s but below prior year on higher hosting costs; non‑GAAP operating margin dipped to 18% in Q4 (vs. 20% in Q3) as mix and reinvestment weighed .
- Elongated, larger deal cycles: more approvals and longer timing for bigger platform deals, especially in North America; management flagged more pronounced seasonality with net new ARR skewed to 2H, impacting near‑term visibility .

Financial Results

Q2–Q4 2024 summary

Metric	Q2 2024	Q3 2024	Q4 2024
Total Revenue ($M)	$208.0	$214.7	$216.3
Product Subscriptions Rev ($M)	$200.1	$205.6	$206.3
Professional Services Rev ($M)	$7.9	$9.1	$9.9
GAAP Gross Margin (%)	71%	71%	70%
Non‑GAAP Gross Margin (%)	74%	74%	73%
Non‑GAAP Op Margin (%)	19%	20%	18%
GAAP EPS (Diluted)	$0.11	$0.22	$0.03
Non‑GAAP EPS (Diluted)	$0.58	$0.66	$0.48
Adjusted EBITDA ($M)	$45.4	$50.1	$46.3
Cash from Ops ($M)	$32.9	$44.0	$63.8
Free Cash Flow ($M)	$29.2	$38.5	$58.8

KPIs and ARR

KPI	Q2 2024	Q3 2024	Q4 2024
Ending ARR ($M)	$815.6	$823.1	$839.8
Customers	11,484	11,619	11,727
ARR per Customer ($K)	71.0	70.8	71.6

Geographic revenue

Region Revenue ($M)	Q2 2024	Q3 2024	Q4 2024
North America	$159.3	$163.7	$163.0
Rest of World	$48.7	$50.9	$53.2

Additional context

Q4 revenue +5% YoY; product subscriptions +6% YoY; ROW +14% YoY; total non‑GAAP gross margin 73% .
Full‑year 2024: revenue $844.0M (+9%), non‑GAAP op income $163.5M (19%), FCF $154.1M (~18% margin) .

Estimates vs. actual

S&P Global consensus was unavailable at time of analysis due to an API rate limit; we could not present consensus vs. actual comparisons. We attempted to retrieve “Primary EPS Consensus Mean” and “Revenue Consensus Mean” for Q4 2024 but were rate‑limited by S&P Global; therefore, consensus comparisons are not included [GetEstimates error].

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
ARR ($M)	FY 2025	N/A	$870–$890; +4–6% YoY	New
Revenue ($M)	Q1 2025	N/A	$207–$209	New
Revenue ($M)	FY 2025	N/A	$860–$870 (+2–3% YoY)	New
Non‑GAAP Op Inc ($M)	Q1 2025	N/A	$23–$25	New
Non‑GAAP Op Inc ($M)	FY 2025	N/A	$125–$135	New
Non‑GAAP EPS (Diluted)	Q1 2025	N/A	$0.33–$0.36 (75.6M shares)	New
Non‑GAAP EPS (Diluted)	FY 2025	N/A	$1.72–$1.85 (77.3M shares)	New
Free Cash Flow ($M)	FY 2025	N/A	~ $135	New

Note: Q4 and FY2024 guidance was provided on Nov 6, 2024; the company exceeded ranges on revenue/operating income in subsequent results, but the table above focuses on the newly introduced 2025 guidance .

Earnings Call Themes & Trends

Topic	Q2 2024 (Q‑2)	Q3 2024 (Q‑1)	Q4 2024 (Current)	Trend
MDR/D&R growth & AI	Emphasized MDR innovation and AI in SOC; consolidated “Threat Complete” drove >40% of new ARR	D&R remains area of strength; double‑digit growth; IDC SIEM leadership cited	D&R ~>$400M ARR; mid‑teens growth; investing further (SOC India, AI)	Positive, sustained
Exposure Command (Exposure Mgmt)	Launch at Black Hat; upsell path from VM and mainstream cloud security adoption	+70% QoQ pipeline creation in risk visibility; early 6‑figure wins	Encouraging pipeline and conversion; modest FY25 plan contribution; secular VM headwinds acknowledged	Building momentum
Partner ecosystem	Pipeline +15% YoY; AWS marketplace traction	90% new ARR via partners; Partner Academy launched	Booking 80–90% via channel; deeper engagement with top partners	Structural tailwind
Deal cycles/seasonality	GTM retooling underway; pipeline stabilization goal	Longer approvals, larger deals; ARR guide tightened; Q4 strong seasonality	Larger deals, elongated cycles; 2025 skew to 2H net new ARR	Still a headwind
Regional mix	International +19% YoY; 23% mix	International +17% YoY; ~25% mix; NA slower	NA improved with fuller portfolio; sector variability (e.g., healthcare)	Mixed, stabilizing
Regulatory/Fed	—	—	FedRAMP “In Process” (InsightGovCloud); federal expansion next year	Optionality emerging

Management Commentary

Strategy and mix: “We spent the last 3 years investing in both technology and service experience to build an MDR product that delivers the scale and accessibility to monitor customer security at a lower total cost… Managed D&R contributes over 3/4 of [D&R] total and is growing in the mid‑teens” .
Exposure management pivot: “As we built out our integrated offering, Exposure Command, we were less competitive in traditional vulnerability management… entering 2025 equipped with a better product profile that positions us to reverse these trends” .
Investment posture: “We’re electing to reinvest up to $30 million… half toward MDR… and [half] accelerating the Exposure Command road map and opening an innovation center in India… we expect to see more of that yield in 2026 and beyond” .
2025 framework: “We expect ending total ARR of $870–$890 million (4% to 6%)… revenue $860–$870 million (2% to 3%)… more pronounced seasonality that reflects larger deal sizes and longer deal cycles” .

Q&A Highlights

Business mix and VM: D&R (especially MDR) mid‑teens growth with ~>$400M ARR; remainder includes cloud VM and legacy products; Exposure Command contributions will be treated as upside to plan given deal‑cycle timing .
MDR margin structure: Managed service carries lower gross margin but AI/India SOC investments should offset; overall product gross margin expected to remain mid‑70s over time .
Retention/VM: Gross retention pressures have stabilized; upgrades from InsightVM to Exposure Command expected to enhance stickiness and expansion .
Competitive dynamics: Traditional VM faced competitive pressure; Exposure Command conversions are ahead of early expectations though still competitive; MDR remains a premium, differentiated solution .
Geography: International outperformed in 2024; North America expected to improve with expanded product set (full year of Exposure Command, customizable enterprise MDR) rather than macro changes .

Estimates Context

We attempted to retrieve S&P Global consensus for Q4 2024 revenue and EPS, but were rate‑limited; consensus comparisons are therefore unavailable at this time (no estimate deltas shown) [GetEstimates error].
Company guidance context: Q4 revenue and operating income came in above guided ranges, and full‑year operating margin expanded >600 bps YoY, underscoring execution against internal targets despite mixed demand .

Key Takeaways for Investors

The core D&R/MDR engine remains healthy (mid‑teens growth, ~>$400M ARR) and underpins 2025 ARR growth of 4–6%; reacceleration hinges on scaling MDR and converting early Exposure Command traction into material ARR by 2026 .
Mix shift creates near‑term noise: elongated, larger deals skew seasonality to 2H and can weigh on quarterly optics; expect continued mid‑70s product gross margins with reinvestment muting operating leverage in 2025 .
Structural pivot away from stand‑alone VM to integrated exposure management is strategically sound and should enhance NRR over time, but consensus upgrades likely require more datapoints on conversion/velocity in 1H25 .
Channel scale is a durable advantage (80–90% bookings via partners) and can amplify pipeline generation/coverage as Rapid7 expands platform breadth (Microsoft/AWS telemetry integrations, FedRAMP path) .
Cash generation remains a support: FY2024 FCF of $154.1M and FY2025 FCF guide of ~$135M fund reinvestment while maintaining balance sheet flexibility amid a multi‑year growth reset .
Near‑term trading: stock likely sensitive to Exposure Command deal conversions and ARR seasonality; watch 1H25 commentary for pipeline conversion, healthcare/SLED budget clarity, and MDR enterprise traction .

Supporting documents: Q4 2024 8‑K/press release – –; Q4 2024 earnings call –; Q3 2024 press release/8‑K and call – – –; Q2 2024 8‑K and call – –.

Rapid7, Inc. (RPD)·Q4 2024 Earnings Summary