Rapid7 (NASDAQ:RPD) Posts Better-Than-Expected Sales In Q1

Adam Hejl /
2022/05/04 4:32 pm EDT
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Cybersecurity software maker Rapid7 (NASDAQ:RPD) reported Q1 FY2022 results that beat analyst expectations, with revenue up 33.9% year on year to $157.3 million. The company expects that next quarter's revenue would be around $164 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. Rapid7 made a GAAP loss of $44.9 million, down on its loss of $29.8 million, in the same quarter last year.

Is now the time to buy Rapid7? Access our full analysis of the earnings results here, it's free.

Rapid7 (RPD) Q1 FY2022 Highlights:

  • Revenue: $157.3 million vs analyst estimates of $154.1 million (2.09% beat)
  • EPS (non-GAAP): -$0.16 vs analyst estimates of -$0.16
  • Revenue guidance for Q2 2022 is $164 million at the midpoint, roughly in line with what analysts were expecting
  • The company reconfirmed revenue guidance for the full year, at $689 million at the midpoint
  • Free cash flow of $3.82 million, up from negative free cash flow of $2.17 million in previous quarter
  • Customers: 10,407, up from 10,283 in previous quarter
  • Gross Margin (GAAP): 67.4%, down from 69.1% same quarter last year

“Rapid7’s strong start to the year was driven by on-going momentum across our security transformation and vulnerability management solutions, as we sustained year-over-year ARR growth of 38%,” said Corey Thomas, Chairman and CEO of Rapid7.

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.

The 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 Growth

As you can see below, Rapid7's revenue growth has been very strong over the last year, growing from quarterly revenue of $117.4 million, to $157.3 million.

Rapid7 Total Revenue

And unsurprisingly, this was another great quarter for Rapid7 with revenue up 33.9% year on year. But the growth did slow down compared to last quarter, as the revenue increased by just $5.74 million in Q1, compared to $11.7 million in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates Rapid7 is expecting revenue to grow 29.7% year on year to $164 million, in line with the 27.8% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 25.7% over the next twelve months.

There are others doing even better than Rapid7. Founded by ex-Google engineers, a small company making software for banks has been growing revenue 90% year on year and is already up more than 150% since the IPO last December. You can find it on our platform for free.

Customer Growth

You can see below that Rapid7 reported 10,407 customers at the end of the quarter, an increase of 124 on last quarter. That is a little slower customer growth than last quarter but still in line with what we are used to seeing lately, suggesting that the company still has decent sales momentum. Rapid7 updated its customer count methodology in Q1 2021, which is the reason for the related drop in the number of customers.

Rapid7 Customers

Key Takeaways from Rapid7's Q1 Results

With a market capitalization of $5.5 billion Rapid7 is among smaller companies, but its more than $234.5 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see Rapid7 deliver strong revenue growth this quarter. And we were also excited to see that it outperformed analysts' revenue expectations. On the other hand, it was unfortunate to see the slowdown in customer growth. The company is flat on the results and currently trades at $94.71 per share.

Should you invest in Rapid7 right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.