Cybersecurity software maker Rapid7 (NASDAQ:RPD) reported third-quarter 2024 results that beat Wall Street revenue expectations, with revenue up 8% year over year to $214.7 million. The company expects revenue next quarter to be around $212 million, close to analyst estimates. Non-GAAP earnings of $0.66 per share were also 27.6% above analyst consensus estimates.
Is Now the Time to Buy Rapid7? Find out in our full research report.
Gain: $214.7 million vs. analyst estimates of $210.1 million (2.2% better)
Custom EPS: $0.66 vs. analyst estimates of $0.52 (27.6% better)
EVENTS: $50.08 million vs. analyst estimates of $42.83 million (16.9% better)
Revenue guidance for Q4 CY2024 is $212 million in the middle, about in line with what analysts expected
Management raised expectations for full-year adjusted earnings per share to $2.30 at the midpoint, up 5.5%
Gross margin (GAAP): 70.6%, in line with the same quarter last year
Operating margin: 6.5%, compared to -8.1% in the same quarter last year
EBITDA margin: 23.3%, compared to 21.6% in the same quarter last year
Free cash flow margin: 17.9%, compared to 14% in the previous quarter
Annual recurring turnover: $823.1 million at quarter end, up 6% year over year
Customers: 11,619, compared to 11,484 in the previous quarter
Market capitalization: $2.52 billion
“Rapid7 continued to see positive momentum in key areas of our business in the third quarter, highlighted by growth in our threat detection and response business and strong demand for our consolidated offering, resulting in revenue and operating income that exceeded the stated margins. There are also a number of promising indicators on the horizon, including a stronger sales pipeline and early positive traction from our recently launched Command platform,” said Corey Thomas, Chairman and CEO of Rapid7.
Founded in 2000 with the idea that network security comes before endpoint security, Rapid7 (NASDAQ:RPD) offers software as a service that helps companies understand where they are exposed to cybersecurity risks and quickly detect and respond to breaches.
Demand for cybersecurity is growing as more companies move their data and processes to the cloud. Along with a large increase in the number of employees working remotely, their exposure to attacks and malware has increased. Additionally, the growing array of enterprise IT systems, applications, and Internet-connected devices has increased the complexity of network security, significantly increasing the demand for software intended to protect against data breaches.
A company’s long-term performance can be an indication of its business quality. Any company can perform well for a quarter or two, but many sustainable companies grow for years. Unfortunately, Rapid7’s 18.8% annualized revenue growth over the past three years has been mediocre.
Rapid7 Total turnover
This quarter, Rapid7 reported 8% year-over-year revenue growth, and revenue of $214.7 million exceeded Wall Street estimates by 2.2%. Management currently expects an increase of 3.3% year over year next quarter.
Looking further ahead, sell-side analysts expect revenue to grow by 5.8% over the next twelve months, a slowdown from the past three years. This projection is disappointing and indicates that the market believes its products and services will face some demand challenges.
Here at StockStory, we certainly understand the potential of thematic investing. Several winners, from Microsoft (MSFT) to Alphabet (GOOG), Coca-Cola (KO) to Monster Beverage (MNST), could all have been identified as promising growth stories with a megatrend driving growth. So in that spirit, we’ve identified a relatively under-the-radar profitable growth stock benefiting from the rise of AI, which is available to you for FREE at this link.
Investors interested in Rapid7 should track annual recurring revenue (ARR) in addition to reported revenue. While reported revenue for a SaaS company may include low-margin items such as implementation costs, the ARR is a sum of the next twelve months of contracted revenue purely from software subscriptions, or the predictable, high-margin revenue streams that make SaaS companies so valuable. to make.
Over the past year, Rapid7’s ARR growth slightly underperformed the industry, averaging 9.6% year-over-year growth and reaching $823.1 million in the latest quarter. This performance reflected the turnover and suggests that there may be increasing competition causing problems in securing long-term commitments.
Rapid7 annual recurring revenue
Rapid7 reported 11,619 customers at the end of the quarter, an increase of 135 compared to the previous quarter. That’s slightly better customer growth than last quarter and well above the typical growth we’ve seen in recent quarters, showing that the company has strong sales momentum. We have no doubt that shareholders will take this as an indication that Rapid7’s go-to-market strategy is working very well. Rapid7 updated its customer counting methodology in the first quarter of 2021, which is the reason for the related drop in customer numbers.
Rapid7 customers
We were impressed by Rapid7’s strong customer growth this quarter. We were also pleased to see EBITDA outperform Wall Street estimates. On the other hand, earnings expectations for the next quarter missed. Overall, this quarter had some significant positives. The stock was flat at $41.70 immediately after the results.
Rapid7 had an encouraging quarter, but one earnings result doesn’t necessarily mean the stock is a buy. Let’s see if this is a good investment. What happened in the last quarter matters, but not as much as business quality and longer-term valuation, when deciding whether to invest in this stock. We cover that in our useful full research report which you can read here. It’s free.
Sign Up For Daily Newsletter
Be keep up! Get the latest breaking news delivered straight to your inbox.
By signing up, you agree to our Terms of Use and acknowledge the data practices in our Privacy Policy. You may unsubscribe at any time.
