Rapid7 Inc
For the period ended Sep 30, 2024. Filed Nov 7, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 7, 2024
RPD$14.68-4.9%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-07.
0001560327-24-000093
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-07.
0001560327-24-000106
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 154 previous paragraphs and 157 current paragraphs.
102 unchanged; 40 reworded; 13 added; 10 removed; 2 previous and 2 current paragraphs rearranged.
Tables are not compared: 34 previous and 36 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (13)
Current report
On July 3, 2024, we acquired Noetic Cyber, Inc, (“Noetic”) a provider of cyber asset attack surface management, to extend Rapid7’s security operations platform by unlocking more accessible and accurate asset inventory in order to provide customers more comprehensive visibility to their attack surface, for a purchase price with an aggregate fair value of $51.0 million. The purchase consideration consisted of $38.6 million in cash paid at closing, $12.1 million of contingent consideration and $0.4 million of deferred cash payments. The deferred cash payments will be held by Rapid7 to satisfy certain post-closing purchase price adjustments.
Current report
•Induced conversion expense. In conjunction with the third quarter of 2023 partial repurchase of our 2025 Notes, we incurred a non-cash induced conversion expense of $53.9 million. We exclude induced conversion expense because this amount is not indicative of the performance of, or trends in, our business and neither is comparable to the prior period nor predictive of future results.
Current report
Research and development expense increased by $4.6 million in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $2.8 million increase in personnel costs, inclusive of a $1.2 million increase in stock-based compensation expense, resulting from an increase in headcount including the employees acquired in the acquisition of Noetic in July 2024, and a $1.8 million increase in other expenses.
Current report
General and administrative expense increased by $0.7 million in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $0.7 million increase in professional fees.
Current report
Restructuring
Current report
Restructuring expense of $20.0 million in the three months ended September 30, 2023 was recorded as a result of restructuring charges consisting of employee transition, notice period and severance payments and employee benefits and related facilitation costs related to our Restructuring Plan. Refer to Note 15, Restructuring, in the Notes to our condensed consolidated financial statements for further details on our Restructuring Plan.
Current report
Interest expense decreased in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to $53.9 million of induced conversion expense incurred in the third quarter of 2023 in conjunction with the partial repurchase of the 2025 Notes.
Current report
Comparison of the Nine Months Ended September 30, 2024 and 2023
Current report
General and administrative expense decreased by $4.1 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $3.5 million decrease in personnel costs, inclusive of a $1.4 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to our Restructuring Plan, a $1.6 million decrease in professional fees and a $0.4 million decrease in other expenses.
Current report
Restructuring
Current report
Restructuring expense of $20.0 million in thenine months ended September 30, 2023 was recorded as a result of restructuring charges consisting of employee transition, notice period and severance payments and employee benefits and related facilitation costs related to our Restructuring Plan. Refer to Note 15, Restructuring, in the Notes to our condensed consolidated financial statements for further details on our Restructuring Plan.
Current report
Interest expense decreased in the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to $53.9 million of induced conversion expense incurred in the third quarter of 2023 in conjunction with the partial repurchase of the 2025 Notes.
Current report
Critical Accounting Estimates
Removed paragraphs (10)
Previous report
Other Income (Expense), Net
Previous report
General and administrative expense decreased by $0.5 million in the three months ended June 30, 2024 compared to the same period in 2023, primarily due to a $0.5 million decrease in stock-based compensation expense.
Previous report
Impairment of Long-Lived Assets
Previous report
Other Expense, Net
Previous report
Comparison of the Six Months Ended June 30, 2024 and 2023
Previous report
Sales and marketing expense decreased by $13.0 million in the six months ended June 30, 2024 compared to the same period in 2023, primarily due to a $12.4 million decrease in personnel costs, inclusive of a $1.6 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to our Restructuring Plan, and a $2.1 million decrease in marketing and advertising expenses. These decreases were partially offset by a $1.5 million increase in other expenses.
Previous report
Impairment of Long-Lived Assets
Previous report
Interest expense was consistent in the six months ended June 30, 2024 compared to the same period in 2023.
Previous report
Other Expense, Net
Previous report
Critical Accounting Policies and Estimates
Reworded paragraphs (40)
Previous wording
We market and sell our products and professional services to organizations of all sizes globally, including mid-market businesses, enterprises, non-profits, educational institutions and government agencies. Our customers span a wide variety of industries such as technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, education, real estate, transportation, government and professional services. As of June 30, 2024, we had over 11,000 customers in 147 countries, including 46% of the Fortune 100. Our revenue was not concentrated with any individual customer and no customer represented more than 1% of our revenue for three and six months ended June 30, 2024 or 2023.
Current wording
We market and sell our products and professional services to organizations of all sizes globally, including mid-market businesses, enterprises, non-profits, educational institutions and government agencies. Our customers span a wide variety of industries such as technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, education, real estate, transportation, government and professional services. As of September 30, 2024, we had over 11,000 customers in 146 countries, including 45% of the Fortune 100. Our revenue was not concentrated with any individual customer and no customer represented more than 2% of our revenue for three and nine months ended September 30, 2024 or 2023.
Previous wording
On July 3, 2024, the we acquired Noetic Cyber, Inc, (“Noetic”) a provider of cyber asset attack surface management, for consideration of approximately $39.2 million subject to customary working capital adjustments as set forth in the merger agreement, including an aggregate value of $2.3 million of our common stock to be issued to two key employees of Noetic in three installments over a 36-month period following the closing date of the transaction, subject to continued employment requirements (the “Closing Consideration”). In addition, subject to the terms of the merger agreement, we may also be required to pay additional contingent consideration of up to $20.0 million based on the achievement of certain performance targets (the “Earnout Consideration”), measured annually upon the first, second and third anniversaries of the closing date of the transaction (the “Earnout Period”). If the full $20.0 million is realized, approximately $6.9 million of the Earnout Consideration will be issued in the form of shares of our common stock subject to continued employment requirements over the Earnout Period, and the remainder will be paid in cash.
Current wording
Subject to the terms of the merger agreement, we are required to pay consideration of up to $20.0 million to Noetic shareholders based on the achievement of certain performance targets (the “Earnout Consideration”), measured annually upon the first, second and third anniversaries of the closing date of the transaction (the “Earnout Period”). If all performance targets are achieved, approximately $13.1 million of Earnout Consideration will be paid in cash, and the remaining $6.9 million of Earnout Consideration will be issued to certain employees in the form of shares of our common stock subject to continued employment requirements over the Earnout Period. The approximate $6.9 million of the Earnout Consideration that is subject to continued employment will be recognized as stock-based compensation expense over the required employment period. The fair value of the portion of the Earnout Consideration that is not subject to continued employment is included as part of purchase consideration at the date of the acquisition. As of July 3, 2024, we determined the fair value of the contingent purchase consideration to be $12.1 million. The fair value of the contingent purchase consideration will be reassessed each reporting period and any required adjustment will be recorded to general and administrative expense. As of September 30, 2024, the fair value of the contingent purchase consideration was $12.2 million.
Previous wording
For the three and six months ended June 30, 2024 and 2023, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 96%, and 95%, respectively, of total revenue.
Current wording
For the three months ended September 30, 2024 and 2023, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 96%, and 95%, respectively, of total revenue. For the nine months ended September 30, 2024 and 2023, recurring revenue was 96% and 95%, respectively, of total revenue.
Previous wording
We define non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs and certain other items such as acquisition-related expenses, impairment of long-lived assets, change in the fair value of derivative assets, restructuring expense and discrete tax items. Non-GAAP net income per basic and diluted share is calculated as non-GAAP net income divided by the weighted average shares used to compute net income per share, with the number of weighted average shares decreased, when applicable, to reflect the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes.
Current wording
We define non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income and non-GAAP net income per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs and certain other items such as acquisition-related expenses, impairment of long-lived assets, change in the fair value of derivative assets, restructuring expense, induced conversion expense and discrete tax items. Non-GAAP net income per basic and diluted share is calculated as non-GAAP net income divided by the weighted average shares used to compute net income per share, with the number of weighted average shares decreased, when applicable, to reflect the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes.
Previous wording
•Restructuring expense. We exclude non-ordinary course restructuring expenses related to the restructuring plan we announced in August 2023, which was concluded in the three months ended March 31, 2024 (the "Restructuring Plan") because we do not believe these charges are indicative of our core operating performance and we believe the exclusion of the restructuring expense provides a more useful comparison of our performance in different periods. For further information see Note 15, Restructuring, in the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Current wording
•Restructuring expense. We exclude non-ordinary course restructuring expenses related to the restructuring plan we announced in August 2023, which was concluded in the first quarter of 2024 (the "Restructuring Plan") because we do not believe these charges are indicative of our core operating performance and we believe the exclusion of the restructuring expense provides a more useful comparison of our performance in different periods. For further information see Note 15, Restructuring, in the Notes to our Condensed Consolidated Financial Statements included in this Quarterly Report on Form 10-Q.
Previous wording
We define adjusted EBITDA as net income before (1) interest income, (2) interest expense, (3) other (income) expense, net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, (8) acquisition-related expenses, (9) impairment of long-lived assets and (10) restructuring expense. We believe that the use of adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods.
Current wording
We define adjusted EBITDA as net income (loss) before (1) interest income, (2) interest expense, (3) other (income) expense, net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, (8) acquisition-related expenses, (9) impairment of long-lived assets and (10) restructuring expense. We believe that the use of adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods.
Previous wording
The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three and six months ended June 30, 2024, and 2023:
Current wording
The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three and nine months ended September 30, 2024, and 2023:
Previous wording
The following table reconciles GAAP income (loss) from operations to non-GAAP income from operations for the three and six months ended June 30, 2024, and 2023:
Current wording
The following table reconciles GAAP income (loss) from operations to non-GAAP income from operations for the three and nine months ended September 30, 2024, and 2023:
Previous wording
The following table reconciles GAAP net income (loss) to non-GAAP net income for the three and six months ended June 30, 2024, and 2023:
Current wording
The following table reconciles GAAP net income (loss) to non-GAAP net income for the three and nine months ended September 30, 2024, and 2023:
Previous wording
The following table reconciles GAAP net income (loss) to adjusted EBITDA for the three and six months ended June 30, 2024, and 2023:
Current wording
The following table reconciles GAAP net income (loss) to adjusted EBITDA for the three and nine months ended September 30, 2024, and 2023:
Previous wording
The following table reconciles net cash provided by operating activities to free cash flow for the three and six months ended June 30, 2024, and 2023:
Current wording
The following table reconciles net cash provided by operating activities to free cash flow for the three and nine months ended September 30, 2024, and 2023:
Previous wording
We generate product subscriptions revenue from the sale of (1) cloud-based subscriptions, (2) managed services offerings, which utilize our products and (3) software licenses with related maintenance and support and content subscription, as applicable. Software license revenue consists of revenues from term licenses. When software licenses are purchased, maintenance and support and content subscription, as applicable, is bundled with the license for the term period.
Current wording
We generate product subscriptions revenue from the sale of (1) cloud-based subscriptions, (2) managed services offerings, which utilize our products and (3) software licenses with related maintenance and support and content subscription, as applicable. Software license revenue consists of revenues from term licenses. When software licenses are purchased, maintenance and support and content subscription, as applicable, are bundled with the license for the term period.
Previous wording
Total revenue increased by $39.5 million in the six months ended June 30, 2024 compared to the same period in 2023 and consisted of a $3.5 million increase in revenue from new customers and a $36.0 million increase in revenue from existing customers. The $36.0 million increase in revenue from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of the continued growth of our existing customer base. Revenue from new customers represents the revenue recognized from the customer's initial purchase.
Current wording
Total revenue increased by $15.8 million in the three months ended September 30, 2024 compared to the same period in 2023 and consisted of a $2.4 million increase in revenue from new customers and a $13.4 million increase in revenue from existing customers. The $13.4 million increase in revenue from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of the continued growth of our existing customer base. Revenue from new customers represents the revenue recognized from the customer's initial purchase.
Previous wording
The increase in total revenue in the three months ended June 30, 2024 compared to the same period in 2023 was comprised of $9.6 million generated from sales in North America and $8.0 million generated from sales from the rest of the world.
Current wording
The increase in total revenue in the three months ended September 30, 2024 compared to the same period in 2023 was comprised of $8.5 million generated from sales in North America and $7.3 million generated from sales from the rest of the world.
Previous wording
Total cost of revenue increased by $7.6 million in the six months ended June 30, 2024 compared to the same period in 2023, primarily due to a $11.1 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue and a $2.4 million increase in amortization expense for capitalized internally-developed software. These increases were partially offset by a $6.1 million decrease in personnel costs, inclusive of a $0.1 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to our Restructuring Plan, and a $1.2 million decrease in other expenses.
Current wording
Total cost of revenue increased by $5.2 million in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $4.7 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue, a $0.6 million increase in amortization expense for capitalized internally-developed software and a $0.8 million increase in other expenses.
Previous wording
Total gross margin percentage increased for the three months ended June 30, 2024 compared to the same period in 2023. The increase in product subscriptions gross margin for the three months ended June 30, 2024 was driven by our ability to scale as our revenue continues to grow. The increase in professional services gross margin for the three months ended June 30, 2024 was primarily due to a decrease in personnel costs.
Current wording
Total gross margin percentage decreased for the three months ended September 30, 2024 compared to the same period in 2023. The decrease in product subscriptions gross margin for the three months ended September 30, 2024 was primarily due to an increase in cloud computing costs. The increase in professional services gross margin for the three months ended September 30, 2024 was primarily due to a decrease in personnel costs.
Previous wording
General and administrative expense decreased by $4.8 million in the six months ended June 30, 2024 compared to the same period in 2023, primarily due to a $3.3 million decrease in personnel costs, inclusive of a $1.1 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to our Restructuring Plan, and a $2.4 million decrease in professional fees. These decreases were partially offset by a $0.9 million increase in other expenses.
Current wording
Sales and marketing expense decreased by $1.2 million in the three months ended September 30, 2024 compared to the same period in 2023, primarily due to a $3.3 million decrease in personnel costs, inclusive of a $0.3 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to our Restructuring Plan, and a $0.2 million decrease in other expenses. These decreases were partially offset by a $2.3 million increase in commission expense.
Previous wording
Impairment of long-lived assets expense of $27.2 million in the six months ended June 30, 2023 was recorded after a triggering event related to a change in usage of certain idle office space at our corporate headquarters in Boston, Massachusetts indicated that the carrying value of our right of use and other lease-related assets may not be fully recoverable.
Current wording
Impairment of long-lived assets expense of $3.6 million in the three months ended September 30, 2023 related to an impairment charge recorded after a triggering event related to a change in usage of certain idle office spaces located in Plano Texas, Los Angeles, California and Toronto, Canada indicated that the carrying value of our right of use and other lease-related assets may not be fully recoverable.
Previous wording
Interest income increased by $3.4 million in the three months ended June 30, 2024 compared to the same period in 2023 primarily due to an increase in interest rates.
Current wording
Interest income increased by $3.0 million in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to higher interest income as a result of an increase in cash and cash equivalents and investments.
Previous wording
Other expense, net decreased by $11.4 million in the six months ended June 30, 2024 compared to the same period in 2023, primarily due to a $12.7 million expense for the change in fair value on derivative assets related to our 2023 capped calls settlement in the prior period as well as increases in realized and unrealized foreign currency gains, primarily related to the euro and British pound sterling.
Current wording
Other income (expense), net increased by $7.3 million in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to increases in realized and unrealized foreign currency gains, primarily related to the Euro and British Pound Sterling, partially offset by $2.9 million of expense for the change in fair value on derivative assets related to our 2023 capped calls settlement in the prior period.
Previous wording
Provision for income taxes decreased by $0.3 million in the three months ended June 30, 2024 compared to the same period in 2023 primarily due to a decrease in taxes associated with our international operations.
Current wording
Provision for income taxes increased by $0.9 million in the three months ended September 30, 2024 compared to the same period in 2023 primarily due to an increase in taxes associated with our international operations.
Previous wording
Total revenue increased by $17.6 million in the three months ended June 30, 2024 compared to the same period in 2023. The $17.6 million increase in revenue consisted of a $1.6 million increase in revenue from new customers and a $16.0 million increase in revenue from existing customers. The $16.0 million increase in revenue from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of the continued growth of our existing customer base. Revenue from new customers represents the revenue recognized from the customer's initial purchase.
Current wording
Total revenue increased by $55.3 million in the nine months ended September 30, 2024 compared to the same period in 2023 and consisted of a $5.9 million increase in revenue from new customers and a $49.4 million increase in revenue from existing customers. The $49.4 million increase in revenue from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of the continued growth of our existing customer base. Revenue from new customers represents the revenue recognized from the customer's initial purchase.
Previous wording
The increase in total revenue in the six months ended June 30, 2024 compared to the same period in 2023 was comprised of $23.1 million generated from sales in North America and $16.4 million generated from sales from the rest of the world.
Current wording
The increase in total revenue in the nine months ended September 30, 2024 compared to the same period in 2023 was comprised of $31.6 million generated from sales in North America and $23.7 million generated from sales from the rest of the world.
Previous wording
Total cost of revenue increased by $2.7 million in the three months ended June 30, 2024 compared to the same period in 2023, primarily due to a $5.0 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue and a $1.0 million increase in amortization expense for capitalized internally-developed software. These increases were partially offset by a $3.0 million decrease in personnel costs, inclusive of a $0.1 million decrease in stock-based compensation expense, resulting from a decrease in headcount due to our Restructuring Plan, and a $1.0 million decrease in other expenses.
Current wording
Total cost of revenue increased by $12.8 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $15.8 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue, a $3.0 million increase in amortization expense for capitalized internally-developed software and a $0.4 million increase in other expenses. These increases were partially offset by a $6.4 million decrease in personnel costs resulting from a decrease in headcount primarily due to our Restructuring Plan.
Previous wording
Total gross margin percentage increased in the six months ended June 30, 2024 compared to the same period in 2023. The increase in product subscriptions gross margin in the six months ended June 30, 2024 was driven by our ability to scale as our revenue continues to grow. The increase in professional services gross margin in the six months ended June 30, 2024 was primarily due to a decrease in personnel costs.
Current wording
Total gross margin percentage increased in the nine months ended September 30, 2024 compared to the same period in 2023. The gross margin percentage for product subscriptions was consistent in the nine months ended September 30, 2024 compared to the same period in 2023. The increase in professional services gross margin in the nine months ended September 30, 2024 was primarily due to a decrease in personnel costs.
Previous wording
Research and development expense decreased by $10.7 million in the three months ended June 30, 2024 compared to the same period in 2023, primarily due to a $7.7 million decrease in personnel costs, inclusive of a $3.0 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to our Restructuring Plan, and a $3.0 million decrease due to a write-off of a capitalized internal-use software project in the prior period.
Current wording
Research and development expense decreased by $11.4 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $10.8 million decrease in personnel costs, inclusive of a $4.9 million decrease in stock-based compensation expense, resulting from an overall decrease in headcount, primarily due to our Restructuring Plan, and a $3.0 million decrease due to a write-off of a capitalized internal-use software project in the prior period. These decreases were partially offset by a $2.4 million increase in other expenses.
Previous wording
Sales and marketing expense decreased by $5.2 million in the three months ended June 30, 2024 compared to the same period in 2023, primarily due to a $6.2 million decrease in personnel costs, inclusive of a $0.6 million decrease in stock-based compensation expense, resulting from a decrease in headcount primarily due to our Restructuring Plan, and a $0.5 million decrease in marketing and advertising expenses. These decreases were partially offset by a $1.1 million increase in other expenses.
Current wording
Sales and marketing expense decreased by $14.2 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $15.7 million decrease in personnel costs, inclusive of a $1.9 million decrease in stock-based compensation expense, resulting from an overall decrease in headcount primarily due to our Restructuring Plan, a $1.7 million decrease in marketing and advertising expenses and a $3.6 million decrease in other expenses. These decreases were partially offset by a $6.8 million increase in commission expense.
Previous wording
Impairment of long-lived assets expense of $27.2 million in the three months ended June 30, 2023 was recorded after a triggering event related to a change in usage of certain idle office space at our corporate headquarters in Boston, Massachusetts indicated that the carrying value of our right of use and other lease-related assets may not be fully recoverable.
Current wording
Impairment of long-lived assets expense of $30.8 million in the nine months ended September 30, 2023 was recorded after a triggering event related to a change in usage of certain idle office space at our corporate headquarters in Boston, Massachusetts as well as idle office spaces located in Plano, Texas, Los Angeles, California and Toronto, Canada indicated that the carrying value of our right of use and other lease-related assets may not be fully recoverable.
Previous wording
Interest income increased by $6.5 million in the six months ended June 30, 2024 compared to the same period in 2023, primarily due to an increase in interest rates.
Current wording
Interest income increased by $9.5 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to higher interest income as a result of an increase in cash and cash equivalents and investments.
Previous wording
Other expense, net decreased by $12.6 million in the three months ended June 30, 2024 compared to the same period in 2023 primarily due to a $12.7 million expense for the change in fair value on derivative assets related to our 2023 capped calls settlement in the prior period as well as increases in realized and unrealized foreign currency gains, primarily related to the euro and British pound sterling.
Current wording
Other income (expense), net increased by $18.8 million in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to a $15.5 million expense for the change in fair value on derivative assets related to our 2023 capped calls settlement in the prior period as well as increases in realized and unrealized foreign currency gains, primarily related to the Euro and British Pound Sterling.
Previous wording
Provision for income taxes increased by $8.0 million in the six months ended June 30, 2024 compared to the same period in 2023 primarily due to $6.4 million of tax expense recorded for an intercompany sale of intellectual property as part of post-acquisition strategy related to the acquisition of Minerva Lab Ltd. and an increase in domestic taxes.
Current wording
Provision for income taxes increased by $8.9 million in the nine months ended September 30, 2024 compared to the same period in 2023 primarily due to $6.4 million of tax expense recorded for an intercompany sale of intellectual property as part of post-acquisition strategy related to the acquisition of Minerva Lab Ltd. and a $2.5 million increase in domestic and international taxes.
Previous wording
As of June 30, 2024, we had $237.0 million in cash and cash equivalents, $257.1 million in investments that have maturities ranging from one to fifteen months and an accumulated deficit of $1.0 billion. Since our inception, we have generated significant losses and we may generate losses for the foreseeable future. Our principal sources of liquidity are cash and cash equivalents, investments, cash flow provided by operating activities and our Credit and Security Agreement (the “Credit Agreement”). To date, we have financed our operations primarily through private and public equity financings, issuance of convertible senior notes and through cash generated by operating activities.
Current wording
As of September 30, 2024, we had $222.6 million in cash and cash equivalents, $281.5 million in investments that have maturities ranging from one to twenty months and an accumulated deficit of $1.0 billion. Since our inception, we have generated significant losses and we may generate losses for the foreseeable future. Our principal sources of liquidity are cash and cash equivalents, investments, cash flow provided by operating activities and our Credit and Security Agreement (the “Credit Agreement”). To date, we have financed our operations primarily through private and public equity financings, issuance of convertible senior notes and through cash generated by operating activities.
Previous wording
The following table shows a summary of our cash flows for the six months ended June 30, 2024 and 2023:
Current wording
The following table shows a summary of our cash flows for the nine months ended September 30, 2024 and 2023:
Previous wording
Operating activities provided $63.9 million of cash and cash equivalents in the six months ended June 30, 2024, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments. Cash provided by operating activities reflected our net income of $10.5 million and a decrease in our net operating assets and liabilities of $23.6 million, offset by non-cash charges of $77.1 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, amortization of debt issuance costs and other non-cash charges. The change in our net operating assets and liabilities was primarily due to a decrease in deferred revenue and the timing of payments of operating expenses, including payout of annual bonuses and year-end commissions and other compensation costs and accounts payable, partially offset by a decrease in accounts receivable due to an increase in cash collections from our customers.
Current wording
Operating activities provided $107.9 million of cash and cash equivalents in the nine months ended September 30, 2024, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments. Cash provided by operating activities reflected our net income of $27.0 million and non-cash charges of $111.0 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, amortization of debt issuance costs and other non-cash charges, partially offset by a decrease in our net operating assets and liabilities of $30.1 million. The change in our net operating assets and liabilities was primarily due to a decrease in deferred revenue and the timing of payments of operating expenses, including payout of annual bonuses and year-end commissions and other compensation costs and accounts payable, partially offset by a decrease in accounts receivable due to an increase in cash collections from our customers.
Previous wording
Operating activities provided $37.1 million of cash and cash equivalents in the six months ended June 30, 2023, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments. Cash provided by operating activities reflected our net loss of $92.7 million and a decrease in our net operating assets and liabilities of $0.4 million, offset by non-cash charges of $130.3 million related primarily to depreciation and amortization, stock-based compensation expense, impairment of long-lived assets, change in fair value of derivative assets, amortization of debt issuance costs and other non-cash charges. The change in our net operating assets and liabilities was primarily due to a $12.0 million decrease in accrued expenses, primarily as a result of the payout of annual bonuses and year-end commissions, a $1.3 million decrease in accounts payable and a $6.0 million increase in deferred contract acquisition and fulfillment costs, which each had a negative impact on operating cash flow. These factors were offset by a $15.1 million decrease in accounts receivable due to an increase in collections, a $1.4 million decrease in prepaid expenses, a $1.8 million increase in deferred revenue and a $0.5 million increase in other liabilities, which each had a positive impact on operating cash flow.
Current wording
Operating activities provided $40.8 million of cash and cash equivalents in the nine months ended September 30, 2023, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments. Cash provided by operating activities reflected our net loss of $169.3 million and non-cash charges of $228.2 million related primarily to depreciation and amortization, stock-based compensation expense, impairment of long-lived assets, change in fair value of derivative assets, amortization of debt issuance costs and other non-cash charges, partially offset by a decrease in our net operating assets and liabilities of $18.1 million. The change in our net operating assets and liabilities was primarily due to a $18.0 million decrease in accrued expenses, primarily as a result of the payout of annual bonuses and year-end commissions, a $6.4 million decrease in deferred revenue, a $1.2 million decrease in accounts payable, a $0.9 million decrease in other liabilities and a $9.5 million increase in deferred contract acquisition and fulfillment costs, which each had a negative impact on operating cash flow. These factors were offset by a $12.4 million decrease in accounts receivable due to an increase in collections, and a $5.5 million decrease in prepaid expenses, which each had a positive impact on operating cash flow.
Previous wording
Investing activities used $34.8 million of cash in the six months ended June 30, 2024, consisting of $28.0 million in purchases of investments, net of sales/maturities, $6.3 million for capitalization of internal-use software costs, and $0.9 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by proceeds of $0.4 million for other investing activities.
Current wording
Investing activities used $99.5 million of cash in the nine months ended September 30, 2024, consisting of $49.9 million in purchases of investments, net of sales/maturities, $37.2 million of cash paid for the acquisition of Noetic, $10.4 million for capitalization of internal-use software costs, and $2.2 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by proceeds of $0.4 million for other investing activities.
Previous wording
Investing activities used $62.2 million of cash in the six months ended June 30, 2023, consisting of $34.8 million of cash paid for the acquisition of Minerva, $9.1 million for capitalization of internal-use software costs, and $3.7 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $14.6 million in purchases of investments, net of sales and maturities.
Current wording
Investing activities used $145.2 million of cash in the nine months ended September 30, 2023, consisting of $93.4 million in purchases of investments, net of sales and maturities, $34.8 million of cash paid for the acquisition of Minerva, $13.0 million for capitalization of internal-use software costs and $4.0 million in capital expenditures to purchase computer equipment and leasehold improvements.
Previous wording
Financing activities provided $3.4 million of cash in the six months ended June 30, 2024, which consisted primarily of $5.0 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (“ESPP”) and $1.4 million in proceeds from the exercise of stock options, partially offset by $3.1 million in withholding taxes paid for the net share settlement of equity awards.
Current wording
Financing activities provided $6.8 million of cash in the nine months ended September 30, 2024, which consisted primarily of $9.2 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (“ESPP”) and $1.4 million in proceeds from the exercise of stock options, partially offset by $3.8 million in withholding taxes paid for the net share settlement of equity awards.
Previous wording
Financing activities provided $4.0 million of cash in the six months ended June 30, 2023, which consisted primarily of $6.2 million in proceeds from the issuance of common stock purchased by employees under the ESPP and $2.7 million in proceeds from the exercise of stock options, partially offset by $2.3 million in payments related to the acquisition of IntSights and $2.6 million in withholding taxes paid for the net share settlement of equity awards.
Current wording
Financing activities provided $81.8 million of cash in the nine months ended September 30, 2023, which consisted primarily of $292.8 million in proceeds from the issuance of the 2029 Notes, net of issuance costs paid of $7.2 million, $17.5 million in proceeds from the settlement of the 2023 Capped Calls, $11.3 million in proceeds from the issuance of common stock purchased by employees under the ESPP and $3.0 million in proceeds from the exercise of stock options, partially offset by $200.0 million for the repurchase and conversion of the 2025 Notes, $36.6 million for the purchase of the 2029 Capped Calls, $4.0 million in withholding taxes paid for the net share settlement of equity awards and $2.2 million in payments related to the acquisition of IntSights.
Previous wording
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. There have been no material changes in our critical accounting policies from those disclosed in our Annual Report.
Current wording
Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. There have been no material changes to our critical accounting estimates from those disclosed in our Annual Report.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
In connection with the acquisition, we will issue an aggregate value of $2.3 million of our common stock to two key employees of Noetic in three installments over a 36-month period following the closing date of the transaction, subject to continued employment requirements.
Current report — wording carried from elsewhere
Impairment of long-lived assets consists of impairment charges allocated to the carrying amount of certain operating right-of-use assets and the associated leasehold improvements when the carrying amounts exceed their respective fair values.
Rearranged previous paragraphs (2)
Previous report — wording carried elsewhere
Interest expense was consistent in the three months ended June 30, 2024 compared to the same period in 2023.
Previous report — wording carried elsewhere
Research and development expense decreased by $16.1 million in the six months ended June 30, 2024 compared to the same period in 2023, primarily due to a $13.1 million decrease in personnel costs, inclusive of a $6.0 million decrease in stock-based compensation expense, resulting from a decrease in headcount, primarily due to our Restructuring Plan, and a $3.0 million decrease due to a write-off of a capitalized internal-use software project in the prior period.