Rapid7, Inc. 10-K

Item 1. Business Overview Rapid7 is on a mission to create a safer digital world by making cybersecurity simpler and more accessible. We empower security professionals to manage a modern attack surface through our best-in-class technology, leading-edge research, and broad, strategic expertise. Our comprehensive security solutions help our customers unite cloud risk management and threat detection to reduce attack surfaces and eliminate threats with speed and precision. In the over 20 years that Rapid7 has been in business, security companies and trends have come and gone, while broader technology innovation continues to advance rapidly. Every company is now a technology company, and rampant innovation inevitably creates security risk. The migration of businesses to the cloud, more distributed workforces, and ubiquitous connected devices present security teams with an increasingly complex, ever-changing, and unpredictable attack surface. We believe as cybersecurity challenges continue to rise exponentially, two key factors can prevent organizations from effectively managing their growing security exposure. First, the tools to manage complex security problems are often equally complicated to use. Second, there is a scarcity of cybersecurity professionals who are qualified to successfully manage these sophisticated tools. These two factors compound the difficulties that resource-constrained organizations face when attempting to minimize their security exposure, meet security compliance regulations, and provide visibility to their leadership. We call the expanding divide between risk created through innovation and risk effectively managed by security teams the security achievement gap. We believe Rapid7 is uniquely positioned to improve how security challenges are addressed. Our solutions and services are built with and supported by the expertise of our dedicated team of security researchers, expert SOC analysts and consultants, who bring knowledge of attacker behavior and emerging vulnerabilities directly to customers. We also continue to invest in further simplifying our technology to improve usability, lowering the barrier for teams and organizations who lack resources to manage their security posture. While our security technology is the foundation of our mission to make successful security accessible to all, technology alone will not solve today’s cybersecurity challenges. Our ongoing commitment to researching and partnering with the technology community helps to curb new security risks born through innovation. We are also investing in under-served, at risk communities, like non-profits and hospitals, to better understand their needs and make security technology and services accessible. By continuously improving our technology, stemming the creation of risk in the community, and making security more usable and accessible, Rapid7 aims to close the security achievement gap. As of December 31, 2022, we had more than 10,000 customers that rely on Rapid7 technology, services, and research to improve security outcomes and securely advance their organizations. We have experienced strong revenue growth with revenue increasing from $244.1 million in 2018 to $685.1 million in 2022, representing a 29% compound annual growth rate. In 2022, 2021 and 2020 recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 94%, 92% and 90%, respectively, of total revenue. We incurred net losses of $124.7 million, $146.3 million and $98.8 million in 2022, 2021 and 2020, respectively, as we continued to invest for long-term growth. Our Solutions We offer products across multiple pillars on our Insight Platform: • Incident Detection and Response: Our industry-leading Incident Detection and Response (“IDR”) solutions are designed to enable organizations to rapidly detect and respond to cybersecurity incidents and breaches across physical, virtual, and cloud assets. Equipped with user behavior analytics (“UBA”), attacker behavior analytics (“ABA”), network traffic analysis (“NTA”), end-point detection and response (“EDR”) and deception technology, our Extended Detection and Response (“XDR”) solution is designed to provide comprehensive network visibility and accelerate threat investigation and response. • Cloud Security: Our Cloud Security solutions are designed to effectively manage and protect cloud and container environments. By combining continuous real-time monitoring with automation, our solutions quickly assess an organization's security and compliance posture and automate remediation of misconfigurations and policy violations to help deliver continuous security and compliance across multi-cloud environments. • Vulnerability Risk Management: Our industry-leading Vulnerability Risk Management (“VRM”) solutions provide clarity into risk across traditional and modern IT environments, and the capabilities and data to influence remediation 3 Table of Contents teams and track progress. With built-in risk prioritization, IT-integrated remediation projects, tracking of goals and service level agreements, and pre-built automation workflows, our solutions are designed to not just enumerate risk, but also accelerate risk mitigation. • Application Security: Our Application Security offerings provide dynamic application security testing and run-time application security monitoring and protection solutions that are designed to continuously analyze web applications for security vulnerabilities throughout a customer’s software development life cycle. • Threat Intelligence: Our advanced external threat intelligence tool finds and mitigates threats by proactively monitoring thousands of sources across the clear, deep, and dark web. By providing actionable, real-time information on threats outside their infrastructure coupled with automated remediation capabilities, customers have visibility to tailored threats and can make informed decisions. • Security Orchestration and Automation Response: Our Security Orchestration and Automation Response (“SOAR”) solutions allow security teams to connect disparate solutions within their cybersecurity, IT and development operations and build automated workflows, without requiring code, to eliminate repetitive, manual and labor-intensive tasks, resulting in measurable time and cost savings. Finally, to complement our products, we offer a range of managed services based on our software solutions and professional services, including penetration testing services, incident response services, security advisory services, and deployment and training. Insight Platform Our cloud-native Insight Platform is at the core of our product offerings. The platform was built using our extensive experience in collecting and analyzing data to enable our customers to create and manage analytics-driven cybersecurity risk management programs. By utilizing our powerful, proprietary analytics to assess and understand the context and relationships around users, IT assets and cyber threats within a customer’s environment, our solutions make it easier for teams to identify and remediate vulnerabilities, monitor for misconfigurations and malicious behavior, investigate and shutdown attacks, and automate operations. Our Insight Platform provides a high level of scalability. We leverage cloud technologies to achieve a scalable delivery model with a high degree of redundancy, fault tolerance, and cost-effectiveness. We also designed our Insight Platform to provide a secure environment for our customers' data. We deploy a variety of technologies and practices that are designed to help ensure that the data collected from a customer’s environment remains proprietary, secure and operational. Insight Platform's Features: Visibility: The Insight Platform allows security professionals to collect data once across their IT environment, enabling Security, IT, and development operations (“DevOps”) teams to collaborate effectively as they analyze shared data. • Unified Data Collection: We designed the Insight Platform to allow customers to collect their data once and leverage that same data across multiple solutions, providing shared visibility across teams and reducing time to value for additional solutions. Our robust data collection architecture supports gathering a wide swath of operational data from endpoints to the cloud, including key data about assets and user-specific behavior, into a unified, searchable dataset. • Agentless and Agent-Based Architecture: We developed our platform with flexible processing technologies that employ both agentless data collection and our own internally-developed endpoint agent technology, which enables rapid and seamless integration of our products into our customers’ modern IT environments and provides security and IT professionals with instant visibility into their dynamic and rapidly-expanding IT ecosystem. Our lightweight endpoint Insight Agent is designed to automatically collect data from all endpoints, even those from remote workers and sensitive assets that cannot be actively scanned, or that rarely join the corporate network. • Endpoint Detection and Visibility: With a universal lightweight agent and endpoint scanning, the Insight Platform provides real-time detection and the ability to proactively remediate IT environments, before a potential attack happens. • Network Traffic Analysis: Network flow data illuminates environments and helps accelerate investigations. Our lightweight Network Sensor passively analyzes raw traffic to increase visibility into user activity, pinpoint real threats, and accelerate investigations with granular detail of attacker movement. 4 Table of Contents • Cloud and Virtual Infrastructure Assessment: Modern networks and infrastructures are constantly changing. The Insight Platform integrates with cloud services and virtual infrastructure to help ensure that technology is configured securely and that security professionals know when new devices are brought online. • Attack Surface Monitoring with Project Sonar: As organizations grow and infrastructure becomes more complex, maintaining visibility into attack surface becomes more challenging. Our platform directly integrates with Project Sonar, a Rapid7 research project that regularly scans the public internet, to gain insights into global exposure to common vulnerabilities. This capability also enables security professionals to identify previously unknown, externally facing assets connected to the internet. Analytics: Increasing IT environment complexity coupled with a severe lack of cybersecurity professionals is overwhelming security and IT teams, who are struggling to deal with false positives and maintain adequate levels of cybersecurity. Our Insight Platform addresses these challenges with the following features: • User and Attacker Behavior Analytics: Our Insight Platform incorporates extensive user behavior analytics (“UBA”) and attacker behavior analytics (“ABA”) to provide rapid context around users, attackers and assets involved in an incident, enabling organizations to more quickly respond to, contain and mitigate breaches. Our platform incorporates comprehensive UBA to create a behavior profile for each user and correlates every event with a user, asset or application to detect compromised credentials, lateral movement and other malicious behavior. • Risk Prioritization and Management: With built-in risk assessment and risk prioritization, IT-integrated remediation projects, and pre-built automation workflows, the Insight Platform provides a granular view of what is relevant and critical today, to help ensure risks can be prioritized and mitigated more effectively. • Threat Detection: Our Insight Platform includes integrated threat feeds, informed by public data as well as proprietary threat intelligence and adversary research, and continuously gathers and combines them with a customer’s IT environment, to show threats that are most relevant to them. • Centralized Log Management: Our cloud-based platform correlates millions of daily events in any IT environment directly to the users and assets behind them to highlight risk across the environment and help prioritize where to search and automate compliance without the requirement of extensive hardware. • Deception Technology: Monitoring solutions that only analyze log files leave traces of the attacker unfound. Through our deep understanding of attacker behavior, our Insight Platform provides not only UBA and endpoint detection, but also easy-to-deploy intruder traps. These include honeypots, honey users, honey credentials, and honey files, all crafted to identify malicious behavior earlier in the attack chain. • Industry Experts: With a highly specialized team of penetration testing, incident response, threat hunting and security operation center experts, we believe we are uniquely positioned to stay ahead of emerging threats and help detect threats quickly across a customer’s entire IT ecosystem. Automation: Our Insight Platform unites technology stacks and allows security operations teams to connect disparate solutions within their cybersecurity, IT and development operations. • Built-in Workflows: Security tools have not historically been built to work well together, and without deep programming knowledge, building automation between tools was nearly impossible. With our Insight Platform, security professionals can streamline their operations with connect-and-go workflows, without requiring any code, resulting in significant time and cost savings. Examples of these workflows include assisted patching and automated containment. • Highly Customizable: The Insight Platform not only has a wide range of pre-built workflows and integrations, but it is also highly extensible. With approximately 500 plugins to connect security tools and easily customizable connect-and-go workflows, the Insight Platform frees up security teams to tackle other challenges, while still leveraging human decision points when it is most critical. Insight Platform Product Offerings We offer our Insight Platform solutions as software-as-a-service products, on a subscription basis. Our Insight Platform products are available globally and reduce the need for customers to manage large, complex, data infrastructure. We offer the following cloud products across the main pillars of Security Operations (“SecOps”): InsightIDR: InsightIDR, our unified extended detection and response (“XDR”) and next-gen security information and event management (“SIEM”) solution, is designed to enable organizations to rapidly detect and respond to cybersecurity incidents and breaches across the entirety of their modern environment. 5 Table of Contents InsightIDR unifies SIEM, UEBA, EDR, NTA, and cloud detection to detect stealthy attacks across today’s complex networks. It analyzes the billions of events that occur daily in organizations to reduce them to the important behaviors and deliver high-fidelity and prioritized alerts. In addition to identifying stealthy attacks, InsightIDR reduces the signal-to-noise ratio to deliver reliable, high-context alerts and reduce the time to investigate with its correlation engine, powerful search and forensic capabilities. InsightIDR is designed to provide a cost-effective response to the need for a modern SIEM or XDR solution. With our Metasploit and open source community, research and incident response services, we are continually studying and identifying the latest attacker methods. We have increased accuracy, speed processes, and achieve greater confidence, even as attacker methods change. With diverse detection capabilities across known and unknown threats, unique intelligence, and constant curation, InsightIDR customers benefit from an always up-to-date library of detections and coverage against the most evasive and emergent threats. Unlike most SIEMs, InsightIDR also provides expertly vetted recommendations with every alert and a number of prebuilt workflows and automation capabilities - giving customers the ability to respond quickly and confidently, reducing mean time to respond (“MTTR”). Prebuilt workflows span a number of use cases - including productivity and ticketing workflows, user and asset containment, threat enrichment and more - helping SecOps teams realize greater efficiency and gain time back. While InsightIDR is optimized to drive ultimate efficiency for resource constrained teams, customers with greater security maturity can also have access to a number of advanced modules to unlock expanded use cases. Enhanced Network Traffic Analysis continuously monitors network traffic at any location or site across your network - east / west and north / south. This data not only increases visibility across the attack surface and detects intrusions or other potential security events, it also is incredibly difficult for attackers to tamper with - making it an excellent source of forensic evidence and information. With Enhanced Endpoint Telemetry, InsightIDR collects detailed process activity logs off every endpoint, providing visibility into all endpoint activity whether events occurred before, during, or after a detection. With this holistic view into endpoint activity, customers can unlock custom use cases and enrich investigations in InsightIDR. InsightIDR is offered through a cloud-based subscription. Customers that seek greater support and expertise also have the option of leveraging our Managed Detection and Response (“MDR”) service, an outsourced service that leverages elite security experts to deliver 24 x 7 x 365 monitoring of your environment and a first line of defense and triage against attacks. When attacks are found, customers are promptly informed of all known details and our team moves to incident response, providing security teams with detailed, easy-to-follow remediation steps tailored to the environment. This MDR service is powered by InsightIDR - providing a real-time feedback loop and constant vetting of our technology. This infused expertise means that even software only customers benefit from having the insights, input, and vetting of experts across all of our detections, investigation capabilities, and overall user experience. InsightCloudSec: InsightCloudSec, our cloud risk and compliance management platform, enables customers to securely accelerate cloud adoption with continuous security and compliance throughout the entire software development lifecycle. InsightCloudSec is a fully-integrated solution that integrates posture management, workload protection, infrastructure entitlements management, infrastructure-as-code security, and Kubernetes protection. It helps Security and DevOps teams surface risk in cloud and container environments, shift their cloud security program earlier in the development lifecycle, and automate workflows to speed up remediation and implement cost-saving efforts. Integrating best-of-breed technologies, InsightCloudSec provides unified visibility and robust context across multi-cloud environments to analyze, prioritize, and remediate issues as they arise. By performing real-time, continuous discovery and analysis of cloud and container resources, we allow customers to identify security risks, threats and policy compliance violations such as data breaches, malicious insiders, account hijacking, insecure interfaces, and weak authentication. InsightCloudSec can then take automatic action to remediate identified issues based on user-defined and/or automated parameters before they are exploited by a malicious actor. InsightCloudSec is offered through a cloud-based subscription. InsightVM: Leveraging the power of our Insight Platform, InsightVM helps organizations to discover and remediate vulnerability risk across their network in a fully available, scalable, and efficient manner. InsightVM is designed to provide continuous visibility across a company’s IT environment through lightweight agents and prioritize those vulnerabilities using our real risk score with an integrated threat feed - including CVSS scores, malware exposure, exploit exposure and ease of use, and vulnerability age - which provides organizations with the business context of vulnerabilities to focus on what is most important. Customers can visualize these risk scores through Live Dashboards and our IT-integrated remediation projects help to assign and track remediation duties and provide continuous visibility into how well issues are being fixed. In-product integrations include ServiceNow, IBM Bigfix, Microsoft SCCM and Jira ticketing systems. 6 Table of Contents InsightVM is offered through a cloud-based subscription or as a managed service. The managed service is known as Managed Vulnerability Risk Management, which provides our resource constrained customers with a fully outsourced option for leveraging our innovation, expertise and technology. InsightAppSec: InsightAppSec provides comprehensive dynamic application security testing (“DAST”) that continuously analyzes web applications for security weaknesses and vulnerabilities. InsightAppSec assesses web applications with both out of the box and custom attack modules such as scanning for OWASP Top 10 and Out of Band injections. InsightAppSec also allows security teams to easily partner with key remediators with our Attack Replay functionality and integrations with CI/CD pipeline and key ticketing systems. InsightAppSec is offered on a cloud-based subscription basis. For customers that seek greater support and expertise, they can leverage our Managed Application Security (“MAS”) solution which is powered by InsightAppSec and supported by experts. InsightConnect: InsightConnect is our SOAR solution that is used by security professionals to connect their many disparate solutions and automate workflows to increase the speed with which they can identify risk and respond to incidents, and accelerate communication workflows with key remediators, such as development teams. With a growing library of over 500 integration plugins and easily customizable pre-built workflows, it allows our customers to automate manual and tedious tasks, while still leveraging their expertise when it is most critical, thereby saving time and improving efficiency. InsightConnect is offered on a cloud-based subscription basis. Other Products Threat Intelligence: Threat Intelligence finds and mitigates threats by proactively monitoring thousands of sources across the clear, deep, and dark web. By providing actionable, real-time information on threats outside their infrastructure coupled with automated remediation capabilities, customers have visibility to tailored threats and can make informed decisions. Threat Intelligence is offered on a cloud-based subscription basis. Nexpose: Nexpose is an on-premise version of our Vulnerability Risk Management solution, that enables customers to assess and remediate their overall exposure to cyber risk across their increasingly complex IT environments. Nexpose is offered through term-based software licenses. AppSpider: AppSpider is the on-premise version of our Application Security Testing solution that provides comprehensive dynamic application security testing that continuously analyzes web applications for security vulnerabilities. AppSpider is offered through term-based software licenses. Metasploit : Metasploit is an industry-leading penetration testing software solution, developed on an open source framework. Metasploit can be used to safely simulate attacks on an organization’s network in order to uncover vulnerabilities before they are exploited by cyber attackers and assess the effectiveness of an organization’s existing defenses, security controls and mitigation efforts. The Metasploit open source framework is freely available and geared toward developers and security researchers. We also offer Metasploit Pro, the commercial penetration testing software based on the Metasploit framework, through term-based software licenses. Professional Services Our professional services offerings enhance our ability to serve as a trusted advisor in assisting organizations to think proactively about their security programs and implement strategic, analytics-driven security strategies. We believe that our role as a trusted advisor helps drive better security outcomes for our customers, as well as loyalty and further usage of our products. Our professional services offerings include, but are not limited to, Penetration Testing, Cybersecurity Maturity Assessments, Security & Incident Response Program Development Services, IoT & Internet Embedded Device testing as well as Threat Modeling, TableTop Exercises and Incident Response services. In addition, we offer deployment and training services related to our platform, to further help customers operationalize and customize their platform experience. For example, our Cybersecurity Maturity Assessments provide our customers with a view of their current security posture, an objective review of their existing plans, and a guide to their strategic planning. By accessing our security talent, we help organizations develop an approach and road map to further mature and strengthen their program efforts - often simplifying the otherwise complex. Our Growth Strategy Our goal is to make advanced security accessible to resource constrained enterprises of all sizes. The main drivers of our growth strategy are: • Continued investments in product development: We intend to continue to invest heavily in our product development to enhance our Insight Platform and deliver additional features, which will allow us to further penetrate and grow our addressable markets. 7 Table of Contents • Grow our customer base: We believe we have a strong opportunity to address the security needs of resource constrained organizations of any size. We will continue to increase investments in our sales and marketing efforts and foster the growth of our channel relationships to enable acquisition of these customers. • Upsell and cross-sell to our existing customer base: We see significant opportunity to deepen our relationship with our existing customers. With a strong focus on customer experience, satisfaction, and the value proposition of our Insight Platform, we intend to expand customers' usage of products they own (upsell) and help them adopt additional products (cross-sell). • Further strengthen our customer renewal rate: We intend to continue to drive customer satisfaction and renewals by offering professional services, support, and strong investments in customer success functions. Our customer success teams provide expertise to help our customers improve their security outcomes, leading to higher customer satisfaction. • Expand our partner ecosystem: We continue to expand our strategic partnerships with our channel partners and system integrators. Technology alliances with partners such as ServiceNow, Microsoft, AWS and Palo Alto Networks enable our customers to succeed with our technology and platform in their ecosystem and deliver more value from their security operations program. • International expansion: We continue to make investments to expand our international presence. These include investments in infrastructure, sales and marketing, and strategic partnerships. • Strategic M&A: We have and may continue to make acquisitions that enhance the value of our Insight Platform and bolster our ability to solve emerging customer challenges, allowing us to deliver on the vision of becoming the SecOps leader. Sales, Customer Support, and Marketing We sell our solutions through direct inside and field sales teams and indirect channel partner relationships. Sales: Our sales teams focus on both new customer acquisition as well as upselling and cross-selling additional offerings to our existing customers. Our sales teams are organized by geography, consisting of the Americas; Europe, the Middle East and Africa (“EMEA”); and Asia Pacific (“APAC”), as well as by target organization size. Our sales team consists of a mix of inside sales and field sales professionals, that sell to small, medium and large customers. Our highly technical sales engineers help define customer use cases, manage solution evaluations and train channel partners. We maintain a global channel partner network that complements our sales organization, particularly in EMEA, APAC and Latin America. We have established strong co-sell relationships with strategic channel partners, who provide additional leverage through customer acquisition, deal execution and providing value in securing renewals. We continue to invest in partner models that enable us to create long term customer value. We generated 57%, 52%, and 47% of sales from channel partners, in 2022, 2021, and 2020, respectively. Our revenue is not concentrated with any individual channel partner as no channel partner represented more than 10% of our revenue in 2022, 2021 or 2020. Customer Support: Our customer support organization is responsible for providing technical support to our customers acquired directly and through channel partners. We believe that a dedicated support team is essential to a successful customer deployment and ongoing experience, as well as overall customer satisfaction. Marketing: We focus our marketing efforts on increasing the strength of the Rapid7 brand, communicating product advantages and business benefits, generating leads for our sales force and channel partners and driving product adoption. We deliver targeted content to demonstrate our thought leadership in security and use digital advertising methods to drive downloads of our free trial software, which deliver opportunities to our sales organization. We work with our own researchers, as well as the broader IT and security community, to share important information about vulnerabilities and threats. We share that research through our blog, social media and traditional public relations. In addition, we host regional and national events to engage both customers and prospects, deliver product training and foster community collaboration. Consolidation Offerings: In addition to offering compelling platform technology, our consolidation offerings are refining how our salesforce goes to market. For example, our Threat Complete and Cloud Risk Complete consolidation offerings lean into vendor consolidation as well as the prioritization of security budgets around critical spending areas that include Detection & Response and Cloud Security. Threat Complete enables customers to consolidate our expert-driven threat detection and response solution along with unlimited VM coverage together in one platform subscription. Cloud Risk Complete is our cloud-centered risk visibility offering, which consolidates visibility across customers’ on-prem, cloud, and external environments, at various stages of transition to the cloud. It enables use of Cloud and Application Security with unlimited VM 8 Table of Contents coverage together in one platform subscription. These consolidation offerings are part of the realignment of our sales strategy, and an important step in advancing our platform selling motion. Research and Development Efforts We invest substantial resources in research and development to enhance our core technology platform and products, develop new end market-specific solutions and applications, and conduct product and quality assurance testing. Our technical and engineering team monitors and tests our products on a regular basis, and we maintain a regular release process to refine, update, and enhance our existing products. We also have a team of experienced security researchers who work to keep us abreast of the latest developments in the cybersecurity landscape. Our research and development teams are located in our offices in Boston, Massachusetts; Austin, Texas; Los Angeles and San Francisco, California; Arlington, Virginia; Toronto, Canada; Dublin and Galway, Ireland; Belfast, Northern Ireland; Tel Aviv, Israel and Stockholm, Sweden, providing us with a broad, worldwide reach to engineering talent. Metasploit Community: Our Metasploit product has an active community of contributors and users. This online security community provides us with a robust and growing network of active users and influencers who promote the usage of our software. Security researchers contribute modules to the Metasploit Framework that serve as a resource about real-world attacker techniques. The community also provides us with near real-time visibility into new cyber attacks as they occur and a deep understanding of attacker behaviors. We perform security research that enables the analytics in our platform and products as well as delivers strategic value to the security community at large. The output of our research results in threat intelligence, exposure analysis and attacker awareness that we publish as well as integrate into our platform. This data is used for security research, product development, and across our services to help protect and inform our customers, partners and community. We share this data with validated educational and private security researchers, research partners, vetted threat sharing communities, and organizational security teams through our Open Data portal to foster collaboration and encourage discovery of new insights. We collect data for research purposes through a few key areas: Attacker Intelligence: We collect data from across the internet through a variety of honeypots distributed both geographically and across IP space. The honeypots collect many data types which are then analyzed to help enhance our understanding of attacker methods. Internet Intelligence: We conduct internet-wide scans across many services and protocols to gain insight into global exposures and vulnerabilities. This data collected is analyzed for the purpose of analytics in our platform and results in core research reports. We publish a variety of reports including The National Exposure Index, The Industry Cyber Exposure Report and Under the Hoodie. The National Exposure Index, published annually, is a census report that highlights the state of exposed internet services at the nation-state level and provides key trending information on the use of insecure protocols. The Industry Cyber Exposure Index details the attack surface, insecure service presence, email safety configurations, malware infection rates and internet supply-chain risks of Fortune 500 companies. The Under the Hoodie report sheds light on the art of penetration testing by revealing not just the process, techniques and tools that go into it, but also revealing the real-world experience of our engineers and investigators, gathered over thousands of penetration tests. Velociraptor Open Source DFIR: Velociraptor is a unique, advanced open-source endpoint monitoring, digital forensic and cyber response platform. It was developed by Digital Forensic and Incident Response (“DFIR”) professionals who needed a powerful and efficient way to hunt for specific artifacts and monitor activities across fleets of endpoints. Velociraptor provides you with the ability to more effectively respond to a wide range of digital forensic and cyber incident response investigations and data breaches such as: • Reconstruct attacker activities through digital forensic analysis • Hunt for evidence of sophisticated adversaries • Investigate malware outbreaks and other suspicious network activities • Monitor continuously for suspicious user activities, such as files copied to USB devices • Discover whether disclosure of confidential information occurred outside the network • Gather endpoint data over time for use in threat hunting and future investigations Velociraptor’s power and flexibility comes from the Velociraptor Query Language (“VQL”). VQL is a framework for creating highly customized artifacts, which allow you to collect, query, and monitor almost any aspect of an endpoint, groups of 9 Table of Contents endpoints, or an entire network. It can also be used to create continuous monitoring rules on the endpoint, as well as automate tasks on the server. Our Customers Our customer base has grown from approximately 8,700 customers at the end of 2020 to more than 10,000 customers as of December 31, 2022, in 146 countries, including 48% of the organizations in the Fortune 100. We define a customer as any entity that has an active Rapid7 recurring revenue contract as of the specified measurement date, excluding InsightOps and Logentries only customers with a contract value less than $2,400 per year. Our customers span a wide variety of industries including technology, energy, financial services, healthcare and life sciences, manufacturing, media and entertainment, retail, education, real estate, transportation, government and professional services, with customers in the services industry representing our largest industry in 2022 at 17% of our revenue. In 2022, 43% of our revenue was generated from enterprises, which we define as organizations that have either annual revenue greater than $1.0 billion or more than 2,500 employees, and the balance was generated from middle-market and small organizations. Our revenue is not concentrated with any individual customer and no customer represented more than 1% of our revenue in 2022, 2021 or 2020. Our Competition The markets we operate in are highly competitive, fragmented, and subject to technology change and innovation. Our primary competitors in XDR and SIEM include CrowdStrike, Exabeam, LogRhythm, Microsoft, and Splunk; in Cloud Security include Orca Security, Palo Alto Networks, and Wiz; in Vulnerability Risk Management include Qualys and Tenable; in Application Security include IBM and Micro Focus; in Threat Intelligence include Digital Shadows and Recorded Future and finally, while the competition in our professional services business is diverse, our competitors include Crowdstrike, Mandiant (Google), and SecureWorks. We compete on the basis of a number of factors, including: • product functionality; • breadth of offerings; • depth and expertise of our security service providers; • performance; • brand name, reputation and customer satisfaction; • ease of implementation, use and maintenance; • total cost of ownership; and • scalability, reliability and security. Some of our competitors have greater sales, marketing and financial resources, more extensive geographic presence or greater brand awareness than we do. We may face future competition in our markets from other large, established companies, as well as from emerging companies. In addition, we expect that there is likely to be continued consolidation in our industry that could lead to increased price competition and other forms of competition. Government Regulations We are subject to various federal, state and international laws and regulations that affect our business, including those relating to the privacy and security of customer and employee personal information and export or import of our products to certain countries, governments or entities. Additional laws in all of these areas are likely to be passed in the future, which could result in significant limitations on or changes to the ways in which we can collect, use, host, store or transmit the personal information and data of our customers or employees, communicate with our customers, and deliver products and services, which may significantly increase our compliance costs. Intellectual Property Our future success and competitive position depends in part on our ability to protect our intellectual property and proprietary technologies. To safeguard these rights, we rely on a combination of patents, trademarks, copyrights, trade secrets, employee and third-party nondisclosure agreements, licensing arrangements and other contractual protections to protect our intellectual property in the United States and other jurisdictions. 10 Table of Contents We have numerous issued patents and a number of registered and unregistered trademarks. We believe that the duration of our issued patents is sufficient when considering the expected lives of our products. We file patent applications to protect our intellectual property and have a number of patent applications pending. We require our employees, consultants and other third parties to enter into confidentiality and proprietary rights agreements and control access to software, documentation and other proprietary information. Although we rely on intellectual property rights, including trade secrets, patents, copyrights and trademarks, as well as contractual protections to establish and protect our proprietary rights, we believe that factors such as the technological and creative skills of our personnel, creation of new modules, features and functionality, and frequent enhancements to our solutions are more essential to establishing and maintaining our technology leadership position. We also license software from third parties for integration into our offerings, including open source software and other software available on commercially reasonable terms. We believe our continuing research and product development are not materially dependent on any single license or other agreement with a third party relating to the development of our products. Human Capital Rapid7 is dedicated to making the best in security operations achievable for all, and our employees are critical to achieving this mission. In order to continue to innovate, compete and succeed in our highly competitive and rapidly evolving market, it is crucial that we continue to attract and retain experienced employees. As part of these efforts, we strive to offer a competitive compensation and benefits program, foster a community where everyone feels included and empowered to do their best work, and give employees the opportunity to give back to their communities and make a social impact. As of December 31, 2022, we had 2,623 full-time employees, including 497 in product and service delivery and support, 1,031 in sales and marketing, 780 in research and development and 315 in general and administrative. As of December 31, 2022, we had 1,672 full-time employees in the U.S. and 951 full-time employees internationally. None of our U.S. employees are covered by collective bargaining agreements. We believe our employee relations are good and we have not experienced any work stoppages. Compensation, Benefits and Well-being Our compensation program is designed to attract and reward talented individuals who possess the skills necessary to support our business objectives, assist in the achievement of our strategic goals and create long-term value for our stockholders and fit within our company culture. In addition to their base salary, eligible employees are compensated for their contributions to the Company’s goals with short-term incentives and long-term equity awards tied to the value of our stock price. We believe that a compensation program with both short-term and long-term awards provides fair and competitive compensation and aligns employee and stockholder interests, including by incentivizing business and individual performance (pay for performance), motivating based on long-term company performance and integrating compensation with our business plans. In addition to cash and equity compensation, we also offer employees a wide array of benefits such as life and health (medical, dental and vision) insurance, paid time off and retirement benefits. We also provide emotional well-being services through our Employee Assistance Program. As an initial response to the COVID-19 pandemic, we implemented significant changes, including having the vast majority of our employees work from home and providing regular testing for employees continuing critical on-site work. Over the course of 2022, we evolved to a hybrid-first model, in which employees who are assigned to an office can divide their work between the office and home. We are actively iterating our approach to support new ways of working and evolving the employee experience. Moving forward we intend to continue with a hybrid-first work model through which we balance our view that the office remains a critical environment for mentorship, career development and the kinds of lasting bonds that create a great work culture, with flexibility and trust in our employees to work with their teams to find the right model that allows us to deliver for our customers. Talent Development We believe in investing in the growth and development of all of our employees so they may build the career experience of their lifetime. “Never Done” is one of our core values, and our employees take advantage of a myriad of opportunities for continuous learning, both through internal training and development experiences, on-demand learning modules, and access to content-specific curriculum based on need and interest. We have designed and implemented learning experiences for our employees at every stage of their careers. including personalized leadership development experiences that build capabilities for both non-technical and technical leaders at each stage of the leadership journey. These experiences align to our core values and promote the leadership skills and behaviors we believe are critical to the success of our mission, customers, and development of our people. As a supporter of internal career growth, we actively mentor and invest in the pipeline of our future leaders. Additionally, new employees engage in our 90-day onboarding experience, Making the Band , which is intended to support the embodiment of our core values, and shorten their time to create impact. To supplement our internal learning experiences, as well as provide opportunities for independent study, employees have access to online education tools, including a digital library, to build the necessary skills to pursue additional certifications related to 11 Table of Contents one’s role. To further invest in the future of cybersecurity and to deliver on our company mission, we created a platform that includes the most recent product training materials, as well as makes certification exams available at zero cost. Electronic certificates can be published to an employee’s LinkedIn professional profile, and the CPEs associated with the exam and learning materials help cybersecurity professionals maintain their minimum “continuing development” points for their professional certifications such as Certified Information Systems Security Professional, Global Information Assurance Certification and Certified Professional Hacker. We believe our investment in these resources, along with flexible working environments, will support our employees in their pursuit of lifelong learning. We believe we will positively impact the experience of our customers by focusing on the development and engagement of our employees. Diversity, Equity and Inclusion We believe that a company culture focused on diversity and inclusion is a key driver of creativity and innovation and that diverse and inclusive teams make better business decisions, which ultimately drive better business outcomes. We are committed to recruiting, retaining and developing high-performing, innovative and engaged employees with diverse backgrounds and experiences. Several years ago, we set out to ensure we were creating a more diverse workforce population, while simultaneously ensuring we are creating the best possible environment for everyone to thrive. Specifically, we sought to increase the number of under-represented groups (in particular women and people of color) to 50% of the employee base in the U.S. Having achieved those goals in 2021, we focused on increasing our global population of women to 35% and investing in our recruiting and retaining of employees who identify as Black, Latinx or multi-racial, with the goal of increasing our U.S. population of this demographic to 18%. While we had originally expected to achieve these goals by the end of 2022, over the course of the year we adjusted the pace of hiring to better align with our operational performance and profitability goals amidst an evolving economic environment. Despite these pressures, we still made strides towards our goals. At the end of 2022, we increased our representation of under-represented communities, including Black, Latinx, and those who identify as multi-racial to 14% of U.S. employees. Additionally, 33% of our U.S. employees identify as women, and in our international offices, employees identifying as women make up 30% of our staff. We aim to promote transparency by publishing our workforce demographic data and encouraging thoughtful discussions across the Company, including through unconscious bias training and a mandatory Global Diversity, Equity and Inclusion e-learning titled “Laying the foundation - Diversity, Equity and Inclusion” which was implemented at the end of 2022. In addition, we continued our efforts to recruit under-represented groups through referrals and beyond the traditional networks from which we previously recruited. We are also focused on identifying and promoting diverse leaders through the organization at all levels and signed the Corporate Parity Pledge, which includes, among other things, a commitment to interview at least one woman and one person of color for every open role at the vice president level and above. We have also directed our talent acquisition team to take the further step of interviewing at least one woman and/or person of color for every role we hire for. Community Involvement & The Rapid7 Cybersecurity Foundation We give back to the communities where we live and work, and believe that this commitment helps in our efforts to attract and retain employees. We partner with a variety of STEM and inclusion-focused programs to promote technology education for all. Beyond contributions of cash, we encourage employee volunteerism at all our locations. In 2021, we formed the Rapid7 Cybersecurity Foundation (the “Foundation”). The Foundation’s mission, which aligns closely to that of Rapid7, is to help close the cybersecurity achievement gap by promoting a more diverse and inclusive cyber workforce and advancing security by supporting cybersecurity programs and solutions that are free and open. These include, among others, Hack.Diversity, the Cyber Peace Institute and its program Cyber Peace Builders and Cyversity. After seeding the Foundation with an initial contribution of $1.0 million in 2021, Rapid7 continued its support of the Foundation with an additional investment of $0.5 million in 2022. In February 2023, Rapid7 and its Foundation announced a multi-year partnership and a $1.5 million dollar commitment to create the Rapid7 Cyber Threat Intelligence Lab at the University of South Florida (“USF”). The goal of the interdisciplinary lab at USF is to catalyze new collaborative research efforts in cyber threat detection, track malicious threat actors through an extensive sensor network, support an inclusive approach to diverse talent development in cybersecurity, and serve as a hub for thought leadership and community-engaged programming both locally and within the global cybersecurity industry. 12 Table of Contents Corporate Information Our principal executive offices are located at 120 Causeway Street, Boston, Massachusetts. Our telephone number is +1 617-247-1717. Our website address is www.rapid7.com . “Rapid7,” the Rapid7 logo, and other trademarks or service marks of Rapid7, Inc. appearing in this Annual Report on Form 10-K are the property of Rapid7, Inc. This Annual Report on Form 10-K contains additional trade names, trademarks and service marks of others, which are the property of their respective owners. Solely for convenience, trademarks and trade names referred to in this Annual Report on Form 10-K may appear without the ® or TM symbols. The information contained on our website or information that may be accessed through links on our website is not incorporated by reference into this Annual Report on Form 10-K. Available Information Our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to these reports filed pursuant to Sections 13(a) and 15(d) of the Securities Exchange Act of 1934, as amended, are made available free of charge on or through our website at investors.rapid7.com as soon as reasonably practicable after such reports are filed with, or furnished to, the SEC. 13 Table of Contents