RPD 10-Q Quarterly Report Sept. 30, 2025

RAPID7, INC.

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rp-20250930

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2025


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37496

RAPID7, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware						35-2423994
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)


120 Causeway Street
Boston,	MA	02114
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code: ( 617 ) 247-1717


Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:

Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common Stock, $0.01 par value per share	RPD	The Nasdaq Global Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

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Large Accelerated Filer	☒	Accelerated Filer	☐
Non-accelerated Filer	☐	Small Reporting Company	☐
Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 31, 2025 , there were 65,480,776 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

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		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (Unaudited)	1
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Income	3
	Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit)	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	39
Item 4.	Controls and Procedures	40
PART II.	OTHER INFORMATION	42
Item 1.	Legal Proceedings	42
Item 1A.	Risk Factors	42
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	42
Item 3.	Defaults Upon Senior Securities	42
Item 4.	Mine Safety Disclosures	42
Item 5.	Other Information	42
Item 6.	Exhibits	43
	Signatures

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PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

RAPID7, INC.

Condensed Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data)


	September 30, 2025		December 31, 2024
Assets
Current assets:
Cash and cash equivalents	$	130,613	$	334,686
Short-term investments	276,515		187,025
Accounts receivable, net of allowance for credit losses of $ 2,595 and $ 1,833 at September 30, 2025 and December 31, 2024, respectively	141,339		168,242
Deferred contract acquisition and fulfillment costs, current portion	47,557		52,134
Prepaid expenses and other current assets	39,001		44,024
Total current assets	635,025		786,111
Long-term investments	227,418		37,274
Property and equipment, net	31,966		32,245
Operating lease right-of-use assets	47,536		48,877
Deferred contract acquisition and fulfillment costs, non-current portion	64,109		73,672
Goodwill	575,268		575,268
Intangible assets, net	69,877		85,719
Other assets	15,208		12,868
Total assets	$	1,666,407	$	1,652,034
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	15,571	$	18,908
Accrued expenses and other current liabilities	80,539		88,802
Convertible senior notes, current portion, net	—		45,895
Operating lease liabilities, current portion	15,955		15,493
Deferred revenue, current portion	422,943		461,118

Total current liabilities	535,008		630,216
Convertible senior notes non-current portion, net	891,279		888,356
Operating lease liabilities, non-current portion	63,551		68,430
Deferred revenue, non-current portion	28,342		27,078
Other long-term liabilities	21,011		20,243
Total liabilities	$	1,539,191	$	1,634,323
Stockholders’ equity:
Preferred stock, $ 0.01 par value per share; 10,000,000 shares authorized at September 30, 2025 and December 31, 2024; 0 shares issued and outstanding at September 30, 2025 and December 31, 2024	$	—	$	—
Common stock, $ 0.01 par value per share; 100,000,000 shares authorized at September 30, 2025 and December 31, 2024; 65,908,155 and 64,067,220 shares issued at September 30, 2025 and December 31, 2024, respectively; 65,337,900 and 63,496,965 shares outstanding at September 30, 2025 and December 31, 2024, respectively	652		635
Treasury stock, at cost, 570,255 shares at September 30, 2025 and December 31, 2024	( 4,765 )		( 4,765 )
Additional paid-in-capital	1,096,652		1,011,080
Accumulated other comprehensive income (loss)	2,459		( 1,205 )
Accumulated deficit	( 967,782 )		( 988,034 )
Total stockholders’ equity	127,216		17,711
Total liabilities and stockholders’ equity	$	1,666,407	$	1,652,034

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RAPID7, INC.

Condensed Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Revenue:
Product subscriptions	$	210,146	$	205,593	$	622,178	$	602,578
Professional services	7,814		9,061		20,228		25,168
Total revenue	217,960		214,654		642,406		627,746
Cost of revenue:
Product subscriptions	58,263		56,774		169,867		166,615
Professional services	6,721		6,383		17,656		18,528
Total cost of revenue	64,984		63,157		187,523		185,143
Total gross profit	152,976		151,497		454,883		442,603
Operating expenses:
Research and development	46,914		44,976		142,029		126,792
Sales and marketing	79,296		74,821		237,943		226,042
General and administrative	20,863		18,883		65,615		62,013


Total operating expenses	147,073		138,680		445,587		414,847
Income from operations	5,903		12,817		9,296		27,756
Other income (expense), net:
Interest income	6,167		5,571		17,439		15,512
Interest expense	( 2,585 )		( 2,837 )		( 7,866 )		( 8,180 )
Other (expense) income, net	( 173 )		2,811		5,586		681
Income before income taxes	9,312		18,362		24,455		35,769
(Benefit) provision for income taxes	( 497 )		2,952		4,203		12,415
Net income	$	9,809	$	15,410	$	20,252	$	23,354
Net income per share, basic	$	0.15	$	0.24	$	0.31	$	0.37
Net income per share, diluted	$	0.15	$	0.21	$	0.31	$	0.31
Weighted-average common shares outstanding, basic	64,967,114		62,898,078		64,404,649		62,389,482
Weighted-average common shares outstanding, diluted	65,181,941		74,537,085		64,691,079		74,225,110

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RAPID7, INC.

Condensed Consolidated Statements of Comprehensive Income (Unaudited)

(in thousands)


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Net income	$	9,809	$	15,410	$	20,252	$	23,354
Other comprehensive (loss) income:
Change in fair value of cash flow hedges	( 2,156 )		1,840		2,459		882
Adjustment for net losses (gains) realized on cash flow hedges and included in net income, net of taxes	827		( 183 )		973		( 656 )
Total change in unrealized (losses) gains on cash flow hedges	( 1,329 )		1,657		3,432		226
Change in unrealized gains on investments	274		1,123		232		359


Total other comprehensive (loss) income	( 1,055 )		2,780		3,664		585
Comprehensive income	$	8,754	$	18,190	$	23,916	$	23,939

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RAPID7, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)

Three Months Ended September 30, 2025 and 2024

(in thousands)


	Common stock			Treasury stock			Additional paid-in-capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance, June 30, 2025	64,707	$	646	571	$	( 4,765 )	$	1,068,643	$	3,514	$	( 977,591 )	$	90,447
Stock-based compensation expense	—	—		—	—		25,293		—		—		25,293
Issuance of common stock under employee stock purchase plan	198	2		—	—		3,255		—		—		3,257
Vesting of restricted stock units	458	4		—	—		( 4 )		—		—		—
Shares withheld for employee taxes	( 25 )	—		—	—		( 535 )		—		—		( 535 )

Other comprehensive loss	—	—		—	—		—		( 1,055 )		—		( 1,055 )
Net income	—	—		—	—		—		—		9,809		9,809
Balance, September 30, 2025	65,338	$	652	571	$	( 4,765 )	$	1,096,652	$	2,459	$	( 967,782 )	$	127,216


	Common stock			Treasury stock			Additional paid-in-capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ deficit
	Shares	Amount		Shares	Amount
Balance, June 30, 2024	62,702	$	628	570	$	( 4,765 )	$	957,996	$	( 851 )	$	( 1,005,616 )	$	( 52,608 )
Stock-based compensation expense	—	—		—	—		25,738		—		—		25,738
Issuance of common stock under employee stock purchase plan	144	1		—	—		4,200		—		—		4,201
Vesting of restricted stock units	341	3		—	—		( 3 )		—		—		—
Shares withheld for employee taxes	( 21 )	—		—	—		( 794 )		—		—		( 794 )
Issuance of common stock upon exercise of stock options	11	—		—	—		136		—		—		136
Other comprehensive gain	—	—		—	—		—		2,780		—		2,780
Net income	—	—		—	—		—		—		15,410		15,410
Balance, September 30, 2024	63,177	$	632	570	$	( 4,765 )	$	987,273	$	1,929	$	( 990,206 )	$	( 5,137 )

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RAPID7, INC.

Condensed Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)

Nine Months Ended September 30, 2025 and 2024

(in thousands)


	Common stock			Treasury stock			Additional paid-in-capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ equity
	Shares	Amount		Shares	Amount
Balance, December 31, 2024	63,497	$	635	571	$	( 4,765 )	$	1,011,080	$	( 1,205 )	$	( 988,034 )	$	17,711
Stock-based compensation expense	—	—		—	—		77,200		—		—		77,200
Issuance of common stock under employee stock purchase plan	385	4		—	—		7,699		—		—		7,703
Vesting of restricted stock units	1,332	13		—	—		( 13 )		—		—		—
Shares withheld for employee taxes	( 87 )	( 1 )		—	—		( 2,434 )		—		—		( 2,435 )
Vesting of equity awards previously classified as liabilities	22	—		—	—		777		—		—		777
Issuance of common stock upon exercise of stock options	157	1		—	—		1,588		—		—		1,589
Issuance of common stock from acquisition	32	—		—	—		755		—		—		755
Other comprehensive gain	—	—		—	—		—		3,664		—		3,664
Net income	—	—		—	—		—		—		20,252		20,252
Balance, September 30, 2025	65,338	$	652	571	$	( 4,765 )	$	1,096,652	$	2,459	$	( 967,782 )	$	127,216


	Common stock			Treasury stock			Additional paid-in-capital		Accumulated other comprehensive loss		Accumulated deficit		Total stockholders’ deficit
	Shares	Amount		Shares	Amount
Balance, December 31, 2023	61,714	$	617	570	$	( 4,765 )	$	898,185	$	1,344	$	( 1,013,560 )	$	( 118,179 )
Stock-based compensation expense	—	—		—	—		80,549		—		—		80,549
Issuance of common stock under employee stock purchase plan	292	3		—	—		9,243		—		—		9,246
Vesting of restricted stock units	1,123	11		—	—		( 11 )		—		—		—
Shares withheld for employee taxes	( 83 )	—		—	—		( 3,883 )		—		—		( 3,883 )

Issuance of common stock upon exercise of stock options	131	1		—	—		1,538		—		—		1,539
Other comprehensive gain	—	—		—	—		—		585		—		585
Net income	—	—		—	—		—		—		23,354		23,354
Balance, September 30, 2024	63,177	$	632	570	$	( 4,765 )	$	987,273	$	1,929	$	( 990,206 )	$	( 5,137 )

The accompanying notes are an integral part of these unaudited consolidated financial statements.

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RAPID7, INC.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(in thousands)


	Nine Months Ended September 30,
		2025		2024
Cash flows from operating activities:
Net income		$	20,252	$	23,354
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		34,254		33,457
Amortization of debt issuance costs		3,116		3,325
Stock-based compensation expense		81,059		80,549


Deferred income taxes		( 1,300 )		1,840

Other		( 4,730 )		( 4,534 )
Changes in assets and liabilities:
Accounts receivable		25,911		22,432
Deferred contract acquisition and fulfillment costs		14,138		( 493 )
Prepaid expenses and other assets		( 1,339 )		6,062
Accounts payable		( 3,806 )		( 10,450 )
Accrued expenses		( 11,578 )		( 17,413 )
Deferred revenue		( 36,911 )		( 37,112 )
Other liabilities		( 2,816 )		6,880
Net cash provided by operating activities		$	116,250	$	107,897
Cash flows from investing activities:
Business acquisitions, net of cash acquired		—		( 37,198 )
Purchases of property and equipment		( 6,446 )		( 2,242 )
Capitalization of internal-use software		( 11,984 )		( 10,414 )
Purchases of investments		( 503,038 )		( 242,494 )
Sales and maturities of investments		227,500		192,500
Other investing activities		1,786		360
Net cash used in investing activities		( 292,182 )		( 99,488 )
Cash flows from financing activities:


Payment of debt issuance costs		( 1,693 )		—
Payments for maturity of convertible senior notes		( 45,992 )		—


Taxes paid related to net share settlement of equity awards		( 2,435 )		( 3,883 )
Proceeds from employee stock purchase plan		7,703		9,246
Proceeds from stock option exercises		1,589		1,436

Net cash (used in) provided by financing activities		( 40,828 )		6,799
Effect of exchange rate changes on cash ,cash equivalents and restricted cash		5,272		770
Net (decrease) increase in cash, cash equivalents and restricted cash		$	( 211,488 )	$	15,978
Cash, cash equivalents and restricted cash, beginning of period		342,101		214,130
Cash, cash equivalents and restricted cash, end of period		$	130,613	$	230,108
Supplemental cash flow information:
Cash paid for interest on convertible senior notes		5,768		5,840
Cash paid for income taxes, net of payments		7,124		7,073
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents		130,613		222,571
Restricted cash included in other assets		—		7,537
Total cash, cash equivalents and restricted cash		$	130,613	$	230,108

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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RAPID7, INC.

Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1. Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies

Description of Business

Rapid7, Inc. and subsidiaries (“we,” “us” or “our”) are advancing security with visibility, analytics, and automation delivered through our platform solutions. Our solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks.

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. Based on an analysis of quantitative and qualitative factors 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, and as described further in Note 15, Immaterial Correction of an Error, 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 .

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as well as pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), regarding interim financial reporting. Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2024 filed with the SEC on February 28, 2025.

The condensed consolidated financial statements include our results of operations and those of our wholly-owned subsidiaries and reflect all adjustments (consisting solely of normal, recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. All intercompany transactions and balances have been eliminated in consolidation. The results of operations for the three and nine months ended September 30, 2025 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes.

The management estimates include, but are not limited to the determination of standalone selling prices in revenue transactions with multiple performance obligations, the estimated period of benefit for deferred contract acquisition costs, the useful lives and recoverability of long-lived assets, the valuation for credit losses, the valuation of stock-based compensation, the fair value of assets acquired and liabilities assumed in business combinations, the valuation of contingent consideration, the incremental borrowing rate for operating leases and the valuation for deferred tax assets. We base our estimates on historical experience and on various other assumptions that we believe are reasonable. Actual results could differ from those estimates.

Significant Accounting Policies

Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies , to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024. There have been no changes to the significant accounting policies during the nine-month period ended September 30, 2025.

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Recent Accounting Pronouncements

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures ("ASU 2023-09") . This new guidance is designed to enhance the transparency and decision usefulness of income tax disclosures. The amendments of this update are related to the rate reconciliation and income taxes paid, requiring (1) consistent categories and greater disaggregation of information in the rate reconciliation and (2) income taxes paid disaggregated by jurisdiction. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024, with early adoption permitted. The Company is currently evaluating the effect of adopting this ASU.

Note 2. Revenue from Contracts with Customers

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.

Product Subscriptions

Product subscriptions consists primarily of revenue from our cloud-based subscription, managed services offerings, term software licenses, content subscriptions and maintenance and support associated with our software licenses.

• We generate cloud-based subscription revenue primarily from sales of subscriptions to access our cloud platform, together with related support services to our customers. These arrangements do not provide the customer with the right to take possession of our software operating on our cloud platform at any time. Instead, customers are granted continuous access to our cloud platform over the contractual period. Revenue is recognized over time on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Our cloud-based subscription contracts generally have annual or multi-year contractual terms which are billed in advance of the annual subscription period and are non-cancellable.

• Managed services offerings consist of fees generated when we operate our software and provide our capabilities on behalf of our customers. Revenue is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Our managed services offerings generally have annual or multi-year contractual terms which are billed in advance of the annual subscription period and are non-cancellable.

• For our term software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, we recognize the license revenue over the contractual term of the content subscription.

• Content subscriptions and our maintenance and support services are sold with our term software licenses. Revenue related to our content subscriptions associated with our software licenses is recognized ratably over the contractual period.

Professional Services

All of our professional services are considered distinct performance obligations when sold stand alone or with other products. These contracts generally have terms of one year or less. For the majority of these contracts, revenue is recognized over time based upon the proportion of work performed to date.

Contract Balances

Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period consistent with the above methodology. For the three months ended September 30, 2025 and 2024, we recognized revenue of $ 192.7 million and $ 184.6 million, respectively, that was included in the contract liability balance as of June 30 of each respective year. For the nine months ended September 30, 2025 and 2024, we recognized $ 413.4 million and $ 398.3 million, respectively, that was included in the contract liability balance as of December 31 of the respective preceding year. Deferred revenue that will be realized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as non-current.

We receive payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Unbilled receivables include amounts related to our contractual right to consideration for both completed and partially completed performance obligations that have not been invoiced. If the right to consideration is based on satisfaction of another performance obligation in the contract other than the passage of time, we

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record a contract asset. As of September 30, 2025 and December 31, 2024, unbilled receivables of $ 3.1 million and $ 2.5 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet. As of September 30, 2025 and December 31, 2024, we had no contract assets recorded on our unaudited condensed consolidated balance sheet.

Disaggregated Revenue by Geographic Location:

Net revenues by geographic area presented based upon the location of the customer are as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
United States	$	154,778	$	156,218	$	458,535	$	458,667
Rest of world	63,182		58,436		183,871		169,079
Total	$	217,960	$	214,654	$	642,406	$	627,746

Transaction Price Allocated to the Remaining Performance Obligations

The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2025 (in thousands). The estimated revenues do not include unexercised contract renewals.


	Next Twelve Months		Thereafter
Product subscriptions	$	556,086	$	262,110
Professional services	15,312		4,087
Total	$	571,398	$	266,197

Deferred Contract Acquisition and Fulfillment Costs

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs, which primarily consist of capitalized sales commissions, for the nine months ended September 30, 2025 and 2024 (in thousands):


	Nine Months Ended September 30,
	2025		2024
Beginning balance	$	125,806	$	121,609
Capitalization of contract acquisition and fulfillment costs	29,377		39,850
Amortization of deferred contract acquisition and fulfillment costs	( 43,517 )		( 39,357 )
Ending balance	$	111,666	$	122,102

Note 3. Business Combinations

Noetic Cyber, Inc.

On July 3, 2024, we acquired Noetic Cyber, Inc, (“Noetic”) a provider of cyber asset attack surface management, to extend Rapid7’s security operations platform by unlocking more accessible and accurate asset inventory in order to provide customers more comprehensive visibility to their attack surface, for a purchase price with an aggregate fair value of $ 51.2 million . The purchase consideration consisted of $ 38.6 million in cash paid at closing, $ 12.1 million of contingent consideration and $ 0.5 million of deferred cash payments. The deferred cash payments were held by Rapid7 to satisfy certain post-closing purchase price adjustments and payment was made during the fourth quarter of 2024.

Subject to the terms of the merger agreement, we are required to pay consideration of up to $ 20.0 million to Noetic shareholders based on the achievement of certain performance targets (the “Earnout Consideration”), measured annually upon the first, second and third anniversaries of the closing date of the transaction (the “Earnout Period”). If all performance targets are achieved, approximately $ 13.1 million of Earnout Consideration will be paid in cash, and the remaining $ 6.9 million of Earnout Consideration will be issued to certain employees in the form of shares of our common stock subject to continued employment requirements over the Earnout Period. The approximate $ 6.9 million of the Earnout Consideration that is subject to continued employment will be recognized as stock-based compensation expense over the required employment period. The fair value of the portion of the Earnout Consideration that is not subject to continued employment is included as part of purchase

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consideration at the date of the acquisition. As of July 3, 2024, we determined the fair value of the contingent purchase consideration to be $ 12.1 million. The fair value of the contingent purchase consideration will be reassessed each reporting period and any required adjustment will be recorded to general and administrative expense. As of September 30, 2025 , the fair value of the contingent purchase c onsideration was $ 13.0 million of which $ 7.2 million was recorded within accrued expenses and other current liabilities and $ 5.8 million was reco rded within other liabilities in our unaudited condensed consolidated balance sheet. For the three and nine months ended September 30, 2025 , we recorded approximately $ 0.2 million and $ 0.6 million of accretion expense related to the contingent purchase consideration to general and administrative expense.

In connection with the acquisition, we expect to issue an aggregate value of $ 2.3 million of our common stock to two key employees of Noetic in three installments over a 36 -month period following the closing date of the transaction, subject to continued employment requirements (the “Key Employee Consideration”), which therefore will be recognized as stock-based compensation expense over the required employment period.

In June 2025, the Company issued 31,911 shares of common stock as the first installment of common stock issued to the two key Noetic employees.

The number of shares to be issued at each issuance date for both the Earnout Consideration and the Key Employee Consideration will be determined by dividing the aggregate value by the fair market value of our common stock on the issuance date, and therefore will be liability-classified until the final issuance dates. In the three and nine months ended September 30, 2025 , we recognized stock-based compensation expense related to such shares in the amount of $ 1.1 million and $ 3.1 million .

The following table summarizes the allocation of purchase price to the estimated fair value of the assets acquired and liabilities assumed at the acquisition date (in thousands):


Consideration:
Cash	$	38,597
Deferred cash consideration	500
Contingent consideration	12,055
Fair value of total consideration transferred	$	51,152

Recognized amount of identifiable assets acquired and liabilities assumed:
Cash and cash equivalents	$	1,296
Accounts receivable	510
Prepaid and other current assets	102
Property and equipment, net	19
Accrued expenses and other current liabilities	( 220 )
Deferred revenue	( 910 )
Other long-term liabilities	( 62 )
Intangible asset	11,500
Total identifiable net assets assumed	$	12,235
Goodwill	38,917
Total purchase price allocation	$	51,152

We identified developed technology as the sole acquired intangible asset. The estimated fair value of the developed technology intangible asset was $ 11.5 million which was based on a valuation using a probability weighted expected return model (“PWERM”). The estimated useful life of the developed technology is 7 years.

The excess of the purchase price over the tangible assets acquired, identifiable intangible asset acquired and assumed liabilities was recorded as goodwill. We believe that the amount of goodwill reflects the expected synergistic benefits of being able to leverage the integration of the technology acquired with our existing product offerings and being able to successfully market and sell these new features to our customer base. The goodwill was allocated to our one reporting unit. The acquired goodwill and intangible asset were not deductible for tax purposes.

Our revenue and net income attributable to the Noetic business for the three and nine months ended September 30, 2025 were not material.

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Note 4. Investments

Our investments, which are all classified as available-for-sale, consisted of the following (in thousands):


	As of September 30, 2025
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Description:
U.S government agencies	$	503,589	$	516	$	( 172 )	$	503,933



Total assets	$	503,589	$	516	$	( 172 )	$	503,933


	As of December 31, 2024
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
Description:


U.S government agencies	224,187		328		( 216 )		224,299

Total assets	$	224,187	$	328	$	( 216 )	$	224,299

As of September 30, 2025 and December 31, 2024, our available-for-sale investments had maturities ranging from one to nineteen and from one to seventeen months , respectively.

For all of our investments for which the amortized cost basis was greater than the fair value at September 30, 2025 and December 31, 2024, we have concluded that there is no plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated maturity. In making the determination as to whether the unrealized loss is other-than-temporary, we considered the length of time and extent the investment has been in an unrealized loss position, the financial condition and near-term prospects of the issuers, the issuers’ credit rating and the time to maturity.

Note 5. Fair Value Measurements

We measure certain financial assets and liabilities at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:

• Level 1 : Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 : Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

• Level 3 : Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability.

We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and consider an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers.

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The following table presents our financial assets and liabilities measured and recorded at fair value on a recurring basis using the above input categories (in thousands):


	As of September 30, 2025
	Level 1		Level 2		Level 3		Total
Description:
Assets:
U.S. government agencies	$	503,933	$	—	$	—	$	503,933

Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets)	—		2,167		—		2,167
Total assets	$	503,933	$	2,167	$	—	$	506,100
Liabilities:
Contingent consideration (other current liabilities and other long-term liabilities)	—		—		12,972		12,972

Total liabilities	$	—	$	—	$	12,972	$	12,972


	As of December 31, 2024
	Level 1		Level 2		Level 3		Total
Description:
Assets:
U.S. government agencies	$	224,299	$	—	$	—	$	224,299



Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets and other assets)	—		96		—		96
Total assets	$	224,299	$	96	$	—	$	224,395
Liabilities:
Contingent consideration (other current liabilities and other long-term liabilities)	—		—		12,422		12,422
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other long term liabilities)	—		1,415		—		1,415
Total liabilities	$	—	$	1,415	$	12,422	$	13,837

Cash and cash equivalents are excluded from the table above as carrying amounts reported in our unaudited condensed consolidated balance sheet equal or approximate fair value. As of September 30, 2025, the fair value of our 0.25 % and 1.25 % convertible senior notes due 2027 and 2029, as further described in Note 9, Debt , was $ 560.6 million and $ 264.9 million, respectively, based upon quoted market prices. We consider the fair value of the Notes (as defined in Note 9, Debt ) to be a Level 2 measurement due to limited trading activity of the Notes. As of September 30, 2025, the fair value of our contingent consideration, as further described in Note 3, Business Combinations, was $ 13.0 million and is classified as a Level 3 measurement based on inputs not observable in the market.

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Note 6. Property and Equipment

Property and equipment are recorded at cost and consist of the following (in thousands):


	As of September 30, 2025		As of December 31, 2024
Computer equipment and software	$	34,064	$	28,789
Furniture and fixtures	11,168		10,960
Leasehold improvements	58,653		57,051
Total	103,885		96,800
Less accumulated depreciation	( 71,919 )		( 64,555 )
Property and equipment, net	$	31,966	$	32,245

We recorded depreciation expense of $ 2.3 million and $ 2.7 million for the three months ended September 30, 2025 and 2024, respectively, and $ 7.5 million and $ 8.4 million for the nine months ended September 30, 2025 and 2024, respectively.

Note 7. Goodwill and Intangibles

Goodwill was $ 575.3 million as of September 30, 2025 and December 31, 2024.

The following table presents details of our intangible assets which include acquired identifiable intangible assets and capitalized internal-use software costs (in thousands):


		As of September 30, 2025						As of December 31, 2024
	Weighted-Average Estimated Useful Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
Intangible assets subject to amortization:
Developed technology	6.3	$	146,855	$	( 107,463 )	$	39,392	$	146,855	$	( 94,193 )	$	52,662
Customer relationships	4.3	12,000		( 11,835 )		165		12,000		( 10,363 )		1,637
Trade names	5.0	2,619		( 2,619 )		—		2,619		( 2,559 )		60
Total acquired intangible assets		161,474		( 121,917 )		39,557		161,474		( 107,115 )		54,359
Internal-use software	3.0	79,812		( 49,492 )		30,320		68,878		( 37,518 )		31,360
Total intangible assets		$	241,286	$	( 171,409 )	$	69,877	$	230,352	$	( 144,633 )	$	85,719

Intangible assets are expensed on a straight-line basis over the useful life of the asset. Amortization expense was $ 8.9 million and $ 8.5 million for the three months ended September 30, 2025 and 2024, respectively, and $ 26.8 million and $ 25.1 million for the nine months ended September 30, 2025 and 2024, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of September 30, 2025 was as follows (in thousands):


2025 (for the remaining three months)	$	8,641
2026	27,607
2027	15,217
2028	5,103
2029	3,243
2030 and thereafter	4,409
Total	$	64,220

The table above excludes the impact of $ 5.7 million of capitalized internal-use software costs for projects that have not been completed as of September 30, 2025, and therefore, all the costs associated with these projects have not been incurred.

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Note 8. Derivative and Hedging Activities

To mitigate our exposure to foreign currency fluctuations resulting from certain expenses denominated in certain foreign currencies, we enter into forward contracts that are designated as cash flow hedging instruments. These forward contracts have contractual maturities of nineteen months or less, and as of September 30, 2025 and December 31, 2024, outstanding forward contracts had a total notional value of $ 84.6 million and $ 50.4 million, respectively. The notional value represents the gross amount of foreign currency that will be bought or sold upon maturity of the forward contract. During the three and nine months ended September 30, 2025 and 2024, all cash flow hedges were considered effective. Refer to Note 5, Fair Value Measurements , for the fair values of our outstanding derivative instruments.

Note 9. Debt

Convertible Senior Notes

In May 2020, we issued $ 230.0 million aggregate principal amount of convertible senior notes due May 1, 2025 (the “2025 Notes”), in March 2021, we issued $ 600.0 million aggregate principal amount of convertible senior notes due March 15, 2027 (the “2027 Notes”), and in September 2023, we issued $ 300.0 million aggregate principal amount of convertible senior notes due March 15, 2029 (the “2029 Notes”) (collectively, the “Notes”). In September 2023, we used $ 201.0 million of the proceeds from the issuance of the 2029 Notes to repurchase and retire $ 184.0 million aggregate principal amount of the 2025 Notes and paid accrued and unpaid interest thereon. Further details of the Notes are as follows:


Issuance	Maturity Date	Interest Rate	First Interest Payment Date	Effective Interest Rate	Semi-Annual Interest Payment Dates	Initial Conversion Rate per $1,000 principal	Initial Conversion Price	Number of Shares (in millions)
2025 Notes	May 1, 2025	2.25 %	November 1, 2020	2.88 %	May 1 and November 1	16.3875	61.02	0.8
2027 Notes	March 15, 2027	0.25 %	September 15, 2021	0.67 %	March 15 and September 15	9.6734	103.38	5.8
2029 Notes	March 15, 2029	1.25 %	March 15, 2024	1.69 %	March 15 and September 15	15.4213	64.85	4.6

On May 1, 2025, the Company paid $ 46.5 million to redeem the outstanding portion of the 2025 Notes, including the outstanding principal amount and accrued interest through the maturity date of the 2025 Notes.

The 2027 Notes and the 2029 Notes are senior unsecured obligations, do not contain any financial covenants and are governed by indentures between the Company, as issuer, and U.S. Trust Company, Bank National Association, as trustee (the “Indentures”). The total net proceeds from the 2025 Notes, the 2027 Notes and the 2029 Notes offerings, after deducting initial purchase discounts and debt issuance costs, were $ 222.8 million, $ 585.0 million and $ 292.0 million, respectively.

As of September 30, 2025, the 2027 Notes and the 2029 Notes were not convertible at the option of the holders.

The holders may convert the 2027 Notes and the 2029 Notes at any time on or after December 15, 2026 and December 15, 2028, respectively, until the close of business on the second scheduled trading day immediately preceding the maturity date, regardless of the circumstances set forth above. Upon conversion, we will pay or deliver, as the case may be, cash, shares of our common stock or a combination of cash and shares of our common stock, at our election, in the manner and subject to the terms and conditions provided in the Indentures.

If we undergo a fundamental change (as set forth in the Indentures) at any time prior to the maturity date, holders of the Notes will have the right, at their option, to require us to repurchase for cash all or any portion of their Notes at a repurchase price equal to 100 % of the principal amount of the Notes to be repurchased, plus accrued and unpaid interest to, but excluding, the fundamental change repurchase date. In addition, following certain corporate events that occur prior to the maturity date or following our issuance of a notice of redemption, in each case as described in the Indentures, we will increase the conversion rate for a holder of the Notes who elects to convert its Notes in connection with such a corporate event or during the related redemption period in certain circumstances.

For additional details on the terms of our Notes, see Note 11, Debt , to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

Accounting for the Notes

In accounting for the issuance of the Notes, the principal less debt issuance costs are recorded as debt on our unaudited condensed consolidated balance sheet. The debt issuance costs are amortized to interest expense using the effective interest method over the contractual term of the Notes.

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The net carrying amount of the Notes as of September 30, 2025 and December 31, 2024 was as follows (in thousands):


	2025 Notes						2027 Notes						2029 Notes
	Principal		Unamortized debt issuance costs		Total		Principal		Unamortized debt issuance costs		Total		Principal		Unamortized debt issuance costs		Total
Balance at December 31, 2024	$	45,992	$	( 97 )	$	45,895	$	600,000	$	( 5,564 )	$	594,436	$	300,000	$	( 6,080 )	$	293,920
Amortization of debt issuance costs	—		97		97		—		1,880		1,880		—		1,043		1,043
Principal payment upon maturity	( 45,992 )		—		( 45,992 )		—		—		—		—		—		—
Balance at September 30, 2025	$	—	$	—	$	—	$	600,000	$	( 3,684 )	$	596,316	$	300,000	$	( 5,037 )	$	294,963

Interest expense related to the Notes was as follows (in thousands):


	Three Months Ended September 30,
	2025								2024
	2025 Notes		2027 Notes		2029 Notes		Total		2025 Notes		2027 Notes		2029 Notes		Total
Contractual interest expense	$	—	$	375	$	938	$	1,313	$	258	$	375	$	938	$	1,571
Amortization of debt issuance costs	—		639		363		1,002		79		634		455		1,168
Total interest expense	$	—	$	1,014	$	1,301	$	2,315	$	337	$	1,009	$	1,393	$	2,739


	Nine Months Ended September 30,
	2025								2024
	2025 Notes		2027 Notes		2029 Notes		Total		2025 Notes		2027 Notes		2029 Notes		Total
Contractual interest expense	$	345	$	1,125	$	2,813	$	4,283	$	776	$	1,125	$	2,812	$	4,713
Amortization of debt issuance costs	97		1,880		1,043		3,020		228		1,877		1,077		3,182
Total interest expense	$	442	$	3,005	$	3,856	$	7,303	$	1,004	$	3,002	$	3,889	$	7,895

Capped Calls

In connection with the offering of the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2025 Capped Calls”, “2027 Capped Calls” and “2029 Capped Calls”) (collectively, the “Capped Calls”).

The Capped Calls are expected to reduce potential dilution to our common stock upon conversion of a given series of notes and/or offset any cash payments that we are required to make in excess of the principal amount of converted notes of such series, as the case may be, with such reduction and/or offset subject to a cap. The Capped Calls are subject to adjustment upon the occurrence of certain specified extraordinary events affecting us, including merger events, tender offers and announcement events. In addition, the Capped Calls are subject to certain specified additional disruption events that may give rise to a termination of the Capped Calls, including nationalization, insolvency or delisting, changes in law, failures to deliver, insolvency filings and hedging disruptions.

The following table sets forth other key terms and premiums paid for the Capped Calls related to each series of Notes:


	Capped Calls Entered into in Connection with the Issuance of the 2025 Notes		Capped Calls Entered into in Connection with the Issuance of the 2027 Notes		Capped Calls Entered into in Connection with the Issuance of the 2029 Notes
Initial strike price, subject to certain adjustments	$	61.02	$	103.38	$	64.85
Cap price, subject to certain adjustments	$	93.88	$	159.04	$	97.88
Total premium paid (in thousands)	$	27,255	$	76,020	$	36,570
Expiration dates	March 4, 2025 - April 29, 2025		January 1, 2027 - March 11, 2027		February 13, 2029 - March 13, 2029

The 2025 Capped Calls expired in full on April 29, 2025. The Company did not elect to exercise any portion of the 2025 Capped Calls prior to expiration.

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For additional details on the terms of our Capped Calls, see Note 11, Debt, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

For accounting purposes, the 2025 Capped Calls, the 2027 Capped Calls and the 2029 Capped Calls are separate transactions, and not part of the terms of the 2025 Notes, the 2027 Notes and the 2029 Notes. The 2025 Capped Calls, 2027 Capped Calls and 2029 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

Credit Agreement

On June 25, 2025 (the "Closing Date"), the Company 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 $ 1.7 million in connection with entering into the Credit Agreement. The fees are recorded in other current and non-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 condensed consolidated statement of operations. The Credit Agreement matures on the fifth anniversary of the Closing Date or, if certain specified liquidity conditions are not 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.

The Company recorded $ 0.1 million of amortization of debt issuance costs related to the Credit Agreement for the three and nine months ended September 30, 2025.

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 which reduce the amount of borrowing availability under our Credit Agreement.

Note 10. Stock-Based Compensation

( a) General

Stock-based compensation expense for restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), stock options and purchase rights issued under our employee stock purchase plan was classified in the accompanying unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Stock-based compensation expense:
Cost of revenue	$	2,457	$	3,141	$	7,301	$	9,082
Research and development	9,399		9,946		30,037		26,879
Sales and marketing	7,255		7,123		21,948		22,103
General and administrative	7,216		5,528		21,773		22,485
Total stock-based compensation expense	$	26,327	$	25,738	$	81,059	$	80,549

The Company recognizes compensation cost of all awards on a straight-line basis over the applicable vesting period, which is generally three to four years .

The Company's Compensation Committee adopted and approved the performance goals, targets and payout formulas for the 2025 and 2024 bonus plans, including permitting executive officers and certain other employees the opportunity to receive payment of their earned bonuses in the form of common stock (in lieu of cash). During the three

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months ended September 30, 2025, the Company recognized a reduction to stock-based compensation expense related to such bonus of less than $ 0.1 million resulting from a revision in estimated achievement of the pre-established corporate objectives. During the three months ended September 30, 2024, the Company recognized an expense of $ 0.4 million. The reversal of expense recognized during the three months ended September 30, 2025 reflects a revision in the estimated achievement of the pre-established corporate financial objectives. During the nine months ended September 30, 2025 and 2024, the Company recognized stock-based compensation expense in the amount of $ 0.7 million and $ 0.5 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of September 30, 2025 and 2024. For employees, including executive officers, who elect to receive their bonuses in the form of common stock (in lieu of cash), the payouts are expected to be made in the form of fully vested stock awards in the first quarter of the following year pursuant to our 2015 Equity Incentive Plan, as amended. The number of shares underlying such awards is determined by dividing the dollar value of the actual bonus award payment by the closing price per share of our common stock on the date of grant.

(b) Restricted Stock, Restricted Stock Units and Performance-Based Restricted Stock Units

RSUs and PSUs activity during the nine months ended September 30, 2025 was as follows:


	Restricted Stock	Weighted Average Grant Date Fair Value








Unvested balance as of December 31, 2024	2,853,235	$	57.25
Granted	2,673,501	$	32.30
Vested	( 1,354,588 )	$	54.30
Forfeited	( 544,223 )	$	51.11
Unvested balance as of September 30, 2025	3,627,925	$	40.85

As of September 30, 2025, the unrecognized compensation expense related to our unvested RSUs and PSUs was $ 68.0 million. This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 1.08 years.

In January 2025, our Compensation Committee awarded 181,067 PSUs that required the achievement of net annualized recurring revenue (“Net ARR”) and Adjusted EBITDA targets for the 2025 fiscal-year to earn any payout. Net ARR is defined as the change in the annual value of all recurring revenue related to contracts in place at year end. In addition, the portion of the PSUs that are earned would be capped at a maximum of 200 % of the target level payout and if certain net ARR or Adjusted EBITDA goals were not met, no PSUs will be earned. The PSUs have a performance period of one year and the earned PSUs will vest in three equal installments following each of the first, second and third anniversary of the vesting commencement date, subject to the participant’s continuous service as of each such date. In the three and nine months ended September 30, 2025, we recorded $ 0.7 million and $ 1.8 million, respectively, of stock-based compensation expense related to these PSUs based on estimated achievement of the performance criteria.

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The following tables summarizes information about stock option activity during the reporting periods:


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)




Outstanding as of December 31, 2024	582,638	$	12.38		$	16,225
Granted	—	—
Exercised	( 157,317 )	$	10.10		$	4,541
Forfeited/cancelled	( 200 )	$	10.88		$	—
Outstanding as of September 30, 2025	425,121	$	13.23	0.8	$	2,371
Vested and exercisable as of September 30, 2025	425,121	$	13.23	0.8	$	2,371

(d) Employee Stock Purchase Plan

Under the Rapid7, Inc. 2015 Employee Stock Purchase Plan ("ESPP"), employees may set aside up to 15 % of their gross earnings, on an after-tax basis, to purchase our common shares at a discounted price, which is calculated at 85 % of the lesser of: (i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date.

On March 14, 2025, we issued 186,793 sha res of common stock to employees, with a purchase price of $ 23.79 per share, for aggregate proceeds of $ 4.4 million.

On September 15, 2025, we issued 198,074 shares of common stock to employees with a purchase price of $ 16.52 per share, for aggregate proceeds of $ 3.3 million.

Note 11. Income Taxes

We provide for income taxes during interim periods based on our estimate of the effective tax rate for the year. Our effective tax rates for the three and nine months ended September 30, 2025 and 2024 are as follows:


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Effective Tax Rate	( 5.3 )	%	16.1	%	17.2	%	34.7	%

The primary reconciling items between the Federal statutory tax rate of 21% and our overall effective rate for the three and nine months ended September 30, 2025 were due to foreign taxes on our international operations, state income taxes, and the impact of valuation allowance on deferred tax assets.

The primary reconciling items between the Federal statutory tax rate of 21% and our overall effective rate for the three and nine months ended September 30, 2025 were due to foreign taxes on our international operations, state income taxes, the impact of valuation allowance on deferred tax assets, and certain discrete items.

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 the Company currently accounts 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. The Company concluded the OBBBA did not have a material impact on the Company's provision for income tax. As a result of the application of OBBBA, the Company recorded a benefit to the tax provision for the three months ended September 30, 2025.

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Note 12. Net Income per Share

The following table summarizes the computation of basic and diluted net income per share of our common stock for the three and nine months ended September 30, 2025 and 2024 (in thousands, except share and per share data):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
Numerator:
Net income attributable to common stockholders, basic and diluted	$	9,809	$	15,410	$	20,252	$	23,354

Denominator:
Weighted-average common shares outstanding, basic	64,967,114		62,898,078		64,404,649		62,389,482
Weighted-average effect of dilutive shares:
Dilutive effect of employee equity incentive plans	214,827		455,396		286,430		652,017
Dilutive effect of convertible senior notes	—		11,183,611		—		11,183,611
Weighted-average common shares outstanding, diluted	65,181,941		74,537,085		64,691,079		74,225,110

Net income per share attributable to common stockholders, basic	$	0.15	$	0.24	$	0.31	$	0.37
Net income per share attributable to common stockholders, diluted	$	0.15	$	0.21	$	0.31	$	0.31

We intend to settle any conversion of our 2027 Notes and 2029 Notes in cash, shares, or a combination thereof. The dilutive impact of the Notes for our calculation of diluted net income per share is considered using the if-converted method. For the three and nine months ended September 30, 2025, the shares underlying the Notes were not considered in the calculation of diluted net income per share as the effect would have been anti-dilutive.

In connection with the issuance of the 2025 Notes, the 2027 Notes and the 2029 Notes, we entered into the 2025 Capped Calls, 2027 Capped Calls and 2029 Capped Calls, which were not included for the purpose of calculating the number of diluted shares outstanding, as their effect would have been anti-dilutive.

As of September 30, 2025, the 2027 Notes and the 2029 Notes were not convertible at the option of the holder. As of September 30, 2024, the 2025 Notes, the 2027 Notes and the 2029 Notes were not convertible at the option of the holder. We had not received any conversion notices through the issuance date of our unaudited condensed consolidated financial statements. For disclosure purposes, we have calculated the potentially dilutive effect of the conversion spread, which is included in the table below. The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average shares outstanding for the respective periods below because they would have been anti-dilutive:


	Three Months Ended September 30,		Nine Months Ended September 30,
	2025	2024	2025	2024
Options to purchase common stock	5,130	584,078	991	584,078
Unvested restricted stock units	3,341,018	3,105,684	2,936,257	3,105,684
Common shares issued in conjunction with acquisitions	36,702	36,923	46,236	36,923
Shares to be issued under ESPP	75,326	18,332	75,326	18,332
Convertible senior notes	10,429,891	—	10,763,957	—
Total	13,888,067	3,745,017	13,822,767	3,745,017

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Note 13. Commitments and Contingencies

(a) Purchase Obligations

In January 2025, we amended our contract with a cloud services provider which increased our total purchase obligation to $ 660 million, including a minimum purchase commitment of $ 125.0 million in 2025, 2026, 2027, 2028 and 2029, and an additional $ 35.0 million obligation over the five-year period.

(b) Warranty

We provide limited product warranties. Historically, any payments made under these provisions have been immaterial.

From time to time, we may be a party to litigation or subject to claims incident to the ordinary course of business. Although the results of litigation and claims cannot be predicted with certainty, we currently believe that the final outcome of these ordinary course matters will not have a material adverse effect on our business. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

(d) Indemnification Obligations

We agree to standard indemnification provisions in the ordinary course of business. Pursuant to these provisions, we agree to indemnify, hold harmless and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally our customers, in connection with any United States patent, copyright or other intellectual property infringement claim by any third party arising from the use of our products or services in accordance with the agreement or arising from our gross negligence, willful misconduct or violation of the law (provided that there is not gross or willful misconduct on the part of the other party) with respect to our products or services. The term of these indemnification provisions is generally perpetual from the time of execution of the agreement. We carry insurance that covers certain third-party claims relating to our services and limits our exposure. We have never incurred costs to defend lawsuits or settle claims related to these indemnification provisions.

As permitted under Delaware law, we have entered into indemnification agreements with our officers and directors, indemnifying them for certain events or occurrences while they serve as officers or directors of the company.

(d) Income Taxes

From time to time, we may receive income tax assessments from taxing authorities asserting additional tax liabilities owed by the Company. During the quarter ended June 30, 2024, we received an initial assessment from the Israel Tax Authority (“ITA”) of approximately 324 million Israeli New Shekels (approximately $ 97 million, based upon current exchange rates between the Israeli New Shekel and the US Dollar) related to fiscal year 2021. Based on our interpretation of the regulations and available case law, we believe that the tax positions we have taken on our filed tax return in Israel are sustainable and we intend to defend our position through all available means. As such, we have not recorded any impact of the ITA assessment in our unaudited condensed consolidated financial statements as of and for the three and nine months ended September 30, 2025. We are continuing to monitor developments related to this matter and its impact on our existing income tax reserves for all open years. If we are unsuccessful in sustaining our tax position in this matter, our financial condition and results of operations would be adversely affected.

Note 14. Segment Information and Information about Geographic Areas

We operate in a single reportable operating segment, providing product subscriptions and professional services to our customers. The operating segment’s accounting policies are consistent with those described in Note 1, Summary of Significant Accounting Policies . Our chief operating decision maker (“CODM”) is our Chief Executive Officer. One of the measures of profit or loss that is used by our CODM to assess performance and allocate resources is consolidated net income, as reported in the condensed consolidated statements of operations. Consolidated net income is used by our CODM in monitoring actual versus budgeted results as well as in benchmarking against our competitors, which are used in assessing performance of the segment.

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The following table includes segment revenue, segment profit or loss, significant segment expenses and other segment expenses 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
Total revenue	$	217,960	$	214,654	$	642,406	$	627,746
Adjusted total cost of revenue 1	58,103		55,606		166,952		163,322
Adjusted research and development 1	37,517		35,030		111,992		99,913
Adjusted sales and marketing 1	71,873		67,046		214,523		201,983
Adjusted general and administrative 1	13,563		13,020		43,782		39,305
Other segment expense, net 2	27,095		28,542		84,905		99,869
Net income	$	9,809	$	15,410	$	20,252	$	23,354

1 Adjusted total cost of revenue excludes the impact of stock-based compensation expense and amortization of acquired intangible assets. Adjusted research and development excludes the impact of stock-based compensation expense. Adjusted sales and marketing excludes the impact of stock-based compensation and amortization of acquired intangible assets. Adjusted general and administrative excludes the impact of stock-based compensation, amortization of acquired intangible assets and acquisition-related expenses.

2 Other segment expenses include stock-based compensation expense, amortization of acquired intangible assets, acquisition-related expenses, restructuring expense, interest income, interest expense, other income (expense) and (benefit) provision for income taxes. See the unaudited condensed consolidated financial statements for other financial information regarding our operating segment.

Property and equipment, net by geographic area was as follows (in thousands):


	As of September 30, 2025		As of December 31, 2024
United States	$	19,324	$	22,613
Rest of World	12,642		9,632
Total	$	31,966	$	32,245

Note 15. 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 RSUs and 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, the Company evaluated the errors and determined that the related impact was not material to results of operations or financial position for any historical annual or interim period. As a result, we have corrected the errors by adjusting prior period financial statements as of and for the three and nine months ended September 30, 2024. Refer to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024 for detailed tables showing the effect of the immaterial error corrections to certain line items of our unaudited condensed consolidated statements of operations and unaudited condensed consolidated statements of cash flows for the interim period ended September 30, 2024.

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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, 2024 included in our Annual Report on Form 10-K, filed with the SEC on February 28, 2025. 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, innovate and scale our solutions, including our Command Platform;

• 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;

• 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;

• the outcomes of our initiatives that use artificial intelligence (“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

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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. 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 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.

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 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.

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

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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.

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.

New U.S. 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.

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 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.

• 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 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

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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.

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 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.

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.

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.

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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 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, 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.

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.

(Benefit) 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. 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

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:
Revenue:
Product subscriptions	$	210,146	$	205,593	$	622,178	$	602,578
Professional services	7,814		9,061		20,228		25,168
Total revenue	217,960		214,654		642,406		627,746
Cost of revenue: (1)
Product subscriptions	58,263		56,774		169,867		166,615
Professional services	6,721		6,383		17,656		18,528
Total cost of revenue	64,984		63,157		187,523		185,143
Operating expenses: (1)
Research and development	46,914		44,976		142,029		126,792
Sales and marketing	79,296		74,821		237,943		226,042
General and administrative	20,863		18,883		65,615		62,013


Total operating expenses	147,073		138,680		445,587		414,847
Income from operations	5,903		12,817		9,296		27,756
Interest income	6,167		5,571		17,439		15,512
Interest expense	(2,585)		(2,837)		(7,866)		(8,180)
Other (expense) income, net	(173)		2,811		5,586		681
Income before income taxes	9,312		18,362		24,455		35,769
(Benefit) provision for income taxes	(497)		2,952		4,203		12,415
Net income	$	9,809	$	15,410	$	20,252	$	23,354

(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)
Stock-based compensation expense:
Cost of revenue	$	2,457	$	3,141	$	7,301	$	9,082
Research and development	9,399		9,946		30,037		26,879
Sales and marketing	7,255		7,123		21,948		22,103
General and administrative	7,216		5,528		21,773		22,485
Total stock-based compensation expense	$	26,327	$	25,738	$	81,059	$	80,549

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	Three Months Ended September 30,				Nine Months Ended September 30,
	2025		2024		2025		2024
	(in thousands)
Depreciation and amortization expense:
Cost of revenue	$	9,211	$	8,332	$	26,718	$	24,558
Research and development	586		804		2,142		2,502
Sales and marketing	1,075		1,671		4,298		5,073
General and administrative	328		431		1,096		1,324
Total depreciation and amortization expense	$	11,200	$	11,238	$	34,254	$	33,457

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:
Revenue:
Product subscriptions	96	%	96	%	97	%	96	%
Professional services	4	%	4	%	3	%	4	%
Total revenue	100	%	100	%	100	%	100	%
Cost of revenue: (1)
Product subscriptions	27	%	26	%	26	%	27	%
Professional services	3	%	3	%	3	%	3	%
Total cost of revenue	30	%	29	%	29	%	29	%
Operating expenses: (1)
Research and development	22	%	21	%	22	%	20	%
Sales and marketing	36	%	35	%	37	%	36	%
General and administrative	10	%	9	%	10	%	10	%


Total operating expenses	67	%	65	%	69	%	66	%
Income from operations	3	%	6	%	1	%	4	%
Interest income	3	%	3	%	3	%	2	%
Interest expense	(1)	%	(1)	%	(1)	%	(1)	%
Other income (loss), net	—	%	1	%	1	%	—	%
Income before income taxes	4	%	9	%	4	%	6	%
Provision for income taxes	—	%	1	%	1	%	2	%
Net income	5	%	7	%	3	%	4	%

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

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

Revenue


	Three Months Ended September 30,				Change				Nine Months Ended September 30,				Change
	2025		2024		$		%		2025		2024		$		%
Revenue:
Product subscriptions	$	210,146	$	205,593	$	4,553	2.2	%	$	622,178	$	602,578	$	19,600	3.3	%
Professional services	7,814		9,061		(1,247)		(13.8)	%	20,228		25,168		(4,940)		(19.6)	%
Total revenue	$	217,960	$	214,654	$	3,306	1.5	%	$	642,406	$	627,746	$	14,660	2.3	%

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.