Rapid7, Inc. (RPD)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with (1) our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and (2) the audited consolidated financial statements and the related notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the fiscal year ended December 31, 2025 included in our Annual Report on Form 10-K, filed with the SEC on February, 19, 2026. Forward-looking statements in this review are qualified by the cautionary statement included under the next sub-heading, “Special Note Regarding Forward-Looking Statements”.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q, including the sections entitled “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains forward-looking statements that involve risks and uncertainties, as well as assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. Statements that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These forward-looking statements include, but are not limited to, statements concerning the following:

• our ability to continue to add new customers, maintain existing customers and sell new products and professional services to new and existing customers;

• uncertain impacts that prolonged economic uncertainty may have on our business, strategy, operating results, financial condition and cash flows, as well as changes in overall level of software spending and volatility in the global economy;

• the effects of increased competition as well as innovations by new and existing competitors in our market;

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

• 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 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;

• our ability to maintain, or strengthen awareness of, our brand;

• perceived or actual security, integrity, reliability, quality or compatibility problems with our solutions, including problems related to systems, unscheduled downtime, outages or security breaches in our customers;

• statements regarding future revenue, hiring plans, expenses, capital expenditures, capital requirements and stock performance;

• our ability to meet publicly announced guidance or other expectations about our business, key metrics and future operating results;

• our ability to maintain an adequate annualized recurring revenue growth;

• our ability to attract and retain qualified employees and key personnel and further expand our overall headcount;

• our ability to grow, both domestically and internationally;

• our ability to stay abreast of new or modified laws and regulations that currently apply or become applicable to our business both in the United States and internationally;

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

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• 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; and

• the future trading prices of our common stock and the impact of securities analysts’ reports on these prices.

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 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. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances that occur after the date of this report.

As used in this report, the terms “Rapid7,” the “company,” “we,” “us,” and “our” mean Rapid7, Inc. and its subsidiaries unless the context indicates otherwise.

Overview

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. 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 AI. 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, 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

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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 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

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 purchase 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, acc

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual Report on Form 10-K. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those under “Risk Factors” included in Part I, Item 1A or in other parts of this Annual Report on Form 10-K.

Overview

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 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

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across our core products and capabilities to accelerate customer value and provide a frictionless and integrated cloud security 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.

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 December 31, 2025, we had over 11,500 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 years ended December 31, 2025, 2024 or 2023.

Our Business Model

We offer our products through a variety of delivery models to meet the needs of our diverse customer base, including:

•Cloud-based subscriptions, which provide our software capabilities to our customers through cloud access and on a subscription basis. 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. Our Managed Vulnerability Management, Managed Detection and Response, and Managed Application Security products are offered on a managed service basis, pursuant to one or multi-year agreements.

•Licensed on-premise software consists of term licenses. When licensed on-premise software is purchased, maintenance and support and content subscriptions, as applicable, are bundled with the license for the term period. Our Nexpose and Metasploit products are offered through term software licenses with an option for one or multi-year terms. Our maintenance and support provides our customers with telephone and web-based support and ongoing bug fixes and repairs during the term of the maintenance and support agreement, and our customers who purchase our Nexpose and Metasploit products also purchase content subscriptions, which provide them with real-time access to the latest vulnerabilities and exploits.

Additionally, we offer our products through our consolidation offerings, which unify our products and services to our customers in a single package. Our Threat Complete and Cloud Risk Complete packages are offered as cloud based subscriptions, with an option for a one or multi-year term. Our Managed Threat Complete Offering is offered on a managed service basis, generally pursuant to one or multi-year agreements.

For the years ended December 31, 2025, 2024 and 2023, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 96%, 96%, and 95% respectively, of total revenue.

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, Considering 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 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 19, Immaterial Correction of an Error, in the notes to our consolidated financial statements for further information.

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Components of Results of Operations

Revenue

We generate revenue primarily from selling products and professional services through a variety of delivery models to meet the needs of our diverse customer base.

Product Subscriptions

We generate product subscriptions revenue from the sale of (1) cloud-based subscriptions, (2) managed services offerings, which utilize our products and (3) software licenses with related maintenance and support and content subscription, as applicable. Software license revenue consists of revenues from term licenses. When software licenses are purchased, maintenance and support and content subscription, as applicable, are bundled with the license for the term period.

Professional Services

We generate professional service revenue from the sale of deployment and training services related to our products, incident response services and security advisory services.

Cost of Revenue

Our total cost of revenue consists of the costs of product subscriptions and professional services, as noted below. In addition, cost of revenue includes overhead costs for depreciation, facilities, IT, information security, and recruiting. Our IT overhead costs include IT personnel compensation costs and costs associated with our IT infrastructure. All overhead costs are allocated based on relative headcount.

Cost of Product Subscriptions

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 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 over time.

Gross Margin

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.

We expect our gross margins to fluctuate over time depending on the factors described above.

Operating Expenses

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

Research and Development Expense

Research and development expense consists of personnel costs for our research and development team, including salaries and other payroll related costs, bonuses and stock-based compensation. Additional expenses include third-party infrastructure costs,

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travel and entertainment, consulting and professional fees for third-party development resources as well as allocated overhead costs.

Sales and Marketing Expense

Sales and marketing expense consists of personnel costs for our sales and marketing team, including salaries and other payroll related costs, commissions, including amortization of deferred commissions, bonuses and stock-based compensation. Additional expenses include marketing activities and promotional events, travel and entertainment, training costs, amortization of certain intangible assets and allocated overhead costs.

General and Administrative Expense

General and administrative expense consists of personnel costs for our executive, legal, human resources, and finance and accounting departments, including salaries and other payroll related costs, bonuses and stock-based compensation. Additional expenses include travel and entertainment, professional fees, litigation-related expenses, insurance, acquisition-related expenses, amortization of certain intangible assets and allocated overhead costs.

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.

Restructuring Expense

Restructuring expense consists of charges related to the Restructuring Plan such as employee transition, notice period and severance payments and employee benefits and related facilitation costs. For further information, refer to Note 18, Restructuring, in the Notes to our Consolidated Financial Statements.

Interest Income

Interest income consists primarily of interest income on our cash and cash equivalents and our short and long-term investments.

Interest Expense

Interest expense consists primarily of contractual interest expense, amortization of debt issuance costs related to our convertible senior notes and revolving credit facility and induced conversion expense. 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.

Provision (Benefit) for Income Taxes

Provision (Benefit) 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 December 31, 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 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.

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Results of Operations

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

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

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

Comparison of the Years Ended December 31, 2025 and 2024

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

Revenue

The increase in total revenue for the year ended December 31, 2025 as compared to the same period in 2024 was primarily driven by renewals, upselling activities, and cross-selling initiatives conducted with the existing customer base, reflecting sustained expansion among existing customers. This increase in revenue was partially offset by a decline in revenue generated from new customers during the respective periods, as compared to the revenue derived from new customers in the corresponding periods of the prior year.

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Cost of Revenue

The increase in total cost of revenue for the year ended December 31, 2025 as compared to the same period in 2024 was primarily driven by an increase in cloud computing costs of $5.2 million and a $3.0 million increase in amortization expense for capitalized internally-developed software, software subscriptions of $0.7 million, and royalties of $0.3 million. The increase was partially offset by a decrease in personnel costs of $5.8 million, driven by a shift in the nature of certain roles and responsibilities between product delivery and sales support functions of approximately $13.0 million, partially offset by an increase of $7.2 million in personnel costs primarily related to expanding D&R and managed product support.

Operating Expenses

Research and Development Expense

Research and development expenses increased for the year ended December 31, 2025 as compared to the same period in 2024, primarily driven by an increase in personnel cost, inclusive of stock-based compensation, of $14.5 million, third-party cloud infrastructure costs of $2.6 million and professional fees of $1.3 million related to the development of new and enhanced products.

Sales and Marketing Expense

Sales and marketing expenses increased for the year ended December 31, 2025 as compared to the same period in 2024, primarily driven by an increase in personnel costs of $14.6 million driven by a shift in the nature of certain roles and responsibilities between product delivery and sales support functions of $13.0 million. The increase in sales and marketing expense was additionally driven by an increase in marketing and advertising costs of $3.1 million related to external marketing events and related activities and an increase of $1.2 million related to office expenses from internal corporate events, partially offset by a decrease in amortization expense of $1.1 million.

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General and Administrative Expense

General and administrative expenses decreased for the year ended December 31, 2025 as compared to the same period in 2024, primarily driven by a decrease in hosting expenses of $1.8 million associated with enterprise softwares and cloud computing costs, a decrease in professional fees of $0.9 million from investor related expenses, and a decrease in office related expenses of $0.9 million partially offset by an increase in personnel costs of $1.6 million.

Interest Income

Interest income increased for the year ended December 31, 2025 compared to the same period in 2024, primarily due to higher average investment balances this year compared to prior year, as well as favorable market interest rates.

Interest Expense

Interest expense remained consistent in the year ended December 31, 2025 compared to the same period in 2024.

Other Income (Expense), Net

Other income (expense), net increased for the year ended December 31, 2025 compared to the same period due to gains on foreign currency transactions resulting in an increase in unrealized gains primarily related to the British Pound Sterling and recognition of realized gains during the period.

Provision for income taxes

Provision for income taxes decreased by $9.1M in 2025 compared to 2024. This decrease was driven by a $3.2M decrease in the domestic provision and a $5.9M decrease in the international provision for the year ended December 31, 2025. The

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decrease in the domestic provision is primarily related to the immediate expensing of domestic research and development costs from the One Big Beautiful Bill Act ("OBBBA") provisions and the international provision decrease is primarily related to tax expense recorded in 2024 for an intercompany sale of intellectual property as part of post-acquisition strategy related to the acquisition of Minerva Labs Ltd..

Key Metrics

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. We believe that both management and investors benefit from referring to these key metrics as supplemental information in assessing our performance and when planning, forecasting, and analyzing future periods. 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 (in thousands, except percentages):

Total Revenue and Growth. We are focused on driving continued revenue growth through increased sales of our products and professional services to new and existing customers. We monitor total revenue and believe it is useful to investors as a measure of the overall success of our business.

Non-GAAP Income from Operations and Non-GAAP Operating Margin. 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. GAAP measures, in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance and allowing for greater transparency with respect to metrics used by our management in its financial and operational decision-making. See "Non-GAAP Financial Results" below for further information on non-GAAP income from operations and a reconciliation of non-GAAP income from operations to the comparable GAAP financial measure.

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

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Annualized Recurring Revenue and Growth. 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. ARR is not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates and does not include revenue reported as professional services revenue in our consolidated statement of operations. We use ARR and believe it is useful to investors as a measure of the overall success of our business.

Number of Customers. We believe that the size of our customer base is an indicator of our global market penetration and that our net customer additions are an indicator of the growth of our business. We define a customer as any entity that has an active Rapid7 recurring revenue contract as of the specified measurement date, excluding only InsightOps and Logentries customers with a contract value less than $2,400 per year.

ARR per Customer. ARR per customer is defined as ARR divided by the number of customers at the end of the period.

Non-GAAP Financial Results

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we may provide investors with certain non-GAAP financial measures from time to time, including non-GAAP gross profit, non-GAAP income from operations, non-GAAP operating margin, non-GAAP net income, non-GAAP net income per share, adjusted EBITDA and free cash flow. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons, and use certain non-GAAP financial measures as performance measures under our executive bonus plan. We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making. 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, 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.

We believe these non-GAAP financial measures are useful to investors in assessing our operating performance due to the following factors:

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

•Amortization of acquired intangible assets. We believe that excluding the impact of amortization of acquired intangible assets allows for more meaningful comparisons between operating results from period to period as the intangible assets are valued at the time of acquisition and are amortized over several years after the acquisition.

•Amortization of debt issuance costs. 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.

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•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 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 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 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. We believe that the use of adjusted EBITDA is useful to investors and other users of our financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results. 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 years ended December 31, 2025, 2024 and 2023 (in thousands):

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The following table reconciles GAAP income (loss) from operations to non-GAAP income from operations for the years ended December 31, 2025, 2024 and 2023 (in thousands):

(1) For the years ended December 31, 2025, 2024 and 2023, acquisition-related expenses included $0.5 million, $0.8 million, and $0.4 million, respectively of accretion expense related to contingent consideration recorded in connection with our July 2024 acquisition of Noetic.

(2) For the year ended December 31, 2024, restructuring expense was recorded within general and administrative expense in our consolidated statement of operations.

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The following table reconciles GAAP net income (loss) to non-GAAP net income for the years ended December 31, 2025, 2024 and 2023 (in thousands):

(1) We use the if-converted method to compute diluted earnings per share with respect to our Notes. There was no add-back of interest expense or additional dilutive shares related to the Notes where the effect was anti-dilutive. On an if converted basis, for the year ended December 31, 2025, the 2029 Notes, 2027 Notes and 2025 Notes were dilutive, for the year ended December 31, 2024 the 2029 Notes, 2027 Notes and 2025 Notes were dilutive, and for the year ended December 31, 2023 the 2029 Notes and 2027 Notes were dilutive and the 2025 Notes were anti-dilutive.

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

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The following table reconciles GAAP net income (loss) to adjusted EBITDA for the years ended December 31, 2025, 2024 and 2023 (in thousands):

The following table reconciles net cash provided by operating activities to free cash flow for the years ended December 31, 2025, 2024 and 2023 (in thousands):

Liquidity and Capital Resources

As of December 31, 2025, we had $246.7 million in cash and cash equivalents, $412.1 million in investments that have maturities ranging from one to fourteen months and an accumulated deficit of $964.7 million. Our principal sources of liquidity are cash and cash equivalents, investments, cash flow provided by operating activities and our Credit Agreement. To date, we have financed our operations primarily through private and public equity financings, issuance of convertible senior notes and through cash generated by operating activities.

On June 25, 2025 we entered into a credit agreement (the "Credit Agreement") that establishes a senior secured revolving credit facility and provides for borrowings in an aggregate principal amount of up to $200 million (the “Revolving Facility”, the loans thereunder, the “Revolving Loans” and the commitments thereunder, the “Revolving Commitments”).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. The proceeds of the Revolving Facility can be used to finance working capital needs, capital expenditures, permitted acquisitions and other general corporate purposes. We are presently in full compliance with all applicable covenants. Furthermore, there exists a more than adequate capacity with respect to the affirmative covenants. Refer to Note 10, Debt, for additional information related to the credit agreement.

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

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agreement, for an aggregate total commitment of $660.0 million. See Note 15, Commitments and Contingencies, in the Notes to our consolidated financial statements for more information regarding this commitment. In addition, certain measures have been implemented to prepare for the scheduled maturity and complete repayment of the 2027 Notes, which are due on March 15, 2027. As an integral component of these measures, 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. Furthermore, the investment policy has been revised 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. In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all. 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.

Cash Flows

The following table shows a summary of our cash flows for the years ended December 31, 2025, 2024 and 2023 (in thousands):

Uses of Funds

Our historical uses of cash have primarily consisted of cash used for operating activities such as expansion of our sales and marketing operations, research and development activities and other working capital needs, as well as cash used for business acquisitions and purchases of property and equipment, including leasehold improvements for our facilities.

Operating Activities

Operating activities provided $153.8 million of cash and cash equivalents for the year ended December 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 was primarily driven by a net income of $23.4 million in addition to the significant beneficial adjustments to reconcile net income to net cash provided from operating activities of $104.3 million in stock-based compensation expense from stock awards granted to new and existing employees in order to attract and retain talent, $45.4 million of depreciation, from our fixed assets, and amortization, primarily from our internally-developed software and acquired intangibles. These cash provided amounts were offset by negative working capital for the year of $15.5 million, primarily driven by a decrease in accounts payable of $8.9 million resulting from expense being paid and less cash collected for future performance obligations resulting in a decrease in deferred revenue of $8.4 million.

Operating activities provided $171.7 million of cash and cash equivalents for the year ended December 31, 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 $25.5 million and a decrease in our net operating assets and liabilities of $10.4 million, offset by non-cash charges of $156.6 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, amortization of debt issuance costs and other non-cash charges. The change in our net operating assets and liabilities was primarily due to a $9.8 million decrease in accrued expenses, a $5.5 million increase in accounts receivable, a $0.8 million decrease in deferred revenue and a $4.2 million increase in deferred contract acquisition and fulfillment costs, which each had a negative impact on operating cash flow. These factors

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were offset by a $4.3 million increase in other liabilities, a $2.8 million decrease in prepaid expenses and a $2.8 million increase in accounts payable, which each had a positive impact on operating cash flow.

Investing Activities

Investing activities used $209.4 million of cash for the year ended December 31, 2025, primarily driven $533.3 million in purchases of investments, which was partially offset by $351.3 million in proceeds from investment as we strategically utilize our cash to maximize return; $16.1 million for capitalization of internal-use software costs as we continue to develop new products and enhance our existing product catalog, and $7.6 million in capital expenditures to purchase computer equipment to support new and existing employees and leasehold improvements related to the new leases entered into in 2025.

Investing activities used $46.5 million of cash for the year ended December 31, 2024, consisting of $37.3 million of cash paid for the acquisition of Noetic, $14.2 million for capitalization of internal-use software costs, and $3.4 million in capital expenditures to purchase computer equipment and leasehold improvements, partially offset by $8.0 million in sales and maturities of investments, net of purchases and $0.4 million in proceeds from other investments.

Financing Activities

Financing activities used $45.5 million for the year ended December 31, 2025, which consisted primarily of $46.0 million of cash paid relating to the repayment of our 2025 convertible senior note, $4.1 million in cash paid relating to the earnout from our Noetic acquisition, and $3.0 million in withholding taxes paid for the net share settlement of equity awards, partially offset by cash provided by the purchase of stock by our employees through the employee stock purchase plan.

Financing activities provided $5.6 million of cash for the year ended December 31, 2024, which consisted primarily of $9.2 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 Employee Stock Purchase Plan and $1.6 million in proceeds from the exercise of stock options, partially offset by $4.7 million in withholding taxes paid for the net share settlement of equity awards and $0.5 million in payments related to the acquisition of Noetic.

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. We therefore believe that we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in these relationships.

Critical Accounting Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States (“GAAP”). The preparation of our consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, expenses and disclosures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates.

Our significant accounting policies, including those considered to be critical accounting estimates are summarized in Note 2, Summary of Significant Accounting Policies, in the Notes to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

Revenue Recognition

We generate revenue primarily from: (1) product subscriptions from the sale of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with our software licenses and (2) professional services from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.

The majority of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine SSP of our products and services based on our overall pricing objectives using all information reasonably available to us, taking into consideration market conditions and other factors, including the geographic locations of our customers, negotiated discounts from price lists and selling method (i.e., partner or direct). When available, we use directly observable stand-alone transactions to determine SSP. When not regularly sold on a stand-alone basis, we estimate SSP for our products and services utilizing historical sales data, including discounts

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from list price. The historical data is aggregated and analyzed by geographic location and selling method to establish a median or average price. Once SSP is established it is applied consistently to all transactions involving that product or service.

Deferred Contract Acquisition Costs

We defer contract costs that are recoverable and incremental to obtaining customer contracts. Contract costs, which primarily consist of sales commissions, are amortized on a systematic basis that is consistent with the transfer to the customer of the goods or services to which the asset relates. Contract costs for a new customer, upsell or cross-sell are amortized on a straight-line basis over an estimated period of benefit of five years as sales commissions on initial sales are not commensurate with sales commissions on contract renewals. We determined the estimated period of benefit by taking into consideration the contractual term and expected renewals of customer contracts, our technology and other factors, including the fact that commissions paid on renewals are not commensurate with commissions paid on initial sales transactions. Contract costs relating to contract renewals are deferred and amortized on a straight-line basis over the weighted average contract length of renewal contracts. Contract costs for professional services arrangements are expensed as incurred in accordance with the practical expedient as the contractual period of our professional services arrangements is one year or less. We periodically review the carrying amount of deferred contract acquisition costs to determine whether events or changes in circumstances have occurred that could impact the period of benefit.

Recent Accounting Pronouncements

See Note 2, Summary of Significant Accounting Policies, in the Notes to our Consolidated Financial Statements in Item 8 of Part II of this Annual Report on Form 10-K for a description of recent accounting pronouncements and our expectation of their impact, if any, on our results of operations and financial conditions.