Rapid7, Inc.

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, 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.

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, 2026, we had approximately 11,800 customers in 149 countries, including 32% 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 nine months ended September 30, 2026 and 2025.

Previous wording

On August 7, 2026, our board of directors approved a restructuring plan that is designed to simplify our operations, align resources and investments with our core platform, and create capacity to reinvest in capabilities and solutions that improve the customer experience and strengthen our competitive position (collectively, the “2026 Restructuring Plan”). The 2026 Restructuring Plan includes reduction of the Company’s workforce by approximately 12%. For further information, refer to Note 16, Subsequent events, in the Notes to our Consolidated Financial Statements. The actions associated with the Restructuring Plan are expected to be completed by the end of fiscal 2026, subject to local law and consultation requirements.

Current wording

On August 7, 2026, our board of directors approved a restructuring plan that is designed to simplify our operations, align resources and investments with our core platform, and create capacity to reinvest in capabilities and solutions that improve the customer experience and strengthen our competitive position (collectively, the “2026 Restructuring Plan”). The 2026 Restructuring Plan includes reduction of the Company’s workforce by approximately 12%. For further information, refer to Note 15, Restructuring, in the Notes to our unaudited condensed consolidated financial statements. The actions associated with the Restructuring Plan are expected to be completed by the end of fiscal 2026, subject to local law and consultation requirements.

Previous 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.

Current wording

For each of the three and nine months ended September 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

Other (expense) income, net consists primarily of the change in fair value of derivative assets and unrealized and realized gains and losses related to changes in foreign currency exchange rates.

Current wording

Other (expense) income, net consists primarily of the change in fair value of derivative assets, change in fair value of equity investments ,and unrealized and realized gains and losses related to changes in foreign currency exchange rates.

Previous wording

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

Current wording

Comparison of the Three and Nine Months Ended September 30, 2026 and 2025

Previous wording

Total revenue decreased by $3.9 million for the six months ended June 30, 2026 as compared to the corresponding period in 2025, primarily driven by a decrease in our non-core standalone products, partially offset by an increase in our managed detection and response revenue. The decrease in professional services revenue was primarily driven by lower penetration-testing revenue.

Current wording

Total revenue decreased by $9.4 million for the nine months ended September 30, 2026 as compared to the corresponding period in 2025, primarily driven by a decrease in exposure management, and, to a lesser degree, our non-core and standalone products, which excludes detection and response and exposure management product revenues. These decreases are offset by an increase in our detection and response revenue products. The decrease in professional services revenue was primarily driven by lower penetration-testing revenue.

Previous 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.

Current wording

The increase in total cost of revenue for the nine months ended September 30, 2026 compared with the corresponding period in 2025 was primarily driven by an increase of personnel expenses of $3.0 million, inclusive of a $5.4 million increase in wages and wage-related expenses primarily driven by an increase in headcount, partially offset by a $2.5 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 $3.0 million increase in cloud computing costs; and a $1.2 million increase in facilities related expenses.

Previous wording

Research and development expenses slightly increased for the six months ended June 30, 2026 as compared to the same period in 2025, primarily driven by a $3.3 million increase in personnel costs, including a $6.2 million increase in wages and wage-related expenses, partially offset by a $3.0 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 $1.0 million decrease related to professional fees as we used less third-party services; a $0.9 million decrease in hosting and cloud computing expenses; a $0.6 million decrease in impairment of internally-developed software expense; and a $0.8 decrease in expenses driven by a gain from hedging activities related to international research and development wages and wage-related costs. These expenses were offset by a $0.2 million increase to engineering costs as we continue to develop new and enhance existing products.

Current wording

Research and development expenses decreased for the nine months ended September 30, 2026 as compared to the same period in 2025, primarily driven by a $4.2 million decrease in personnel costs, resulting from a $5.2 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, offset by a $1.0 million increase in wages and wage-related expenses. The decrease was also driven by a $1.9 million decrease related to professional fees as we used less third-party services and a $0.8 million decrease in expenses driven by a gain from hedging activities related to international research and development wages and wage-related costs. These decreases were offset by a $0.8 million increase to engineering costs as we continue to develop new and enhance existing products.

Previous wording

Sales and marketing expenses decreased for the six months ended June 30, 2026 compared with the corresponding period in 2025, primarily driven by a $6.7 million decrease in personnel related expenses, which was substantially driven by the $0.7 million restructuring charges which reduced personnel related expenses for the quarter and a $5.2 million decrease in stock-based compensation which was driven by stock awards granted at lower stock prices and fewer awards granted than in the same period in 2025. Sales and marketing expense was further reduced by a $1.2 million decrease in amortization expense as the customer relationships intangible asset was completely amortized as of April 2026. The decrease was offset by a $2.4 million increase in professional fees for consulting, a $1.7 million increase expenses from sales related events, and a $0.8 million increase in marketing expenses.

Current wording

Sales and marketing expenses decreased for the nine months ended September 30, 2026 compared with the corresponding period in 2025, primarily driven by a $19.7 million decrease in personnel related expenses, which was substantially driven by a $11.6 million decrease related to wages, commissions, and wage-related expenses, which was driven by a decrease in headcount due to the 2026 Restructuring Plan and a decrease in commissions from declining ARR and revenue and $8.1 million decrease in stock-based compensation which was driven by stock awards granted at lower stock prices and fewer awards granted than in the same period in 2025. Sales and marketing expense was further reduced by a $1.4 million decrease in amortization expense as the customer relationships intangible asset was completely amortized as of April 2026. The decrease was offset by a $2.4 million increase in professional fees for consulting and market event support, a $1.5 million increase in expenses from sales-related events, and a $0.7 million increase in travel and entertainment expenses related to customer events.

Previous 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.

Current wording

General and administrative expenses decreased for the nine months ended September 30, 2026 compared with the corresponding period in 2025, primarily driven by a $3.9 million decrease in personnel costs, which included a $1.8 million decrease in wages and wage-related expenses from the 2026 Restructuring Plan and a $2.3 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 $2.9 million, primarily related to legal, accounting, and tax services, bad debt expense decreased by $0.7 million, and hosting expenses decreased by $0.5 million. These decreases were partially offset by an increase in recruiting costs of $0.9 million and $0.5 million of acquisition-related expenses incurred from the Kenzo Security acquisition.

Previous wording

Restructuring expenses increased for the six months ended June 30, 2026 compared with the corresponding period in 2025, primarily driven by a restructuring primarily from our reduction in force as we realign our workforce to focus on our core platform and create capacity to reinvest in capabilities and solutions that improve the customer experience and strengthen our competitive position.s whereas, there were no restructuring expenses in 2025

Current wording

Restructuring expenses increased for the nine months ended September 30, 2026 compared with the corresponding period in 2025, primarily driven by the 2026 Restructuring Plan as we realign our workforce to focus on our core platform and create capacity to reinvest in capabilities and solutions that improve the customer experience and strengthen our competitive positions, whereas, there were no restructuring expenses in 2025.

Previous 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.

Current wording

Interest income slightly decreased for the nine months ended September 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

Interest expense decreased by $0.3 million for the six months ended June 30, 2026 compared with the corresponding period in 2025 primarily because the prior-year period included interest on the 2025 Notes prior to their maturity in May 2025.

Current wording

Interest expense decreased by $0.3 million for the nine months ended September 30, 2026 compared with the corresponding period in 2025 primarily because the prior-year period included interest on the 2025 Notes prior to their maturity in May 2025.

Previous 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.

Current wording

Other (expense) income, net increased for the nine months ended September 30, 2026 compared with the corresponding period in 2025 primarily due to the $5.5 million of impairment expenses incurred related to our SAFE investment in a cybersecurity company and to realized and unrealized losses on foreign currency transactions primarily related to transactions in the British Pound Sterling, the Euro, Indian Rupee, and the Israeli Shekel during the nine months ended September 30, 2026 as compared to unrealized gains in the same period in 2025.

Previous 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.

Current wording

Provision for income taxes decreased for the nine months ended September 30, 2026 compared with the corresponding period in 2025. The decrease was primarily driven by lower domestic and international pre-tax income in 2026 as compared to 2025.

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, non-ordinary course litigation-related expenses, impairment of long-lived assets, induced conversion expense, 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, non-ordinary course litigation-related expenses, impairment of long-lived assets, impairment of strategic equity investment, induced conversion expense, 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.

Previous 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):

Current wording

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

Previous 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):

Current wording

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

Previous 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.

Current wording

(1)For the three and nine months ended September 30, 2026 and 2025, acquisition-related expenses were comprised of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic of no expense and $0.1 million and $0.7 million and $0.5 million, respectively.

Previous 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):

Current wording

The following table reconciles GAAP net income to non-GAAP net income for the three and nine months ended September 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 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.

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 nine months ended September 30, 2026 and the three months ended September 30, 2025, the 2029 Notes and 2027 Notes were dilutive, and for the nine months ended September 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 and six months ended June 30, 2026 and 2025 (in thousands):

Current wording

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

Previous 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.

Current wording

As of September 30, 2026, we had $335.7 million in cash and cash equivalents, $395.9 million in investments that have maturities ranging from one to five monthsand an accumulated deficit of $953.9 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

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

Current wording

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

Previous 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.

Current wording

Operating activities provided $106.9 million of cash and cash equivalents for the nine months ended September 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 $10.7 million in addition to significant beneficial adjustments to reconcile net income to net cash provided from operating activities including $63.0 million in stock-based compensation, $32.9 million of depreciation from our fixed assets, and amortization, primarily from our internally-developed software and acquired intangibles. Additionally, working capital used $2.8 million of cash for operating activities primarily driven by a decrease to operating cash flow from accounts receivable of $40.4 million and prepaid expenses and other assets of $21.9 million, offset by an increase in deferred revenue of $49.8 million and other liabilities of $13.8 million.

Previous 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.

Current wording

Operating activities provided $116.3 million of cash and cash equivalents for the nine months ended September 30, 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 $20.3 million and an increase in operating cash from a decrease of our net operating assets and liabilities of $16.4 million, offset by non-cash charges of $112.4 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 $11.6 million decrease in accrued expenses, a $36.9 million decrease in deferred revenue, a $1.3 million increase in prepaid expenses, a $2.8 million decrease in other liabilities and a $3.8 million decrease in accounts payable, which each had a negative impact on operating cash flow. These factors were offset by a $25.9 million decrease in accounts receivable and a $14.1 million decrease in deferred contract acquisition and fulfillment costs, which each had a positive impact on operating cash flow.

Previous 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.

Current wording

Investing activities used $21.1 million of cash for the nine months ended September 30, 2026, primarily driven by $185.0 million of investment maturities, which provided cash, offset primarily by $167.5 million of investment purchases, $23.3 million in cash paid, net of cash acquired, in the acquisition of Kenzo to further strengthen our AI SOC capabilities, and $11.7 million in capitalized internal-use software costs as we continue to invest and develop our product offering.

Previous 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.

Current wording

Investing activities used $292.2 million of cash for the nine months ended September 30, 2025, primarily consisting of $503.0 million in purchases of investments, net of sales/maturities, $12.0 million for capitalization of internal-use software costs, and $6.4 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $227.5 million in proceeds from other investments.

Previous 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.

Current wording

Financing activities provided $3.9 million for the nine months ended September 30, 2026, which consisted primarily of $4.5 million in proceeds from our employee stock purchase plan and was partially offset by $0.4 million in withholding taxes paid for the net share settlement of equity awards.

Previous 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.

Current wording

Financing activities used $40.8 million of cash for the nine months ended September 30, 2025, which consisted primarily of $46.0 million in conversion of convertible senior notes, $2.4 million in withholding taxes paid for the net share settlement of equity awards, and $1.7 million in debt issuance costs, partially offset by $7.7 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.