Rapid7, Inc. CAPEX jumped on 166% and Revenue surged on 21.5%
02/07/2019 • About Rapid7, Inc. (
$RPD) • By InTwits
Rapid7, Inc. reported 2018 financial results today. Here are the key drivers of the company's long term financial model:
- Rapid7, Inc. is a fast growth stock: 2018 revenue growth was 21.5%, 5 year revenue CAGR was 32.4% at 2018 ROIC -39.7%
- The company operates at negative EBITDA Margin: -17.2%
- Rapid7, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2014-2018 is 9.8%. Average EBITDA Margin for the same period was -24.3%. In 2018 SBC/Revenue was even higher: 11.3%
- Rapid7, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.7%. At the same time it's a lot of higher than industry average of 3.1%.
- CAPEX is quite volatile: $13m in 2018, $5m in 2017, $4m in 2016, $4m in 2015, $7m in 2014
- The company has unprofitable business model: ROIC is -39.7%
- It operates with medium-size leverage: Net Debt/EBITDA is 0.8x while industry average is -1.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Rapid7, Inc.'s Revenue jumped on 21.5%. Revenue growth showed slowdown in 18Q4 - it was 19.1% YoY. During the last 5 years Revenue growth topped in 2015 at 43.8% and was decelerating since that time. Revenue growth happened at the same time with EBITDA margin expansion. EBITDA Margin increased on 3.3 pp from -20.5% to -17.2% in 2018. EBITDA Margin grew at 4.7 pp per annum in the last 5 years.
Gross Margin decreased slightly on 0.80 pp from 71.7% to 70.9% in 2018. Gross Margin stuck to a declining trend at -1.2 pp per annum in 2014-2018. SG&A as a % of Revenue decreased on 5.8 pp from 70.6% to 64.9% in 2018. SG&A as a % of Revenue stuck to a declining trend at -4.2 pp per annum in 2014-2018. Stock Based Compensation (SBC) as a % of Revenue increased slightly on 1.6 pp from 9.7% to 11.3% in 2018.
Net Income margin showed almost no change in 2018. Net Income margin followed a growing trend at 6.2 pp per annum in the last 5 years.
Investments (CAPEX, working capital and M&A)
In 2018 the company had CAPEX/Revenue of 5.2%. The company's CAPEX/Revenue increased slightly on 1.5 pp from 3.7% in 2015 to 5.2% in 2018. For the last three years the average CAPEX/Revenue was 3.5%. During 2014-2018 CAPEX as a % of Revenue bottomed in 2017 at 2.4%.
Accounts receivable as a % of Revenue decreased on 6.0 pp from 36.7% to 30.7% in 2018. Accounts payable as a % of Revenue increased on 6.0 pp from 3.9% to 9.9% in 2018.
Rapid7, Inc. has spent
$14m on M&A in 2018 which accounts for 5.9% of revenue.
Return on investment
The company operates at negative ROIC (-39.7%) and ROE (-99.7%). ROIC jumped on 101 pp from -140% to -39.7% in 2018. ROE surged on 37.7 pp from -137% to -99.7% in 2018.
Leverage (Debt)
Debt level is 0.8x Net Debt / EBITDA and Debt / EBITDA. Net Debt / EBITDA didn't change in 2018. Debt surged while cash jumped on 93.1%.
The company has no short term refinancing risk: short term debt is zero.
Management team
CEO total compensation was
$5,036,352 in 2018 which included
$350,000 salary. The company's CFO is Jeffrey Kalowski "Jeff". Jeffrey Kalowski "Jeff" has 2 years tenure at the company.
Insider ownership is 8.1%. Insider ownership didn't change in 2018.
At the end of financial year the company had 1,246 employees. The number of employees jumped on 15.5%. Average revenue per employee in 2018 was
$195,900 and it increased on 5.2%.
Financial and operational results
FY ended 12/31/2018
Rapid7, Inc. ($RPD) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 76.9 | 110.5 | 157.4 | 200.9 | 244.1 | 21.5% |
| Gross Profit | 58.4 | 81.3 | 117.7 | 144.0 | 173.0 | 20.1% |
| SG&A | 62.0 | 89.1 | 118.8 | 141.9 | 158.3 | 11.6% |
| EBITDA | -25.0 | -41.2 | -42.3 | -41.2 | -41.9 | |
| EBIT | -29.1 | -46.6 | -49.0 | -48.8 | -53.0 | |
| Tax | 0.4 | 0.5 | -0.0 | -2.2 | 0.5 | |
| Net Income | -32.6 | -49.9 | -49.0 | -45.5 | -55.5 | |
| Stock Based Compensation | 2.2 | 10.7 | 17.3 | 19.5 | 27.6 | 41.2% |
Balance Sheet
|
|---|
| Cash | 36.8 | 86.6 | 53.1 | 51.6 | 99.6 | 93.1% |
| Accounts Receivable | 25.4 | 44.2 | 49.2 | 73.7 | 74.9 | 1.7% |
| Accounts Payable | 3.5 | 2.0 | 4.0 | 2.2 | 7.0 | 214.6% |
| Short Term Debt | 0.3 | 0.1 | 0.0 | 0.0 | 0.0 | |
| Long Term Debt | 16.9 | 0.0 | 0.0 | 0.0 | 174.7 | |
Cash flow
|
|---|
| Capex | 7.1 | 4.1 | 4.5 | 4.8 | 12.8 | 165.6% |
| Acquisitions | | 38.8 | | 14.7 | 14.5 | -1.7% |
Ratios
|
|---|
| Revenue growth | 28.1% | 43.8% | 42.4% | 27.6% | 21.5% | |
| EBITDA growth | 56.3% | 64.8% | 2.7% | -2.7% | 1.9% | |
|
|---|
| Gross Margin | 76.0% | 73.5% | 74.8% | 71.7% | 70.9% | -0.8% |
| EBITDA Margin | -32.5% | -37.3% | -26.9% | -20.5% | -17.2% | 3.3% |
| EBIT Margin | -37.9% | -42.1% | -31.2% | -24.3% | -21.7% | 2.6% |
| SG&A, % of revenue | 80.6% | 80.6% | 75.5% | 70.6% | 64.9% | -5.8% |
| SBC, % of revenue | 2.8% | 9.7% | 11.0% | 9.7% | 11.3% | 1.6% |
| Net Income Margin | -42.4% | -45.1% | -31.1% | -22.6% | -22.8% | -0.1% |
| CAPEX, % of revenue | 9.2% | 3.7% | 2.9% | 2.4% | 5.2% | 2.8% |
|
|---|
| ROIC | | -183.1% | -87.4% | -140.3% | -39.7% | 100.6% |
| ROE | | | -89.0% | -137.4% | -99.7% | 37.7% |
People
|
|---|
| Insider ownership | 8.1% | 8.1% | 8.1% | 8.1% | 8.1% | 0.0% |
| Employees | | 756 | 887 | 1,079 | 1,246 | 15.5% |
| Revenue/Employee, th. $ | | 146 | 177 | 186 | 196 | 5.2% |
Rapid7, Inc. ($RPD) key quoterly financial indicators
| mln. $ | 18Q1 | 18Q2 | 18Q3 | 18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 55 | 58 | 62 | 69 | | 20.5% | 23.2% | 23.4% | 19.1% |
| EBITDA | -14 | -12 | -9 | -7 | | | | | |
| Net Income | -16 | -14 | -12 | -13 | | | | | |
Balance Sheet
|
|---|
| Cash | 100 | 101 | 131 | 100 | | 96.7% | 89.8% | 167.4% | 93.1% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 172 | 175 | | | | | |
Ratios
|
|---|
| Gross Margin | 69.6% | 70.2% | 71.4% | 72.0% | | -3.3% | -2.2% | -0.1% | 1.7% |
| EBITDA Margin | -26.0% | -20.0% | -13.9% | -10.8% | | -6.5% | 1.7% | 7.9% | 8.3% |
| Net Income Margin | -30.0% | -24.5% | -19.0% | -18.9% | | -6.7% | 0.0% | 1.4% | 3.6% |
Peers in Systems Software
Below we provide Rapid7, Inc. benchmarking against other companies in Systems Software industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Advantego Corp ($ADGO) | | | | | 973.8% |
| Solbright Group Inc ($SBRT) | | | 286.4% | 25.4% | 414.0% |
| Duos Technologies Group Inc ($DUOT) | | 61.0% | -9.8% | -36.4% | 210.2% |
| Dell Technologies Inc. ($DVMT) | | | | | 145.7% |
| Finjan Holdings, Inc. ($FNJN) | | -6.2% | 292.3% | 174.6% | 63.0% |
| |
|---|
| Median (48 companies) | | 18.2% | 14.6% | 14.0% | 19.0% |
|---|
| Rapid7, Inc. ($RPD) | | 43.8% | 42.4% | 27.6% | 21.5% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| StrikeForce Technologies Inc ($SFOR) | 97.0% | 96.9% | 98.3% | 95.4% | 94.0% |
| Varonis Systems, Inc. ($VRNS) | 90.2% | 90.6% | 90.5% | 90.4% | 89.8% |
| Check Point Software Technologies Ltd. ($CHKP) | 88.2% | 88.5% | 88.5% | 88.6% | 89.6% |
| Tableau Software, Inc. ($DATA) | 91.0% | 88.7% | 88.0% | 87.1% | 87.7% |
| Attunity Ltd. ($ATTU) | 90.7% | 84.9% | 83.9% | 84.1% | 87.5% |
| |
|---|
| Median (53 companies) | 77.0% | 75.4% | 73.1% | 74.1% | 75.0% |
|---|
| Rapid7, Inc. ($RPD) | 76.0% | 73.5% | 74.8% | 71.7% | 70.9% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 54.3% | 52.4% | 49.8% | 50.7% | 48.8% |
| SolarWinds Corporation ($SWI) | | | -8.0% | 44.0% | 44.8% |
| Finjan Holdings, Inc. ($FNJN) | -192.1% | -295.2% | 2.2% | 30.2% | 42.0% |
| Oracle Corporation ($ORCL) | 46.2% | 43.8% | 40.8% | 40.2% | 40.8% |
| CA Inc. ($CA) | 33.9% | 36.7% | 37.2% | 36.1% | 35.3% |
| |
|---|
| Median (47 companies) | 1.0% | -5.0% | -8.0% | -3.6% | -3.9% |
|---|
| Rapid7, Inc. ($RPD) | -32.5% | -37.3% | -26.9% | -20.5% | -17.2% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| The Rubicon Project, Inc. ($RUBI) | 15.6% | 11.4% | 12.0% | 26.0% | 16.0% |
| CYREN Ltd. ($CYRN) | 2.4% | 4.4% | 3.2% | 5.8% | 9.2% |
| ServiceNow, Inc. ($NOW) | 8.0% | 8.7% | 7.6% | 7.8% | 8.6% |
| Qualys, Inc. ($QLYS) | 10.4% | 12.2% | 11.7% | 16.4% | 8.2% |
| Zscaler, Inc. ($ZS) | | 12.5% | 7.8% | 6.5% | 8.0% |
| |
|---|
| Median (48 companies) | 2.7% | 2.1% | 2.0% | 2.2% | 2.5% |
|---|
| Rapid7, Inc. ($RPD) | 9.2% | 3.7% | 2.9% | 2.4% | 5.2% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Finjan Holdings, Inc. ($FNJN) | -42.6% | -113.5% | 3.4% | 46.6% | 64.1% |
| Fortinet, Inc. ($FTNT) | 9.2% | 2.1% | 5.3% | 15.0% | 28.0% |
| Check Point Software Technologies Ltd. ($CHKP) | 22.2% | 23.7% | 24.7% | 26.8% | 25.5% |
| MAM Software Group, Inc. ($MAMS) | 13.3% | 19.3% | 21.1% | 24.2% | 25.2% |
| Red Hat, Inc. ($RHT) | 15.1% | 14.1% | 14.2% | 16.4% | 22.4% |
| |
|---|
| Median (56 companies) | 0.0% | 0.0% | 0.0% | -2.7% | -0.9% |
|---|
| Rapid7, Inc. ($RPD) | | -183.1% | -87.4% | -140.3% | -39.7% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NXT-ID Inc. ($NXTD) | | | | | 9.7x |
| Symantec Corporation ($SYMC) | -3.2x | -1.5x | -5.0x | 10.0x | 4.7x |
| SolarWinds Corporation ($SWI) | | | | 6.2x | 4.1x |
| Oracle Corporation ($ORCL) | 0.4x | 1.2x | 1.6x | 2.4x | 2.4x |
| ServiceNow, Inc. ($NOW) | | | | 9.0x | 0.9x |
| |
|---|
| Median (23 companies) | -2.4x | -1.4x | -1.2x | -0.6x | -0.4x |
|---|
