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GAAP to Non-GAAP Reconciliation (Unaudited)(in thousands, except share and per share data) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023GAAP gross profit$151,637 $141,013 $442,978 $400,446 Add: Stock-based compensation expense1 3,001 2,527 8,707 8,348 Add: Amortization of acquired intangible assets2 4,410 4,775 12,739 13,993 Non-GAAP gross profit$159,048 $148,315 $464,424 $422,787 Non-GAAP gross margin 74.1% 74.6% 74.0% 73.9% GAAP gross profit - Product subscriptions$148,940 $138,615 $436,288 $394,752 Add: Stock-based compensation expense 2,564 1,940 7,460 6,332 Add: Amortization of acquired intangible assets 4,410 4,775 12,739 13,993 Non-GAAP gross profit - Product subscriptions$155,914 $145,330 $456,487 $415,077 Non-GAAP gross margin - Product subscriptions 75.8% 76.5% 75.8% 76.1% GAAP gross profit - Professional services$2,697 $2,398 $6,690 $5,694 Add: Stock-based compensation expense 437 587 1,247 2,016 Non-GAAP gross profit - Professional services$3,134 $2,985 $7,937 $7,710 Non-GAAP gross margin - Professional services 34.6% 33.3% 31.5% 28.5% GAAP income (loss) from operations$13,961 $(16,041) $31,409 $(91,665)Add: Stock-based compensation expense1 24,594 23,768 76,896 84,836 Add: Amortization of acquired intangible assets2 5,107 5,497 14,830 16,409 Add: Acquisition-related expenses3 290 — 568 363 Add: Restructuring expense4 — 19,996 (190) 19,996 Add: Impairment of long-lived assets — 3,553 — 30,784 Non-GAAP income from operations$43,952 $36,773 $123,513 $60,723 GAAP net income (loss)$16,554 $(76,611) $27,007 $(169,308)Add: Stock-based compensation expense1 24,594 23,768 76,896 84,836 Add: Amortization of acquired intangible assets2 5,107 5,497 14,830 16,409 Add: Acquisition-related expenses3 290 — 568 363 Add: Amortization of debt issuance costs 1,217 1,041 3,325 3,061 Add: Induced conversion expense — 53,889 — 53,889 Add: Restructuring expense4 — 19,996 (190) 19,996 Add: Discrete tax items5 — — 6,360 — Add: Change in fair value of derivative assets — 2,851 — 15,511 Add: Impairment of long-lived assets — 3,553 — 30,784 Non-GAAP net income$47,762 $33,984 $128,796 $55,541 Add: Interest expense of convertible senior notes6 1,571 604 4,714 1,354 Numerator for non-GAAP earnings per share calculation$49,333 $34,588 $133,510 $56,895 Weighted average shares used in GAAP earnings per share calculation, basic 62,898,078 61,065,157 62,389,482 60,506,082 Dilutive effect of convertible senior notes6 11,183,611 6,960,346 11,183,611 6,960,346 Dilutive effect of employee equity incentive plans7 455,396 873,718 652,017 1,919,771 Weighted average shares used in non-GAAP earnings per share calculation, diluted 74,537,085 68,899,221 74,225,110 69,386,199 Non-GAAP net income per share: Basic$0.76 $0.56 $2.06 $0.92 Diluted$0.66 $0.50 $1.80 $0.82 1 Includes stock-based compensation expense as follows: Cost of revenue$3,001 $2,527 $8,707 $8,348 Research and development 9,535 8,436 25,698 30,575 Sales and marketing 6,823 7,106 21,182 23,087 General and administrative 5,235 5,699 21,309 22,826 2 Includes amortization of acquired intangible assets as follows: Cost of revenue$4,410 $4,775 $12,739 $13,993 Sales and marketing 652 652 1,956 1,956 General and administrative 45 70 135 460 3 Includes acquisition-related expenses as follows: General and administrative$290 $— $568 $363 4 For the nine months ended September 30, 2024, restructuring expense was recorded within general and administrative expense in our condensed consolidated statement of operations. 5 Includes discrete tax items as follows: Provision for income taxes$— $— $6,360 $— 6 We use the if-converted method to compute diluted earnings per share with respect to our Notes.
Condensed Consolidated Statements of Cash Flows (Unaudited)(in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023Cash flows from operating activities: Net income (loss)$16,554 $(76,611) $27,007 $(169,308)Adjustments to reconcile net income (loss) to cash provided by operating activities: Depreciation and amortization 11,238 11,649 33,457 34,528 Amortization of debt issuance costs 1,217 1,041 3,325 3,061 Stock-based compensation expense 24,594 23,768 76,896 84,836 Impairment of long-lived assets — 3,553 — 30,784 Change in fair value of derivatives — 2,851 — 15,511 Induced conversion expense — 53,889 — 53,889 Deferred income taxes — — 1,840 — Other (3,182) 1,203 (4,534) 5,626 Change in operating assets and liabilities: Accounts receivable 2,442 (2,682) 22,432 12,428 Deferred contract acquisition and fulfillment costs 1,471 (3,525) (493) (9,488)Prepaid expenses and other assets 5,632 4,033 6,062 5,433 Accounts payable (7,429) 27 (10,450) (1,255)Accrued expenses 978 (6,000) (17,413) (17,968)Deferred revenue (13,766) (8,150) (37,112) (6,367)Other liabilities 4,220 (1,381) 6,880 (898)Net cash provided by operating activities 43,969 3,665 107,897 40,812 Cash flows from investing activities: Business acquisition, net of cash acquired (37,198) — (37,198) (34,841)Purchases of property and equipment (1,342) (295) (2,242) (3,999)Capitalization of internal-use software costs (4,125) (3,952) (10,414) (13,033)Purchases of investments (84,528) (113,756) (242,494) (194,013)Sales/maturities of investments 62,500 35,000 192,500 100,700 Other investing activities — — 360 — Net cash used in investing activities (64,693) (83,003) (99,488) (145,186)Cash flows from financing activities: Proceeds from issuance of convertible senior notes, net of issuance costs paid of $7,200 — 292,800 — 292,800 Purchase of capped calls related to convertible senior notes — (36,570) — (36,570)Payments for repurchase of convertible senior notes — (199,998) — (199,998)Payments related to business acquisitions — — — (2,250)Proceeds from capped call settlement — 17,518 — 17,518 Taxes paid related to net share settlement of equity awards (794) (1,421) (3,883) (4,012)Proceeds from employee stock purchase plan 4,200 5,149 9,246 11,323 Proceeds from stock option exercises 32 302 1,436 2,984 Net cash provided by financing activities 3,438 77,780 6,799 81,795 Effects of exchange rates on cash, cash equivalents and restricted cash 2,846 (1,673) 770 (2,010)Net (decrease) increase in cash, cash equivalents and restricted cash (14,440) (3,231) 15,978 (24,589)Cash, cash equivalents and restricted cash, beginning of period 244,548 186,446 214,130 207,804 Cash, cash equivalents and restricted cash, end of period$230,108 $183,215 $230,108 $183,215 Supplemental cash flow information: Cash paid for interest on convertible senior notes$2,625 $750 $5,840 $1,165 Cash paid for income taxes, net of refunds$1,568 $(56) $7,073 $4,087 Reconciliation of cash, cash equivalents and restricted cash: Cash and cash equivalents$222,571 $182,727 $222,571 $182,727 Restricted cash included in other assets and prepaid expenses and other current assets 7,537 488 7,537 488 Total cash, cash equivalents and restricted cash$230,108 $183,215 $230,108 $183,215 RAPID7, INC.
Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow (Unaudited)(in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2024 2023 2024 2023Net cash provided by operating activities$43,969 $3,665 $107,897 $40,812 Less: Purchases of property and equipment (1,342) (295) (2,242) (3,999)Less: Capitalized internal-use software costs (4,125) (3,952) (10,414) (13,033)Free cash flow$38,502 $(582) $95,241 $23,780 Fourth Quarter and Full-Year 2024 GuidanceGAAP to Non-GAAP Reconciliation(in millions, except per share data) Fourth Quarter 2024 Full-Year 2024Reconciliation of GAAP income from operations to non-GAAP income from operations: Anticipated GAAP income from operations$1.0to$3.0 $32.1 to$34.1 Add: Anticipated stock-based compensation expense 27.0to 27.0 104.0 to 104.0 Add: Anticipated amortization of acquired intangible assets 5.0to 5.0 20.0 to 20.0 Add: Anticipated acquisition-related expense —to — 0.6 to 0.6 Add: Anticipated restructuring expense —to — (0.2)to (0.2)Anticipated non-GAAP income from operations$33.0to$35.0 $156.5 to$158.5 Reconciliation of GAAP net income to non-GAAP net income: Anticipated GAAP net income$2.1to$4.1 $29.1 to$31.1 Add: Anticipated stock-based compensation expense 27.0to 27.0 104.0 to 104.0 Add: Anticipated amortization of acquired intangible assets 5.0to 5.0 20.0 to 20.0 Add: Anticipated acquisition-related expense —to — 0.6 to 0.6 Add: Anticipated amortization of debt issuance costs 1.0to 1.0 4.0 to 4.0 Add: Anticipated restructuring expense —to — (0.2)to (0.2)Add: Anticipated discrete tax items —to — 6.4 to 6.4 Anticipated non-GAAP net income$35.1to$37.1 $163.9 to$165.9 Add: Anticipated interest expense on convertible senior notes 1.6to 1.6 6.4 to 6.4 Numerator for non-GAAP earnings per share calculation$36.7to$38.7 $170.3 to$172.3 Anticipated GAAP net income per share, diluted$0.03 $0.05 $0.39 $0.42 Anticipated non-GAAP net income per share, diluted$0.48 $0.51 $2.28 $2.31 Weighted average shares used in earnings per share calculation, diluted 75.7 74.7 The reconciliation does not reflect any items that are unknown at this time, including, but not limited to, non-ordinary course litigation-related expenses, which we are not able to predict without unreasonable effort due to their inherent uncertainty.
