Rapid7, Inc.

Previous wording

• our ability to capitalize on customer demand for consolidated security platforms and vendor consolidation trends, including out ability to deliver an integrated, open security operations platform;

Current wording

• our ability to capitalize on customer demand for consolidated security platforms and vendor consolidation trends, including our ability to deliver an integrated, open security operations platform;

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 March 31, 2026, we had over 11,500 customers in 150 countries, including 35% of the Fortune 100. Our revenue was not concentrated with any individual customer and no customer represented more than 1% of our revenue for the three months ended March 31, 2026 and 2025.

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 June 30, 2026, we had over 11,500 customers in 149 countries, including 34% of the Fortune 100. Our revenue was not concentrated with any individual customer and no customer represented more than 1% of our revenue for the three and six months ended June 30, 2026 and 2025.

Previous wording

For the three months ended March 31, 2026 and 2025, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 97% and 96%, respectively, of total revenue.

Current wording

For each of the three and six months ended June 30, 2026 and 2025, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 97% of total revenue.

Previous wording

We expect our cost of revenue to increase on an absolute dollar basis as we continue to grow our revenue over time.

Current wording

We expect our cost of revenue to fluctuate on an absolute dollar basis as we continue to grow our revenue over time.

Previous wording

Operating expenses consist of research and development, sales and marketing, general and administrative expenses, impairment of long-lived assets, and restructuring costs. Operating expenses include overhead costs for depreciation, facilities, IT, information security and recruiting. Our IT overhead costs include IT personnel compensation costs and costs associated with our IT infrastructure. All overhead costs are allocated based on relative headcount. In the near term, we expect our operating expenses to increase as a percentage of revenue as we prioritize investments to drive growth.

Current wording

Operating expenses consist of research and development, sales and marketing, general and administrative expenses, impairment of long-lived assets, and restructuring costs. Operating expenses include overhead costs for depreciation, facilities, IT, information security and recruiting. Our IT overhead costs include IT personnel compensation costs and costs associated with our IT infrastructure. All overhead costs are allocated based on relative headcount. In the near term, we are taking restructuring actions that are expected to reduce the absolute amount of our expenses while continuing to prioritize investments to drive growth.

Previous wording

Provision for income taxes consists of domestic and foreign taxes on income and withholding taxes. We maintain a substantially full valuation allowance for domestic and certain foreign deferred tax assets, including net operating loss carryforwards and tax credits. We determined as of March 31, 2026 that it was more likely than not that these deferred tax assets will not be realized. However, we may release some of these valuation allowances in future periods if positive evidence, such as projection of sustained future growth, supports the realization of such deferred tax assets. Release of all or a portion of these valuation allowances would result in a decrease in the provision for income taxes in the period of the release.

Current wording

Provision for income taxes consists of domestic and foreign taxes on income and withholding taxes. We maintain a substantially full valuation allowance for domestic and certain foreign deferred tax assets, including net operating loss carryforwards and tax credits. We determined as of June 30, 2026 that it was more likely than not that these deferred tax assets will not be realized. However, we may release some of these valuation allowances in future periods if positive evidence, such as projection of sustained future profitability, supports the realization of such deferred tax assets. Release of all or a portion of these valuation allowances would result in a decrease in the provision for income taxes in the period of the release.

Previous wording

Comparison of the Three Months Ended March 31, 2026 and 2025

Current wording

Comparison of the Three and Six Months Ended June 30, 2026 and 2025

Previous wording

The increase in total cost of revenue for the three months ended March 31, 2026 as compared to the same period in 2025 was primarily driven by a $3.1 million increase in personnel costs related to supporting product delivery, a $0.9 million increase in cloud computing costs, a $0.6 million increase in amortization expense for capitalized internally-developed software, and a $0.5 million increase in facilities expenses. The increase was partially offset by $0.1 million decrease in subscription expense.

Current wording

The increase in total cost of revenue for the six months ended June 30, 2026 compared with the corresponding period in 2025 was primarily driven by an increase of personnel expenses of $4.5 million, inclusive of a $6.1 million increase in wages and wage-related expenses primarily driven by an increase in headcount, partially offset by a $1.5 million decrease in stock-based compensation expense, which was driven by stock awards granted at lower stock prices and fewer awards granted than in the same period in 2025; a $1.1 million increase in cloud computing costs; a $1.0 million increase in facilities related expenses; and $0.8 million increase in amortization expense related to acquired developed technologies and capitalized internally-developed software.

Previous wording

General and administrative expenses decreased for the three months ended March 31, 2026 as compared to the same period in 2025, primarily driven by a decrease of $3.2 million personnel costs, which included a $2.6 million decrease in stock-based compensation expense due to fewer awards granted and more recent grants valued at a lower grant price. Additionally, professional fees decreased by $1.7 million, primarily related to certain consulting services, and a $1.2 million decrease in bad debt expense. The decrease was partially offset by an increase in hosting expenses of $0.6 million associated with enterprise software and cloud computing costs and $0.5 million of acquisition-related expenses associated with our acquisition of Kenzo.

Current wording

General and administrative expenses decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025, primarily driven by a $5.8 million decrease in personnel costs, which included a $5.3 million decrease in stock-based compensation expense due to more recent grants valued at a lower grant price and fewer awards granted. Additionally, professional fees decreased by $2.7 million, primarily related to legal and accounting services, and a $0.9 million decrease in bad debt expense. The decrease was partially offset by an increase in hosting expenses of $0.8 million associated with enterprise software and cloud computing costs.

Previous wording

Interest income slightly decreased for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to lower cash and investment balances this year compared to prior year.

Current wording

Interest income slightly decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025, primarily driven by lower investment balances partially offset by interest income generated from higher cash and cash equivalent balances compared to the prior year.

Previous wording

Other (expense) income, net decreased for the three months ended March 31, 2026 compared to the same period in 2025 primarily due to unrealized losses on foreign currency transactions resulting in an increase in unrealized losses as compared to unrealized gains in comparative periods primarily related to the British Pound Sterling and Euro.

Current wording

Other (expense) income, net decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025 primarily due to realized and unrealized losses on foreign currency transactions primarily related to transactions in the British Pound Sterling, the Euro, and the Israeli Shekel during the six months ended June 30, 2026 as compared to unrealized gains in the same period in 2025.

Previous wording

Provision for income taxes decreased for the three months ended March 31, 2026 compared to the same period in 2025. The decrease was primarily driven by a one-time discrete tax benefit in the first quarter of 2026 for $0.6 million related to the acquisition of Kenzo and an increase to tax expense in the first quarter of 2025 for $1.1 million related to an unfavorable international return-to-provision expense of $1.1 million.

Current wording

Provision for income taxes decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025. The decrease was primarily driven by a $3.2 million net favorable change in foreign provisions primarily from foreign return to provision adjustments, $0.6 million discrete tax benefit from the Kenzo acquisition, and a lower domestic tax expense due to OBBBA.

Previous wording

•Stock-based compensation expense. We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our non-cash expense. We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.

Current wording

•Stock-based compensation expense. We exclude stock-based compensation expense because of varying available valuation methodologies, subjective assumptions and the variety of equity instruments that can impact our expense. We believe that providing non-GAAP financial measures that exclude stock-based compensation expense allows for more meaningful comparisons between our operating results from period to period.

Previous wording

The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three and six months ended June 30, 2026 and 2025 (in thousands):

Previous wording

The following table reconciles GAAP loss from operations to non-GAAP income from operations for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

The following table reconciles GAAP income from operations to non-GAAP income from operations for the three and six months ended June 30, 2026 and 2025 (in thousands):

Previous wording

(1)For the three months ended March 31, 2026 and 2025, acquisition-related expenses included $0.1 million and $0.2 million, respectively, of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic.

Current wording

(1)For the three and six months ended June 30, 2026 and 2025, acquisition-related expenses included $0.1 million and $0.2 million and $0.7 million and $0.4 million, respectively, of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic.

Previous wording

The following table reconciles GAAP net income to non-GAAP net income for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

The following table reconciles GAAP net income to non-GAAP net income for the three and six months ended June 30, 2026 and 2025 (in thousands):

Previous wording

(1)We use the if-converted method to compute diluted earnings per share with respect to our Notes. There was no add-back of interest expense or additional dilutive shares related to the Notes where the effect was anti-dilutive. On an if converted basis, for the three months ended March 31, 2026, the 2029 Notes and 2027 Notes were dilutive, for the three months ended March 31, 2025 the 2029 Notes, 2027 Notes and 2025 Notes were dilutive.

Current wording

(1)We use the if-converted method to compute diluted earnings per share with respect to our Notes. There was no add-back of interest expense or additional dilutive shares related to the Notes where the effect was anti-dilutive. On an if converted basis, for the three and six months ended June 30, 2026, the 2029 Notes and 2027 Notes were dilutive, for the six months ended June 30, 2025 the 2029 Notes, 2027 Notes and 2025 Notes were dilutive.

Previous wording

The following table reconciles GAAP net income to adjusted EBITDA for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

The following table reconciles GAAP net income to adjusted EBITDA for the three and six months ended June 30, 2026 and 2025 (in thousands):

Previous wording

The following table reconciles net cash provided by operating activities to free cash flow for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

The following table reconciles net cash provided by operating activities to free cash flow for the three and six months ended June 30, 2026 and 2025 (in thousands):

Previous wording

As of March 31, 2026, we had $343.3 million in cash and cash equivalents, $327.0 million in investments that have maturities ranging from one to eleven monthsand an accumulated deficit of $963.5 million. Our principal sources of liquidity are cash and cash equivalents, investments, cash flow provided by operating activities and our 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 June 30, 2026, we had $425.6 million in cash and cash equivalents, $277.0 million in investments that have maturities ranging from one to eight monthsand an accumulated deficit of $957.5 million. Our principal sources of liquidity are cash and cash equivalents, investments, cash flow provided by operating activities and our 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

We believe that our existing cash and cash equivalents, our investments, our cash generated by operating activities and our available borrowings under our Credit Agreement will be sufficient to meet our operating and capital requirements for at least the next 12 months. Our foreseeable cash needs, in addition to our recurring operating expenses, include our expected capital expenditures to support expansion of our infrastructure and workforce, office facilities lease obligations, purchase commitments, including our cloud infrastructure services, potential future acquisitions of technology businesses and any election we make to redeem our convertible senior notes. Further, in January 2025, we entered into a cloud-services agreement with a cloud services provider that contains minimum spend commitments. The agreement provides for an annual commitment of $125.0 million per year over the next five years, with an additional $35.0 million obligation over the five-year period of the agreement, for an aggregate total commitment of $660.0 million. For more information regarding this commitment, see Note 15, Commitments and Contingencies, in the Notes to our consolidated financial statements on Form 10-K for the year ended

Current wording

We believe that our existing cash and cash equivalents, our investments, our cash generated by operating activities and our available borrowings under our Credit Agreement will be sufficient to meet our operating and capital requirements for at least the next 12 months. Our foreseeable cash needs, in addition to our recurring operating expenses, include our expected capital expenditures to support expansion of our infrastructure and workforce, office facilities lease obligations, purchase commitments, including our cloud infrastructure services, potential future acquisitions of technology businesses, any election we make to redeem our convertible senior notes, and the repayment of the $600 million 2027 Notes . Further, in January 2025, we entered into a cloud-services agreement with a cloud services provider that contains minimum spend commitments. The agreement provides for an annual commitment of $125.0 million per year over the next five years, with an additional $35.0 million obligation over the five-year period of the agreement, for an aggregate total commitment of $660.0 million. As a result of the repayment of the 2027 Notes, we expect a reduction to cash received from interest income. For more information regarding this commitment, see Note 15, Commitments and Contingencies, in the Notes to our consolidated financial statements on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 19, 2026 . In preparation for the repayment of the 2027 Notes, due on March 15, 2027, we implemented the following measures:

Previous wording

The following table shows a summary of our cash flows for the three months ended March 31, 2026 and 2025 (in thousands):

Current wording

The following table shows a summary of our cash flows for the six months ended June 30, 2026 and 2025 (in thousands):

Previous wording

Operating activities provided $39.8 million of cash and cash equivalents for the three months ended March 31, 2026, which reflects the cash generating ability of our operations. Cash provided by operating activities was primarily driven by a net income of $1.1 million in addition to significant beneficial adjustments to reconcile net income to net cash provided from operating activities including $19.9 million in stock-based compensation, $11.2 million of depreciation, from our fixed assets, and amortization, primarily from our internally-developed software and acquired intangibles. Additionally, working capital contributed an additional $6.3 million of cash to operating activities primarily driven by significant accounts receivable collections of $31.4 million, partially offset by decreases in accrued expenses of $14.8 million and $11.1 million of deferred revenue.

Current wording

Operating activities provided $76.8 million of cash and cash equivalents for the six months ended June 30, 2026, which reflects our ability to generate cash from our operations. Cash provided by operating activities was primarily driven by a net income of $7.2 million in addition to significant beneficial adjustments to reconcile net income to net cash provided from operating activities including $39.7 million in stock-based compensation, $22.4 million of depreciation from our fixed assets, and amortization, primarily from our internally-developed software and acquired intangibles. Additionally, working capital contributed an additional $7.2 million of cash to operating activities primarily driven by increase to operating cash flow from accounts receivable of $25.2 million, partially offset by decreases in deferred revenue of $19.6 million and accrued expenses of $8.3 million.

Previous wording

Operating activities provided $29.8 million of cash and cash equivalents for the three months ended March 31, 2025, 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 $2.1 million and a decrease in our net operating assets and liabilities of $11.0 million, offset by non-cash charges of $38.7 million related primarily to depreciation and amortization, stock-based compensation expense, amortization of debt issuance costs and other non-cash charges. The change in our net operating assets and liabilities was primarily due to a $20.3 million decrease in accrued expenses, a $12.9 million decrease in deferred revenue, a $2.0 million increase in prepaid expenses, a $2.2 million decrease in other liabilities and a $6.6 million decrease in accounts payable, which each had a negative impact on operating cash flow. These factors were offset by a $27.7 million decrease in accounts receivable and a $5.3 million decrease in deferred contract acquisition and fulfillment costs, which each had a positive impact on operating cash flow.

Current wording

Operating activities provided $77.3 million of cash and cash equivalents for the six months ended June 30, 2025, which demonstrates our ability to generate cash from our operations 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 $10.4 million and a decrease in our net operating assets and liabilities of $8.3 million, offset by non-cash charges of $75.1 million related primarily to depreciation and amortization, stock-based compensation expense, amortization of debt issuance costs and other non-cash charges. The change in our net operating assets and liabilities was primarily due to a $13.2 million decrease in accrued expenses, a $12.3 million decrease in deferred revenue, a $5.8 million increase in prepaid expenses, a $1.2 million decrease in other liabilities and a $3.0 million decrease in accounts payable, which each had a negative impact on operating cash flow.

Previous wording

Investing activities provided $55.3 million of cash for the three months ended March 31, 2026, primarily driven by $85.0 million of investment maturities, which was partially offset by $23.3 million in cash paid, net of cash acquired, in the acquisition of Kenzo to further strength our AI SOC capabilities and $4.3 million in capitalized internal-use software costs as we continue to invest and develop our product offering.

Current wording

Investing activities provided $100.1 million of cash for the six months ended June 30, 2026, primarily driven by $135.0 million of investment maturities, which was partially offset by $23.3 million in cash paid, net of cash acquired, in the acquisition of Kenzo to further strengthen our AI SOC capabilities and $8.2 million in capitalized internal-use software costs as we continue to invest and develop our product offering.

Previous wording

Investing activities used $79.2 million of cash for the three months ended March 31, 2025, consisting of $75.5 million in purchases of investments, net of sales/maturities, $3.7 million for capitalization of internal-use software costs, and $1.4 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $1.3 million in proceeds from other investments.

Current wording

Investing activities used $120.5 million of cash for the six months ended June 30, 2025, consisting of $111.5 million in purchases of investments, net of sales/maturities, $8.0 million for capitalization of internal-use software costs, and $2.3 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $1.3 million in proceeds from other investments.

Previous wording

Financing activities provided $2.6 million for the three months ended March 31, 2026, which consisted primarily of $2.9 million in proceeds from our employee stock purchase plan and was partially offset by $0.3 million in withholding taxes paid for the net share settlement of equity awards.

Current wording

Financing activities provided $2.6 million for the six months ended June 30, 2026, which consisted primarily of $2.9 million in proceeds from our employee stock purchase plan and was partially offset by $0.3 million in withholding taxes paid for the net share settlement of equity awards.

Previous wording

Financing activities provided $4.7 million of cash for the three months ended March 31, 2025, which consisted primarily of $4.4 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (“ESPP”) and $1.6 million in proceeds from the exercise of stock options, partially offset by $1.3 million in withholding taxes paid for the net share settlement of equity awards.

Current wording

Financing activities used $42.4 million of cash for the six months ended June 30, 2025, which consisted primarily of $46.0 million in conversion of convertible senior notes, $1.9 million in withholding taxes paid for the net share settlement of equity awards, and $1.3 million in debt issuance costs, partially offset by $4.4 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (“ESPP”) and $1.6 million in proceeds from the exercise of stock options.

Previous wording

Our unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of our unaudited 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. Other than the new market-based PSU estimate discussed in Note 2, Summary of Significant Accounting Policies, there have been no material changes in our critical accounting policies from those disclosed in our Annual Report.

Current wording

Our unaudited condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of our unaudited 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. Other than the new market-based PSU estimate discussed in Note 10, Stock-Based Compensation, there have been no material changes in our critical accounting estimates from those disclosed in our Annual Report.