What changed in this filing

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Item 2. Management’s Discussion and Analysis

2026-05-05 compared with 2025-11-05 · 143 added, 195 removed, 314 unchanged (52% of the section changed)

11 unchanged sentences

• our ability to effectively restructure our business in alignment with our strategic priorities;

• our ability to adapt to technological change and effectively enhance, innovate and scale our solutions, including our Command Platform;

• our ability to adapt to technological change and effectively enhance, integrate, innovate and scale our solutions and platform capabilities, including our Command Platform;

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

• our ability to deliver, scale and operate managed services (including managed detection and response (“MDR”) and related offerings, including with respect to service quality, staffing, operating efficiency, and the integration of technology and expertise;

• our ability to effectively manage or sustain our growth and to sustain profitability;

• our ability to diversify our sources of revenue;

• potential acquisitions and integration of complementary business and technologies;

• potential acquisitions and our ability to successfully integrate acquired businesses, technologies and personnel, including the realization of anticipated benefits from such acquisitions;

• our expected use of proceeds from future issuances of equity or convertible debt securities;

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• our ability to maintain, protect and enhance our intellectual property;

• the outcomes of our initiatives that use artificial intelligence (“AI”);

• the outcomes of our initiatives that use artificial intelligence (“AI”), including the development, integration and effectiveness of AI-driven and autonomous (“agentic”) security capabilities within our solutions;

• the evolving threat landscape, including the increasing sophistication and frequency of cyberattacks, including those leveraging AI;

• costs associated with defending intellectual property infringement and other claims;

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These statements represent the beliefs and assumptions of our management based on information currently available to us.

Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the

timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part I, Item 1A.

Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements.

Factors that could cause or contribute to such differences include, but are not limited to, those identified above, and those discussed in the section titled “Risk Factors” included under Part II, Item 1A.

Furthermore, such forward-looking statements speak only as of the date of this report.

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and its subsidiaries unless the context indicates otherwise.

Rapid7 is a global cybersecurity software and service provider on a mission to create a safer digital world by making cybersecurity simpler and more accessible.

For more than twenty years, Rapid7 has partnered with enterprises across the globe representing a diverse range of industries to improve the efficacy and productivity of their security operations (“SecOps”).

In today's rapidly evolving IT environment, customers are encountering escalating challenges due to the widening spectrum of attackers and techniques, including the proliferation of cyberattacks leveraging artificial intelligence (“AI”) and targeted automation.

We empower security professionals to manage a modern attack surface through our trusted AI infused technology, leading-edge research, and broad, strategic expertise.

Rapid7’s comprehensive security solutions help our global customers unite exposure management with threat detection and response to reduce attack surfaces and eliminate threats with speed and precision.

Our Command Platform is anchored on our cloud security, security information and event management (“SIEM”), advanced detection and response, and vulnerability management offerings.

Rapid7 enables the Security Operations Center (“SOC”) to understand their fragmented attack surface with attacker perspective, allowing them to proactively secure their attack surface and better detect and respond to threats.

Enriched by years of managed services expertise, our integrated security operations platform enables SecOps teams to move away from a reactive approach, reduce their attack surface, and enhance response efficiency with a deep contextual understanding of their environment.

In the past few years, we have observed the industry undergoing a customer-driven shift to consolidated security platforms.

As part of this transition, customers are moving away from cloud security as a specialized function towards cloud security as an integrated capability for SecOps teams.

We view this as a demand driver for integrated SecOps, and believe that we have an opportunity to be a leader in delivering integrated risk and threat management across on-premise, cloud, and external attack surfaces.

As we have shifted our strategic focus to SecOps consolidation, we are focused on continuing to drive innovation across our core products and capabilities to accelerate customer value and provide a frictionless and integrated cloud security experience.

Rapid7 is a global leader in AI-powered managed cybersecurity operations, trusted to advance organizations’ cyber resilience.

Open and extensible, the Rapid7 Command Platform integrates security data, enriching it with AI, threat intelligence, and 25 years of expertise and innovation to reduce risk and disrupt attackers.

As a recognized leader in preemptive managed detection and response (MDR), Rapid7 unifies exposure and detection to transform the cybersecurity operations of customers worldwide.

We empower security professionals to manage a modern attack surface through our AI-driven technology, research, and broad, strategic expertise.

Rapid7’s comprehensive security solutions, including our MDR services, next-gen security information and event management ("SIEM"), and exposure management help our global customers unify exposure management with threat detection and response to prioritize and reduce material risk, and eliminate threats with greater speed, precision, and consistency.

We believe that Rapid7 is poised to expand the capabilities of today's SecOps teams through our integrated, open data security operations platform which is powered by our AI-assisted workflows to AI-driven, machine-speed security operations.

Rapid7 enables the Security Operations Center (“SOC”) to understand their fragmented attack surface through an attacker's perspective, thereby allowing them to proactively reduce exposures and better detect and respond to threats.

Enriched by years of industry-leading risk research and managed services expertise, our integrated platform replaces reactive security with a preemptive, risk-aware approach that reduces attack surfaces and enables faster, more confident response through contextually rich insights and deep operational visibility.

In recent years, security leaders have increasingly prioritized consolidating fragmented point products into unified security operations platforms to improve visibility, operational efficiency, and risk outcomes.

In 2022, Gartner reported that approximately 75% of organizations were pursuing security vendor consolidation as part of their SecOps strategies.

This shift reflects mounting challenges associated with managing expanding attack surfaces, disconnected exposure data, escalating alert volume, and the need to continuously prioritize and respond to risk across complex environments.

As a result, customers are seeking platforms that unify exposure management with threat detection and response, enabling them to identify where they are most vulnerable, anticipate how attackers may exploit those exposures, and respond with speed and precision.

At the same time, customers are increasingly relying on MDR and adjacent managed services to deliver continuous expertise, higher-fidelity detection, and faster response outcomes that extend and augment internal SOC teams.

In this context, organizations are prioritizing open, integrated security operations platforms that pair technology with expertise to deliver risk-aware detection and response across on-premise, cloud, identity, and external attack surfaces.

We have been an active participant in advancing this shift toward consolidated SecOps by innovating across our open platform architecture, strengthening our exposure management and AI SOC capabilities, and expanding our managed services portfolio.

As we continue to execute on our SecOps consolidation strategy, we are advancing innovation across our core platform capabilities and managed services to accelerate customer value and deliver a frictionless, integrated security operations experience.

As the threat landscape continues to grow in complexity, customers are demonstrating demand for integrated expertise to support them in effectively managing their security technologies.

The convergence of these key trends – security consolidation, integrated cloud security, and expertise driven outcomes – are the foundation of what our customers require for the modern SOC.

Our focus is to be the leading provider of integrated security operations solutions by providing exposure and threat management that leverages our ability to give customers command of their attack surface.

The convergence of these key trends – security consolidation, AI SOC capabilities, integrated cloud security, and expertise driven outcomes – forms the foundation of what our customers require for the modern SOC.

Our focus is to be the leading provider of integrated, AI-driven security solutions infused with

human expertise for the modern SOC by providing risk-aware detection and response that outpaces attackers and strengthens security program maturity.

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, 2025, we had over 11,000 customers in 150 countries, including 36% 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, 2025 or 2024.

As of March 31, 2026, we had over 11,500 customers in 150 countries, including 35% of the Fortune 100.

Our revenue was not concentrated with any individual customer and no customer represented more than 1% of our revenue for the three months ended March 31, 2026 and 2025.

Recent Developments

Credit Agreement

On June 25, 2025 (the "Closing Date"), we entered into a credit agreement (the "Credit Agreement"), by and among the Company, Rapid7 LLC, the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, that provides for a $ 200.0 million revolving credit facility with a letter of credit sublimit of $20.0 million.

The Credit Agreement allows for incremental facilities up to the greater of $141 million or 75% of Consolidated EBITDA (as defined in the Credit Agreement).

Additional incremental facilities may be incurred, subject to certain conditions.

We incurred fees of $1.6 million in connection with entering into the Credit Agreement.

The fees are recorded as other current assets on the consolidated balance sheet and are amortized on a straight-line basis over the contractual term of the arrangement.

Under the terms of the Credit Agreement, we

are required to pay a commitment fee on the unused portion of the credit facility.

The commitment fee rate is determined by the total net leverage ratio of the Company and its subsidiaries, ranging from 0.20% to 0.25% per annum on the unused portion of the credit facility.

The commitment fee is expensed as incurred and included within interest expense on the consolidated statement of operations.

The Credit Agreement matures on the fifth-anniversary of the Closing Date or, if certain specified liquidity conditions are note satisfied, 91 days prior to the earliest maturity date of either the 2027 or the 2029 Notes.

The Credit Agreement also contains certain affirmative and negative covenants, including a requirement to maintain a minimum interest coverage ratio for the duration of the Credit Agreement and a maximum net leverage ratio.

The borrowings under the Credit Agreement bear interest at a variable annual rate based on either the Secured Overnight Financing Rate (SOFR) subject to a floor of zero or alternate base rate plus, in each case, a fixed margin, which varies depending on the Company’s net leverage ratio.

As of September 30, 2025, we did not have any outstanding borrowings under the Credit Agreement.

As of September 30, 2025, we had a total of $ 6.0 million in letters of credit outstanding as collateral for certain office space leases and corporate credit card programs which reduce the amount of borrowing availability under our Credit Agreement.

Federal Tax Legislation

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act ("OBBBA").

The OBBBA changed the current tax law related to both corporate income taxes and deferred tax assets and liabilities, which we currently account for under ASC 740, Income taxes ("ASC 740") .

The income tax effects of a change in tax law on current taxes related to current year ordinary income and changes to deferred taxes arising subsequent to the date of enactment are included in the annual effective tax rate, beginning in the period of enactment.

We concluded the OBBBA did not have a material impact on our provision for income tax.

As a result of the application of OBBBA, we recorded a benefit to the tax provision for the three months ended September 30, 2025.

Kenzo Security Acquisition

On March 26, 2026, we acquired Kenzo Security, Inc.

("Kenzo") an agentic AI security platform built to scale autonomous security investigations for a p urchase price with an aggregate fair value of $25.5 million.

The purchase consideration consisted of $24.2 million in cash paid at closing and $1.3 million of deferred cash payments related to certain indemnities outlined in the purchase agreement.

The acquisition further enhances our Command Platform, accelerating industry-leading MDR services from AI-assisted workflows to AI-driven, machine-speed security operations.

Our Business Model

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• Cloud-based subscriptions, which provide our software capabilities to our customers through cloud access and on a subscription basis.

Our InsightIDR, InsightCloudSec, InsightVM, InsightAppSec, InsightConnect and Threat Command products are offered as cloud-based subscriptions, with an option for a one or multi-year term.

Our Incident Command, Exposure Command, and Threat Command products are offered as cloud-based subscriptions, with an option for a one or multi-year term.

• Managed services, through which we operate our products and provide our capabilities on behalf of our customers.

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Our Managed Threat Complete Offering is offered on a managed service basis, generally pursuant to one or multi-year agreements.

For the three and nine months ended September 30, 2025 and 2024, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 96%, and 97% of total revenue in 2025, and 96% and 96%, respectively, in 2024.

Immaterial Correction of an Error

During the fourth quarter of 2024, we identified an immaterial error related to stock-based compensation expense associated with certain restricted stock units (“RSUs”) and performance stock units (“PSUs”) granted during fiscal years 2023 and 2024 attributable to an improper valuation of the underlying awards, resulting in an understatement of stock-based compensation expense in 2023 and 2024.

In accordance with Staff Accounting Bulletin (“SAB”) No.

99, Materiality , and SAB No.

108, C onsidering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements , we

evaluated the errors and determined the related impacts were not material to our unaudited consolidated financial statements for the prior periods when they occurred, but that correcting the cumulative errors in the period detected would have been material to our results of operations for that period.

Accordingly, we revised previously reported comparative financial information presented herein for such immaterial errors .

Refer to Note 15, Immaterial Correction of an Error , in the notes to our unaudited condensed consolidated financial statements for further information.

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

Components of Results of Operations

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Cost of product subscriptions consists of personnel and related costs for our content, support, managed service and cloud operations teams, including salaries and other payroll related costs, bonuses, stock-based compensation and allocated overhead costs.

Also included in cost of products are software license fees, cloud computing costs and internet connectivity expenses directly related to delivering our products, amortization of contract fulfillment costs, as well as amortization of certain intangible assets including internally developed software.

Also included in cost of product subscriptions are software license fees, cloud computing costs and internet connectivity expenses directly related to delivering our products, amortization of contract fulfillment costs, as well as amortization of certain intangible assets including internally developed software.

Cost of Professional Services

Cost of professional services consists of personnel and related costs for our professional services team, including salaries and other payroll related costs, bonuses, stock-based compensation, costs of contracted third-party vendors, travel and entertainment expenses and allocated overhead costs.

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

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

Gross margin, or gross profit as a percentage of revenue, has been and will continue to be affected by a variety of factors, including the average sales price of our products and services, transaction volume growth, the mix of revenue between software licenses, cloud-based subscriptions, managed services and professional services and changes in cloud computing costs.

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Operating Expenses

Operating expenses consist of research and development, sales and marketing, general and administrative expenses, and restructuring costs.

Operating expenses consist of research and development, sales and marketing, general and administrative expenses, impairment of long-lived assets, and restructuring costs.

Operating expenses include overhead costs for depreciation, facilities, IT, information security and recruiting.

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We expect interest expense in the near term to represent contractual interest expense and amortization of debt issuance costs related to our convertible senior notes.

Other Income (Expense), Net

Other income (expense), 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.

(Benefit) Provision for Income Taxes

Other (Expense) Income, Net

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.

Provision for Income Taxes

Provision for income taxes consists of domestic and foreign taxes on income and withholding taxes.

We maintain a substantially full valuation allowance for domestic and certain foreign deferred tax assets, including net operating loss carryforwards and tax credits.

We determined as of September 30, 2025 that it was more likely than not that these deferred tax assets will not be realized.

However, we may release some of these valuation allowances in future periods if positive evidence, such as projection of future growth, supports the realization of such deferred tax assets.

We determined as of March 31, 2026 that it was more likely than not that these deferred tax assets will not be realized.

However, we may release some of these valuation allowances in future periods if positive evidence, such as projection of sustained future growth, supports the realization of such deferred tax assets.

Release of all or a portion of these valuation allowances would result in a decrease in the provision for income taxes in the period of the release.

Results of Operations

All numbers presented below are in thousands except for percentages.

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

(in thousands)

Consolidated Statement of Operations Data:

The following table presents the consolidated statement of operations data (in thousands):

Three Months Ended March 31,

Product subscriptions $ 204,049 $ 203,935

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Total operating expenses 145,500 150,874

Income from operations 5,903 12,817 9,296 27,756

Loss from operations (558) (101)

Interest income 5,612 5,758

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Income before income taxes 1,830 4,805

(Benefit) provision for income taxes (497) 2,952 4,203 12,415

Provision for income taxes 700 2,700

Net income $ 1,130 $ 2,105

(1) Cost of revenue and operating expenses include stock-based compensation expense and depreciation and amortization expense as follows:

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

(in thousands)

(1) Cost of revenue and operating expenses include stock-based compensation expense and depreciation and amortization expense as follows (in thousands):

Three Months Ended March 31,

Stock-based compensation expense:

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Total stock-based compensation expense $ 19,890 $ 27,151

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

(in thousands)

Three Months Ended March 31,

Depreciation and amortization expense:

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The following table sets forth our consolidated statements of operations data expressed as a percentage of revenue:

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

(in thousands)

Consolidated Statement of Operations Data:

Three Months Ended March 31,

Product subscriptions 97.3 % 97.0 %

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Total operating expenses 69.4 % 71.8 %

Income from operations 3 % 6 % 1 % 4 %

Loss from operations (0.3) % (0.1) %

Interest income 2.7 % 2.7 %

Interest expense (1.2) % (1.3) %

Other income (loss), net — % 1 % 1 % — %

Other (expense) income, net (0.3) % 0.9 %

Income before income taxes 0.9 % 2.2 %

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Net income 0.5 % 0.9 %

Comparison of the Three and Nine Months Ended September 30, 2025 and 2024

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

All numbers presented below are in thousands, except for percentages.

Three Months Ended September 30, Change Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

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Total revenue $ 209,691 $ 210,253 $ (562) (0.3) %

The increase in total revenue for the nine months ended September 30, 2025 as compared to the same period in 2024 of $14.7 million was primarily driven by renewals, upselling activities, and cross-selling initiatives conducted with the existing customer base of $19.6 million.

This increase in revenue was partially offset by a $8.5 million decline in revenues generated from new customers as compared to the revenue derived from new customers in the corresponding periods of the prior year.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

The decrease in total revenue for the three months ended March 31, 2026 as compared to the same period in 2025 was driven by a decrease in professional services revenue from less consulting testing performed in the first quarter of 2026.

Revenue from product subscriptions was approximately flat.

Cost of Revenue

Three Months Ended September 30, Change Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

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Total gross margin % 69.1 % 71.7 %

The increase in total cost of revenue for the nine months ended September 30, 2025 as compared to the same period in 2024 was primarily driven by an increase in cloud computing costs of $4.5 million, amortization expense for capitalized internally-developed software of $1.9 million, and software subscriptions and royalties of $0.9 million.

The increase was partially offset by a decrease in personnel costs of $4.7 million, including a $7.7 million decrease due to a shift in the nature of certain roles and responsibilities between product delivery and sales support functions offset by a $3.0 million increase in personnel costs as we invest in the business to accelerate future growth .

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

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

The increase was partially offset by $0.1 million decrease in subscription expense.

Operating Expenses

Research and Development Expense

Three Months Ended September 30, Change Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

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% of revenue 23.1 % 22.8 %

Research and development expenses increased for the nine months ended September 30, 2025 as compared to the same period in 2024, primarily driven by an increase in personnel cost of $11.9 million, inclusive of stock-based compensation, as well as third-party cloud infrastructure costs of $3.4 million related to the continuous development of new products and enhancements of existing products.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

Research and development expenses increased for the three months ended March 31, 2026 as compared to the same period in 2025, primarily driven by a $2.5 million increase in personnel cost driven by an increase in headcount to further product development and offset by a $0.6 million decrease in impairment expense of capitalized internally-developed software projects, $0.5 million decrease in professional expenses, and $0.5 million decrease in hosting expenses.

Sales and Marketing Expense

Three Months Ended September 30, Change Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

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% of revenue 37.6 % 37.8 %

Sales and marketing expenses increased for the nine months ended September 30, 2025 as compared to the same periods in 2024, primarily driven by an $8.9 million increase in personnel costs.

This increase was driven by $9.3 million of headcount related changes associated with a shift in the nature of certain roles and responsibilities between product delivery and sales support functions, as well as a net increase in overall headcount.

These increases were partially offset by a $0.4 million decrease in personnel cost attributable to lower spending on contract labor.

Also contributing to the overall increase in sales and marketing expenses were higher marketing and advertising costs of $1.8 million and an additional $0.9 million of increased costs related to corporate events and related activities .

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

Sales and marketing expenses decreased for the three months ended March 31, 2026 as compared to the same period in 2025, primarily driven by a $2.6 million decrease in personnel costs, primarily consisting of a $2.2 million decrease in SBC expense $1.3 million decrease in commissions, and offset by a $0.9 million increase to salaries and bonus costs.

The decrease was also driven by a $0.6 million decrease in amortization of acquired intangibles.

The decrease was partially offset by a $0.9 million increase in full time and contract labor costs.

The decrease was partially offset by a $1.7 million increase to our sales related events and a $1.3 million increase to professional fees for consulting.

General and Administrative Expense

Three Months Ended September 30, Change Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

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% of revenue 8.7 % 11.2 %

General and administrative expenses increased for the nine months ended September 30, 2025 as compared to the same period in 2024, primarily driven by an increase in personnel expenses of $1.9 million as we continue to invest in our growth, increased professional fees of $2.4 million related to accounting, legal and corporate advisory services, and increased software-related expenses of $0.8 million partially offset by decreased infrastructure expenses of $2.0 million.

The year-over-year trends for the three-month period were aligned with the year-over-year trends for the nine-month period discussed above.

General and administrative expenses decreased for the three months ended March 31, 2026 as compared to the same period in 2025, primarily driven by a decrease of $3.2 million personnel costs, which included a $2.6 million decrease in stock-based compensation expense due to fewer awards granted and more recent grants valued at a lower grant price.

Additionally, professional fees decreased by $1.7 million, primarily related to certain consulting services, and a $1.2 million decrease in bad debt expense.

The decrease was partially offset by an increase in hosting expenses of $0.6 million associated with enterprise software and cloud computing costs and $0.5 million of acquisition-related expenses associated with our acquisition of Kenzo.

Interest Income

Three Months Ended September 30, Change Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

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% of revenue 2.7 % 2.7 %

Interest income increased in the three and nine months ended September 30, 2025 compared to the same period in 2024, primarily due to higher interest income as a result of an increase in cash and cash equivalents and investments.

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

Interest Expense

Three Months Ended September 30, Change Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

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% of revenue (1.2) % (1.3) %

Interest expense remained consistent in the three and nine months ended September 30, 2025 as compared to the same periods in 2024.

Interest expense slightly decreased in the three months ended March 31, 2026 compared to the same period in 2025.

Other (Expense) Income, Net

Three Months Ended September 30, Change Nine Months Ended September 30, Change

Three Months Ended March 31, Change

2026 2025 $ %

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% of revenue (0.3) % 0.9 %

Other (expense) income, net increased for the nine months ended September 30, 2025 compared to the same period primarily driven by favorable foreign exchange currency rates resulting in an increase in realized and unrealized gains primarily related to the British Pound Sterling.

Other (expense) income, net decreased for the three months ended September 30, 2025 compared to the same period due to unfavorable foreign exchange currency rates resulting in an increase in realized and unrealized losses primarily related to the British Pound Sterling.

(Benefit) provision for income taxes

Three Months Ended September 30, Change Nine Months Ended September 30, Change

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

Provision for income taxes

Three Months Ended March 31, Change

2026 2025 $ %

(Benefit) provision for income taxes $ (497) $ 2,952 $ (3,449) (116.8) % $ 4,203 $ 12,415 $ (8,212) (66.1) %

Provision for income taxes $ 700 $ 2,700 $ (2,000) (74.1) %

% of revenue 0.3 % 1.3 %

The tax provision for the nine months ended September 30, 2025 decreased primarily as a result of a tax expense recorded in the prior period for an intercompany sale of intellectual property as part of post-acquisition strategy related to the acquisition of Minerva Lab Ltd.

and the impact of OBBBA, partially offset by an increase in domestic and international taxes in the current period.

(Benefit) provision for income taxes for the three months ended September 30, 2025 changed from an income tax provision to income tax benefit due to the impact of OBBBA on our tax provision.

Provision for income taxes decreased for the three months ended March 31, 2026 compared to the same period in 2025.

The decrease was primarily driven by a one-time discrete tax benefit in the first quarter of 2026 for $0.6 million related to the acquisition of Kenzo and an increase to tax expense in the first quarter of 2025 for $1.1 million related to an unfavorable international return-to-provision expense of $1.1 million.

We monitor the following key metrics to help us measure and evaluate the effectiveness of our operations and as a means to evaluate period-to-period comparisons.

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These key metrics also facilitate management's internal comparisons to our historical performance as well as comparisons to certain competitors' operating results.

We believe these key metrics are useful to investors both because they allow for greater transparency with respect to key metrics used by management in its financial and operational decision-making and also because they are used by institutional investors and the analyst community to help evaluate the health of our business :

Three Months Ended September 30, Nine Months Ended September 30,

(in thousands, except percentages)

2025 2024 2025 2024

Three Months Ended March 31,

Total revenue $ 209,691 $ 210,253

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Free cash flow $ 33,417 $ 24,677

As of September 30,

(in thousands, except percentages)

As of March 31,

Annualized recurring revenue (“ARR”) $ 832,130 $ 837,220

Year-over-year growth 1.8 % 6.0 %

Year-over-year change (0.6) % 3.7 %

Number of customers 11,629 11,685

Year-over-year growth — % 2.0 %

Year-over-year change (0.5) % 1.9 %

ARR per customer $ 71.6 $ 71.6

Year-over-year growth 1.8 % 4.1 %

Year-over-year change — % 1.7 %

Total Revenue and Growth .

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Non-GAAP Income from Operations and Non-GAAP Operating Margin .

We monitor non-GAAP income from operations and non-GAAP operating margin, non-GAAP financial measures, to analyze our financial results.

We monitor non-GAAP income from operations and non-GAAP operating margin, which are non-GAAP financial measures, to analyze our financial results.

We believe non-GAAP income from operations and non-GAAP operating margin are useful to investors, as supplements to U.S.

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Free cash flow is a non-GAAP measure that we define as cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs.

We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures.

We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the

business after necessary capital expenditures.

See "Non-GAAP Financial Results" below for a reconciliation of non-GAAP free cash flow to the comparable GAAP financial measure.

Annualized Recurring Revenue and Growth.

ARR is defined as the annual value of all recurring revenue related to contracts in place at the end of the quarter.

ARR is defined as the annual value of all recurring revenue related to active contracts as of the last day of the period.

ARR is measured at a specific point in time and does not incorporate consideration of any anticipated contract terminations or other prospective events, regardless of whether such events may exert a favorable or adverse influence on the metric.

ARR should be viewed independently of revenue and deferred revenue, as ARR is an operating metric and is not intended to be combined with or replace these items.

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While our non-GAAP financial measures are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, you should review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not rely on any single financial measure to evaluate our business.

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, change in the fair value of derivative assets, restructuring expense and discrete tax items.

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.

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The expense for the amortization of debt issuance costs related to our convertible senior notes and revolving credit facility is a non-cash item and we believe the exclusion of this interest expense provides a more useful comparison of our operational performance in different periods.

• Induced conversion expense.

In conjunction with the third quarter of 2023 partial repurchase of our 2.25% convertible senior notes due 2025, we incurred a non-cash induced conversion expense of $53.9 million.

We exclude induced conversion expense because this amount is not indicative of the performance of or trends in our business, and neither is comparable to the prior period nor predictive of future results.

• Non-ordinary course litigation-related expenses.

We exclude non-ordinary course litigation expense because we do not consider legal costs and settlement fees incurred in litigation and litigation-related matters of non-ordinary course lawsuits and other disputes to be indicative of our core operating performance.

We do not adjust for ordinary course legal expenses, including legal costs and settlement fees resulting from maintaining and enforcing our intellectual property portfolio and license agreements.

• Acquisition-related expenses.

We exclude acquisition-related expenses that are unrelated to the current operations and neither are comparable to the prior period nor predictive of future results.

• Change in fair value of derivative assets.

The change in fair value of derivative assets related to our capped calls settlement is a non-cash item and we believe the exclusion of this other income (expense) provides a more useful comparison of our operational performance in different periods.

• Impairment of long-lived assets.

Impairment of long-lived assets consists of impairment charges allocated to the carrying amount of certain operating right-of-use assets and the associated leasehold improvements when the carrying

amounts exceed their respective fair values and we believe the exclusion of the impairment charges provides a more useful comparison of our operational performance in different periods.

• Restructuring expense.

We exclude non-ordinary course restructuring expenses related to the Restructuring Plan as defined in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 28, 2025 because we do not believe these charges are indicative of our core operating performance and we believe the exclusion of the restructuring expense provides a more useful comparison of our performance in different periods.

• Discrete tax items.

We exclude certain discrete tax items such as income tax expenses or benefits that are not related to ongoing business operations in the current year and adjustments to uncertain tax position reserves as these charges are not indicative of our ongoing operating results, and they are not considered when we are forecasting our future results.

• Anti-dilutive impact of capped call transaction.

Our capped calls transactions are intended to offset potential dilution from the conversion features in our convertible senior notes.

Although we cannot reflect the anti-dilutive impact of the capped call transactions under GAAP, we do reflect the anti-dilutive impact of the capped call transactions in non-GAAP net income (loss) per diluted share, when applicable, to provide investors with useful information in evaluating our financial performance on a per share basis.

We include all non-GAAP financial measures in the current year or any comparative year that will be included in the non-GAAP reconciliation during the current fiscal year annual Form 10-K.

As such, not all non-GAAP financial measures listed above may be included in the current reporting period non-GAAP financial metrics presented with this Form 10-Q.

We define adjusted EBITDA as net income before (1) interest income, (2) interest expense, (3) other (income) expense, net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, (8) acquisition-related expenses, and (9) restructuring expense.

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Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business and an important part of the compensation provided to our employees.

The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three and nine months ended September 30, 2025 and 2024 (in thousands) :

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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

Three Months Ended March 31,

GAAP total gross profit $ 144,942 $ 150,773

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Non-GAAP total gross profit $ 151,081 $ 157,460

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

GAAP gross profit – product subscriptions $ 144,895 $ 149,567

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Non-GAAP gross profit – product subscriptions $ 150,687 $ 155,721

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

Three Months Ended March 31,

GAAP gross profit – professional services $ 47 $ 1,206

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Non-GAAP gross profit – professional services $ 394 $ 1,739

The following table reconciles GAAP income from operations to non-GAAP income from operations for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

GAAP income from operations $ 5,903 $ 12,817 $ 9,296 $ 27,756

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

Three Months Ended March 31,

GAAP loss from operations $ (558) $ (101)

Stock-based compensation expense 19,890 27,151

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Acquisition-related expenses (1)

84 290 450 568

Restructuring expense (2)

Non-GAAP income from operations $ 24,432 $ 32,353

(1) Acquisition-related expenses included expenses included $0.1 million and $0.5 million for the three and nine months ended September 30, 2025, respectively, and $0.3 million and 0.6 million for the three and nine months ended September 30, 2024, respectively of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic.

(2) For the nine months ended September 30, 2024, restructuring expense was recorded within general and administrative expense in our consolidated statement of operations.

The following table reconciles GAAP net income to non-GAAP net income for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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

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

Three Months Ended March 31,

GAAP net income $ 1,130 $ 2,105

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Amortization of debt issuance costs 1,045 1,019

Restructuring expense — — — (190)

Discrete tax items (600) —

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Dilutive effect of convertible senior notes (1)

10,429,891 11,183,611

Dilutive effect of employee equity incentive plans (2)

730,651 388,471

Weighted average shares used in non-GAAP earnings per share calculation, diluted 77,334,883 75,408,027

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There was no add-back of interest expense or additional dilutive shares related to the Notes where the effect was anti-dilutive.

On an if-converted basis, for the three months ended 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.

On an if converted basis, for the three months ended March 31, 2026, the 2029 Notes and 2027 Notes were dilutive, for the three months ended March 31, 2025 the 2029 Notes, 2027 Notes and 2025 Notes were dilutive.

(2) We use the treasury method to compute the dilutive effect of employee equity incentive plan awards.

The following table reconciles GAAP net income to adjusted EBITDA for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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

Three Months Ended March 31,

GAAP net income $ 1,130 $ 2,105

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Other expense (income), net 726 (1,802)

(Benefit) provision for income taxes (497) 2,952 4,203 12,415

Provision for income taxes 700 2,700

Depreciation expense 2,374 2,791

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Acquisition-related expenses 606 183

Restructuring expense

Adjusted EBITDA $ 31,148 $ 38,898

The following table reconciles net cash provided by operating activities to free cash flow for the three and nine months ended September 30, 2025 and 2024 (in thousands):

Three Months Ended September 30, Nine Months Ended September 30,

2025 2024 2025 2024

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

Three Months Ended March 31,

Net cash provided by operating activities $ 39,817 $ 29,757

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Liquidity and Capital Resources

As of September 30, 2025, we had $130.6 million in cash and cash equivalents, $503.9 million in investments that have maturities ranging from one to nineteen months and an accumulated deficit of $967.8 million.

As of March 31, 2026, we had $343.3 million in cash and cash equivalents, $327.0 million in investments that have maturities ranging from one to eleven months and an accumulated deficit of $963.5 million.

Our principal sources of liquidity are cash and cash equivalents, investments, cash flow provided by operating activities and our Credit Agreement.

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The proceeds of the Revolving Facility can be used to finance working capital needs, capital expenditures, permitted acquisitions and other general corporate purposes.

As of March 31, 2026, we were in compliance with all applicable covenants and had sufficient capacity under the affirmative covenants.

Refer to Note 9, Debt , for additional information related to the credit agreement.

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Further, in January 2025, we entered into a cloud-services agreement with a cloud services provider that contains minimum spend commitments.

The agreement provides for an annual commitment of $125.0 million per year over the next five years, with an additional $35.0 million obligation over the five-year period of the

agreement, for an aggregate total commitment of $660.0 million.

See Note 13, Commitments and Contingencies, in the Notes to our unaudited condensed consolidated financial statements for more information regarding this commitment.

The agreement provides for an annual commitment of $125.0 million per year over the next five years, with an additional $35.0 million obligation over the five-year period of the agreement, for an aggregate total commitment of $660.0 million.

For more information regarding this commitment, see Note 15, Commitments and Contingencies , in the Notes to our consolidated financial statements on Form 10-K for the year ended

December 31, 2025, filed with the SEC on February, 19, 2026 .

In preparation for the repayment of the 2027 Notes, due on March 15, 2027, we implemented the following measures:

• Liquidity Management:

Cash management procedures have been refined to ensure the availability of adequate liquidity, thereby supporting uninterrupted operations and facilitating the fulfillment of obligations related to the 2027 Notes without the incurrence of additional indebtedness.

• Investment Policy:

We revised our investment policy to restrict all new investments to instruments with maturities not exceeding twelve months.

These actions collectively reinforce the organization’s commitment to prudent financial management and maintenance of a robust liquidity position.

Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, particularly internationally, the introduction of new and enhanced products and service offerings, the cost of any future acquisitions of technology or businesses and any election we make to redeem our convertible senior notes.

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If we are unable to raise additional capital on terms satisfactory to us when we require it, our business, operating results and financial condition could be adversely affected.

The following table shows a summary of our cash flows for the nine months ended September 30, 2025 and 2024 (in thousands):

Nine Months Ended September 30,

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

Three Months Ended March 31,

Cash, cash equivalents and restricted cash at beginning of period $ 246,664 $ 342,101

Net cash provided by operating activities 39,817 29,757

Net cash used in investing activities (292,182) (99,488)

Net cash (used in) provided by financing activities (40,828) 6,799

Net cash provided by (used in) investing activities 55,255 (79,213)

Net cash provided by financing activities 2,634 4,732

Effects of exchange rates on cash, cash equivalents and restricted cash (1,079) 1,334

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Operating Activities

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 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.

Operating activities provided $39.8 million of cash and cash equivalents for the three months ended March 31, 2026, which reflects the cash generating ability of our operations.

Cash provided by operating activities was primarily driven by a net income of $1.1 million in addition to significant beneficial adjustments to reconcile net income to net cash provided from operating activities including $19.9 million in stock-based compensation, $11.2 million of depreciation, from our fixed assets, and amortization, primarily from our internally-developed software and acquired intangibles.

Additionally, working capital contributed an additional $6.3 million of cash to operating activities primarily driven by significant accounts receivable collections of $31.4 million, partially offset by decreases in accrued expenses of $14.8 million and $11.1 million of deferred revenue.

Operating activities provided $29.8 million of cash and cash equivalents for the three months ended March 31, 2025, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments.

Cash provided by operating activities reflected our net income of $2.1 million and a decrease in our net operating assets and liabilities of $11.0 million, offset by non-cash charges of $38.7 million related primarily to depreciation and amortization, stock-based compensation expense, amortization of debt issuance costs and other non-cash charges.

The change in our net operating assets and liabilities was primarily due to a $20.3 million decrease in accrued expenses, a $12.9 million decrease in deferred revenue, a $2.0 million increase in prepaid expenses, a $2.2 million decrease in other liabilities and a $6.6 million decrease in accounts payable, which each had a negative impact on operating cash flow.

These factors were offset by a $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.

Operating activities provided $107.9 million of cash and cash equivalents in the nine months ended September 30, 2024, which reflects continued growth in revenue partially offset by our continued investments in our operations and the timing of working capital adjustments.

Cash provided by operating activities reflected our net income of $23.4 million and non-cash charges of $119.2 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, amortization of debt issuance costs and other non-cash charges, partially offset by a decrease in our net operating assets and liabilities of $30.1 million.

The change in our net operating assets and liabilities was primarily due to a decrease in deferred revenue and the timing of payments of operating expenses, including payout of annual bonuses and year-end commissions and other compensation costs and accounts payable, partially offset by a decrease in accounts receivable due to an increase in cash collections from our customers.

These factors were

offset by a $27.7 million decrease in accounts receivable and a $5.3 million decrease in deferred contract acquisition and fulfillment costs, which each had a positive impact on operating cash flow.

Investing Activities

Investing activities used $292.2 million of cash for the nine months ended September 30, 2025, 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.

Investing activities used $99.5 million of cash in the nine months ended September 30, 2024, consisting of $49.9 million in purchases of investments, net of sales/maturities, $37.2 million of cash paid for the acquisition of Noetic, $10.4 million for capitalization of internal-use software costs, and $2.2 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by proceeds of $0.4 million for other investing activities.

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

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

Financing Activities

Financing activities used $40.8 million 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.

Financing activities provided $6.8 million of cash in the nine months ended September 30, 2024, which consisted primarily of $292.8 million in proceeds from the issuance of the 2029 Notes, net of issuance costs paid of $7.2 million, $17.5 million in proceeds from the settlement of the 2023 Capped Calls, $11.3 million in proceeds from the issuance of common stock purchased by employees under the ESPP and $3.0 million in proceeds from the exercise of stock options, partially offset by $200.0 million for the repurchase and conversion of the 2025 Notes, $36.6 million for the purchase of the 2029 Capped Calls, $4.0 million in withholding taxes paid for the net share settlement of equity awards and $2.2 million in payments related to the acquisition of IntSights.

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

Financing activities provided $4.7 million of cash for the three months ended March 31, 2025, which consisted primarily of $4.4 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc.

2015 Employee Stock Purchase Plan (“ESPP”) and $1.6 million in proceeds from the exercise of stock options, partially offset by $1.3 million in withholding taxes paid for the net share settlement of equity awards.

Contractual Obligations and Commitments

As of September 30, 2025, there were no additional material changes from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 28, 2025 (the “Annual Report”) other than the cloud services agreement discussed in Note 13, Commitments and Contingencies , in the notes to our unaudited condensed consolidated financial statements.

As of March 31, 2026, there were no material changes from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February, 19, 2026 (the “Annual Report”).

Off-Balance Sheet Arrangements

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Our actual results may differ from these estimates.

There have been no material changes in our critical accounting policies from those disclosed in our Annual Report.

Other than the new market-based PSU estimate discussed in Note 2, Summary of Significant Accounting Policies , there have been no material changes in our critical accounting policies from those disclosed in our Annual Report.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis