Rapid7 (NASDAQ:RPD) Q2 Sales Beat Estimates, Upgrades Full Year Guidance

Radek Strnad /
2021/08/04 4:26 pm EDT

Cybersecurity software maker Rapid7 (NASDAQ:RPD) announced better-than-expected results in the Q2 FY2021 quarter, with revenue up 27.8% year on year to $126.4 million. Rapid7 made a GAAP loss of $34.1 million, down on its loss of $21.4 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) Q2 FY2021 Highlights:

  • Revenue: $126.4 million vs analyst estimates of $123 million (2.7% beat)
  • EPS (non-GAAP): $0.07 vs analyst estimates of $0.03 ($0.04 beat)
  • Revenue guidance for Q3 2021 is $134.2 million at the midpoint, above analyst estimates of $128.1 million
  • The company lifted revenue guidance for the full year, from $503 million to $522 million at the midpoint, a 3.77% increase
  • Free cash flow of $5.04 million, down 71.7% from previous quarter
  • Customers: 9,315, up from 8,945 in previous quarter
  • Gross Margin (GAAP): 68.9%, in line with previous quarter

"Strong demand across Rapid7's Insight Platform drove second quarter ending ARR of approximately $489 million, growth of 29% year-over-year, validating both our strategy and execution as we continue on our journey to make the best in security operations accessible and achievable for all," said Corey Thomas, Chairman and CEO of Rapid7.

Founded in 2000, 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.

As technology penetrates our lives, almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks. The migration of businesses to the cloud and employees working remotely in insecure environments are also contributing to increasing demand for cybersecurity software.

Sales Growth

As you can see below, Rapid7's revenue growth has been strong over the last year, growing from quarterly revenue of $98.9 million, to $126.4 million.

Rapid7 Total Revenue

This quarter, Rapid7's quarterly revenue was once again up a very solid 27.8% year on year. On top of that, revenue increased $8.97 million quarter on quarter, a very strong improvement on the $4.29 million increase in Q1 2021, which shows acceleration of growth, and is great to see.

Analysts covering the company are expecting the revenues to grow 19.6% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

There are others doing even better. 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 400% since the IPO in December. You can find it on our platform for free.

Customer Growth

You can see below that Rapid7 reported 9,315 customers at the end of the quarter, an increase of 370 on last quarter. That is a bit better customer growth than last quarter and a bit above the typical customer growth we have seen lately, demonstrating that the business itself has good sales momentum. We've no doubt shareholders will take this as an indication that the company's go-to-market strategy is working very well.

Rapid7 Customers

Key Takeaways from Rapid7's Q2 Results

With market capitalisation of $6.35 billion Rapid7 is among smaller companies, but its more than $607.8 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were impressed by the very optimistic revenue guidance Rapid7 provided for the next quarter. And we were also glad that the revenue guidance for the rest of the year was upgraded. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is flat on the results and currently trades at $116.73 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 full report which you can read here, it's free.

One way how 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.