Rapid7, Inc. revenue surged on 25.9% while EBITDA Margin decreased on 3.3 pp from -5.6% to -8.9%
02/09/2021 • About Rapid7, Inc. (
$RPD) • By InTwits
Rapid7, Inc. reported 2020 financial results today. Overall the company's long term financial model is characterised by the following facts:
- Rapid7, Inc. is a fast growth stock: 2020 revenue growth was 25.9%, 5 year revenue CAGR was 30.1% at 2020 ROIC -15.6%
- The company operates at negative EBITDA Margin: -8.9%
- Rapid7, Inc. spends a lot for Stock Based Compensation (SBC): average SBC/Revenue for 2016-2020 is 4.8%. Average EBITDA Margin for the same period was -13.4%
- Rapid7, Inc. has low CAPEX intensity: 5 year average CAPEX/Revenue was 4.6%. At the same time it's a lot of higher than industry average of 3.2%.
- CAPEX is quite volatile: $14m in 2020, $29m in 2019, $13m in 2018, $5m in 2017, $4m in 2016
- The company has unprofitable business model: ROIC is -15.6%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
Rapid7, Inc.'s Revenue jumped on 25.9%. Revenue growth showed small slowdown in 20Q4 - it was 23.5% YoY. Revenue growth was financed by EBITDA margin decline. EBITDA Margin decreased on 3.3 pp from -5.6% to -8.9% in 2020. EBITDA Margin grew at 5.1 pp per annum in 2016-2020.
Gross Margin decreased slightly on 1.7 pp from 72.1% to 70.5% in 2020. SG&A as a % of Revenue increased slightly on 1.8 pp from 60.3% to 62.1% in 2020. SG&A as a % of Revenue stuck to a declining trend at -3.7 pp per annum in 2016-2020.
Net Income margin decreased on 7.6 pp from -16.5% to -24.0% in 2020.
Investments (CAPEX, working capital and M&A)
In 2020 Rapid7, Inc. had CAPEX/Revenue of 3.4%. CAPEX/Revenue increased slightly on 0.95 pp from 2.4% in 2017 to 3.4% in 2020. It's average level of CAPEX/Revenue for the last three years was 5.9%.
Return on investment
The company operates at negative ROIC (-15.6%) and ROE (-127.8%). ROIC decreased slightly on 1.6 pp from -14.0% to -15.6% in 2020. ROE dropped on 64.6 pp from -63.2% to -128% in 2020.
Leverage (Debt)
Company's Net Debt / EBITDA is -3.2x and Debt / EBITDA is . Net Debt / EBITDA didn't change in 2020. Debt jumped on 75.3% while cash jumped on 40.7%.
Rapid7, Inc. has no short term refinancing risk: cash is higher than short term debt (1,806.3%).
Management team
Rapid7, Inc.'s CEO is Corey Thomas. Corey Thomas has 8 years tenure with the company. The company's CFO Jeffrey Kalowski "Jeff" has spent 4 years with the company.
Financial and operational results
FY ended 12/31/2020
Rapid7, Inc. ($RPD) key annual financial indicators| mln. $ | 2016 | 2017 | 2018 | 2019 | 2020 | 2020/2019 |
|---|
P&L
|
|---|
| Revenue | 157.4 | 200.9 | 244.1 | 326.9 | 411.5 | 25.9% |
| Gross Profit | 117.7 | 144.0 | 173.0 | 235.8 | 290.0 | 23.0% |
| SG&A | 118.8 | 141.9 | 158.3 | 197.1 | 255.5 | 29.6% |
| EBITDA | -42.3 | -41.2 | -41.9 | -18.2 | -36.6 | |
| EBIT | -49.0 | -48.8 | -53.0 | | | |
| Tax | -0.0 | -2.2 | 0.5 | | | |
| Net Income | -49.0 | -45.5 | -55.5 | -53.8 | -98.8 | |
| Stock Based Compensation | 17.3 | 19.5 | 27.6 | | | |
Balance Sheet
|
|---|
| Cash | 53.1 | 51.6 | 99.6 | 123.4 | 173.6 | 40.7% |
| Accounts Receivable | 49.2 | 73.7 | 74.9 | | | |
| Accounts Payable | 4.0 | 2.2 | 7.0 | | | |
| Short Term Debt | 0.0 | 0.0 | 0.0 | 7.2 | 9.6 | 33.9% |
| Long Term Debt | 0.0 | 0.0 | 174.7 | 257.5 | 454.3 | 76.4% |
Cash flow
|
|---|
| Capex | 4.5 | 4.8 | 12.8 | 29.4 | 13.8 | -53.1% |
| Acquisitions | | 14.7 | 14.5 | | | |
Ratios
|
|---|
| Revenue growth | 42.4% | 27.6% | 21.5% | 33.9% | 25.9% | |
| EBITDA growth | 2.7% | -2.7% | 1.9% | -56.7% | 101.4% | |
|
|---|
| Gross Margin | 74.8% | 71.7% | 70.9% | 72.1% | 70.5% | -1.7% |
| EBITDA Margin | -26.9% | -20.5% | -17.2% | -5.6% | -8.9% | -3.3% |
| EBIT Margin | -31.2% | -24.3% | -21.7% | | |
| SG&A, % of revenue | 75.5% | 70.6% | 64.9% | 60.3% | 62.1% | 1.8% |
| SBC, % of revenue | 11.0% | 9.7% | 11.3% | | |
| Net Income Margin | -31.1% | -22.6% | -22.8% | -16.5% | -24.0% | -7.6% |
| CAPEX, % of revenue | 2.9% | 2.4% | 5.2% | 9.0% | 3.4% | -5.6% |
|
|---|
| ROIC | -87.4% | -140.3% | -39.7% | -14.0% | -15.6% | -1.6% |
| ROE | -89.0% | -137.4% | -99.7% | -63.2% | -127.8% | -64.6% |
People
|
|---|
| Insider ownership | 8.1% | 8.1% | 8.1% | | | |
| Employees | 887 | 1,079 | 1,246 | | | |
| Revenue/Employee, th. $ | 177 | 186 | 196 | | | |
Rapid7, Inc. ($RPD) key quoterly financial indicators
| mln. $ | 20Q1 | 20Q2 | 20Q3 | 20Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 94 | 99 | 105 | 113 | | 28.9% | 25.3% | 26.4% | 23.5% |
| EBITDA | -12 | -6 | -8 | -11 | | - | - | - | - |
| Net Income | -23 | -21 | -26 | -29 | | - | - | - | - |
Balance Sheet
|
|---|
| Cash | 204 | 279 | 239 | 174 | | 127.5% | 120.7% | 108.3% | 40.7% |
| Short Term Debt | 9 | 9 | 10 | 10 | | 69.5% | 55.8% | 48.1% | 33.9% |
| Long Term Debt | 260 | 448 | 451 | 454 | | 34.1% | 78.2% | 76.4% | 76.4% |
Ratios
|
|---|
| Gross Margin | 70.6% | 70.6% | 70.5% | 70.2% | | -2.1% | -1.3% | -1.1% | -2.1% |
| EBITDA Margin | -12.3% | -6.3% | -7.8% | -9.3% | | -6.4% | 0.2% | -3.1% | -4.1% |
| Net Income Margin | -24.3% | -21.7% | -24.3% | -25.6% | | -8.3% | -4.7% | -7.0% | -9.9% |
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 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | - | 56.5% | 51.3% | 59.2% | 42.4% |
| ServiceNow, Inc. ($NOW) | - | 38.0% | 36.0% | 32.6% | 30.6% |
| SailPoint Technologies Holdings, Inc. ($SAIL) | - | 40.5% | 33.8% | 15.9% | 26.6% |
| Tenable Holdings, Inc. ($TENB) | - | 50.9% | 42.4% | 32.6% | 24.2% |
| Allot Communications Ltd. ($ALLT) | - | -9.3% | 16.9% | 14.9% | 23.5% |
| |
|---|
| Median (23 companies) | 12.9% | 14.0% | 19.0% | 15.9% | 12.9% |
|---|
| Rapid7, Inc. ($RPD) | - | 27.6% | 21.5% | 33.9% | 25.9% |
Top companies by Gross margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 88.5% | 88.6% | 89.6% | 89.5% | 89.4% |
| Progress Software Corporation ($PRGS) | 83.8% | 82.6% | 83.1% | 81.8% | 86.0% |
| Varonis Systems, Inc. ($VRNS) | 90.5% | 90.4% | 89.8% | 86.2% | 84.9% |
| Vmware, Inc. ($VMW) | 85.2% | - | 85.5% | 83.9% | 83.4% |
| Tenable Holdings, Inc. ($TENB) | 88.6% | 86.4% | 83.9% | 82.8% | 82.4% |
| |
|---|
| Median (23 companies) | 73.1% | 74.1% | 75.0% | 76.6% | 77.8% |
|---|
| Rapid7, Inc. ($RPD) | 74.8% | 71.7% | 70.9% | 72.1% | 70.5% |
Top companies by EBITDA margin, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Check Point Software Technologies Ltd. ($CHKP) | 49.8% | 50.7% | 48.8% | 46.0% | 45.1% |
| Qualys, Inc. ($QLYS) | 23.8% | 25.1% | 28.4% | 36.5% | 40.3% |
| SolarWinds Corporation ($SWI) | -8.0% | 44.0% | 44.8% | 44.7% | 39.8% |
| Progress Software Corporation ($PRGS) | 2.4% | 28.6% | 32.9% | 23.4% | 34.4% |
| Fortinet, Inc. ($FTNT) | 7.2% | 11.1% | 15.9% | 19.8% | 23.9% |
| |
|---|
| Median (23 companies) | -8.0% | -3.6% | -3.9% | 0.2% | 3.0% |
|---|
| Rapid7, Inc. ($RPD) | -26.9% | -20.5% | -17.2% | -5.6% | -8.9% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Zscaler, Inc. ($ZS) | 7.8% | 6.5% | 8.0% | 9.5% | 12.0% |
| ServiceNow, Inc. ($NOW) | 7.6% | 7.8% | 8.6% | 7.7% | 9.3% |
| Qualys, Inc. ($QLYS) | 11.7% | 16.4% | 8.2% | 8.6% | 8.3% |
| Zuora, Inc. ($ZUO) | 3.4% | 3.3% | 2.8% | 5.7% | 7.8% |
| Proofpoint, Inc. ($PFPT) | 9.2% | 9.0% | 4.1% | 4.0% | 6.9% |
| |
|---|
| Median (23 companies) | 2.0% | 2.2% | 2.5% | 3.4% | 2.8% |
|---|
| Rapid7, Inc. ($RPD) | 2.9% | 2.4% | 5.2% | 9.0% | 3.4% |
Top companies by ROIC, %
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| Fortinet, Inc. ($FTNT) | 5.3% | 15.0% | 28.0% | 29.0% | 46.3% |
| Check Point Software Technologies Ltd. ($CHKP) | 24.7% | 26.8% | 25.5% | 24.2% | 25.6% |
| Qualys, Inc. ($QLYS) | 13.7% | 12.3% | 14.3% | 18.7% | 22.0% |
| Vmware, Inc. ($VMW) | 15.9% | - | - | 18.1% | 19.6% |
| Progress Software Corporation ($PRGS) | -4.9% | 13.5% | 18.5% | 7.6% | 16.0% |
| |
|---|
| Median (23 companies) | 0.0% | -2.7% | -0.9% | -6.3% | -6.4% |
|---|
| Rapid7, Inc. ($RPD) | -87.4% | -140.3% | -39.7% | -14.0% | -15.6% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2016 | FY2017 | FY2018 | FY2019 | FY2020 |
|---|
| SolarWinds Corporation ($SWI) | - | 6.2x | 4.1x | 4.4x | 4.1x |
| Proofpoint, Inc. ($PFPT) | - | - | - | -27.4x | 2.5x |
| Progress Software Corporation ($PRGS) | -7.5x | -0.1x | 0.1x | 1.5x | 2.1x |
| Vmware, Inc. ($VMW) | -0.7x | - | -0.8x | 0.3x | 1.5x |
| CyberArk Software Ltd. ($CYBR) | -4.1x | -5.7x | -4.5x | -3.6x | 0.9x |
| |
|---|
| Median (12 companies) | -1.2x | -0.6x | -0.4x | -0.3x | 0.4x |
|---|
