10-Q

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 June 30, 2022

OR

☐ 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.

 

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 July 29, 2022, there were 58,700,340 shares of the registrant’s common stock, $0.01 par value per share, outstanding.

Table of Contents

 

		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	1
	Consolidated Balance Sheets	1
	Consolidated Statements of Operations	2
	Consolidated Statements of Comprehensive Loss	3
	Consolidated Statements of Changes in Stockholders' Equity (Deficit)	4
	Consolidated Statements of Cash Flows	6
	Notes to 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	42
Item 4.	Controls and Procedures	42
PART II.	OTHER INFORMATION	44
Item 1.	Legal Proceedings	44
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	69
Item 3.	Defaults Upon Senior Securities	69
Item 4.	Mine Safety Disclosures	69
Item 5.	Other Information	69
Item 6.	Exhibits	70

i

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

RAPID7, INC.

Consolidated Balance Sheets (Unaudited)

(in thousands, except share and per share data) 

	June 30, 2022		December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	163,469	$	164,582
Short-term investments	76,244		58,850
Accounts receivable, net of allowance for credit losses of $2,266 and $1,978 at June 30, 2022 and December 31, 2021, respectively	124,701		146,094
Deferred contract acquisition and fulfillment costs, current portion	31,367		29,974
Prepaid expenses and other current assets	34,221		33,236
Total current assets	430,002		432,736
Long-term investments	14,330		34,068
Property and equipment, net	50,533		50,225
Operating lease right-of-use assets	84,937		83,751
Deferred contract acquisition and fulfillment costs, non-current portion	60,878		57,191
Goodwill	515,631		515,258
Intangible assets, net	105,785		111,591
Other assets	23,452		11,191
Total assets	$	1,285,548	$	1,296,011
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	6,832	$	3,521
Accrued expenses	66,348		82,620
Operating lease liabilities, current portion	11,809		9,630
Deferred revenue, current portion	395,208		372,067
Other current liabilities	3,473		842
Total current liabilities	483,670		468,680
Convertible senior notes, non-current portion, net	813,950		812,063
Operating lease liabilities, non-current portion	89,473		90,865
Deferred revenue, non-current portion	33,098		33,056
Other long-term liabilities	13,512		17,342
Total liabilities	1,433,703		1,422,006
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized at June 30, 2022 and December 31, 2021; 0 shares issued at June 30, 2022 and December 31, 2021	—		—
Common stock, $0.01 par value per share; 100,000,000 shares authorized at June 30, 2022 and December 31, 2021; 59,122,773 and 58,181,816 shares issued at June 30, 2022 and December 31, 2021, respectively; 58,635,965 and 57,695,008 shares outstanding at June 30, 2022 and December 31, 2021, respectively	586		577
Treasury stock, at cost, 486,808 shares at June 30, 2022 and December 31, 2021	(4,764)		(4,764)
Additional paid-in-capital	681,194		615,032
Accumulated other comprehensive loss	(4,538)		(812)
Accumulated deficit	(820,633)		(736,028)
Total stockholders’ equity (deficit)	(148,155)		(125,995)
Total liabilities and stockholders’ equity (deficit)	$	1,285,548	$	1,296,011

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

1

RAPID7, INC.

Consolidated Statements of Operations (Unaudited)

(in thousands, except share and per share data)

 

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Revenue:
Products	$	159,122	$	119,147	$	308,147	$	228,432
Professional services	8,333		7,274		16,692		15,440
Total revenue	167,455		126,421		324,839		243,872
Cost of revenue:
Products	45,867		33,169		89,339		62,819
Professional services	8,408		6,139		16,225		12,778
Total cost of revenue	54,275		39,308		105,564		75,597
Total gross profit	113,180		87,113		219,275		168,275
Operating expenses:
Research and development	48,907		35,305		98,719		68,385
Sales and marketing	78,034		56,246		153,180		111,224
General and administrative	20,890		17,488		42,406		33,708
Total operating expenses	147,831		109,039		294,305		213,317
Loss from operations	(34,651)		(21,926)		(75,030)		(45,042)
Other income (expense), net:
Interest income	243		122		355		218
Interest expense	(2,758)		(3,059)		(5,451)		(8,453)
Other income (expense), net	(2,403)		148		(3,006)		(919)
Loss before income taxes	(39,569)		(24,715)		(83,132)		(54,196)
Provision for income taxes	37		9,449		1,473		9,813
Net loss	$	(39,606)	$	(34,164)	$	(84,605)	$	(64,009)
Net loss per share, basic and diluted	$	(0.68)	$	(0.62)	$	(1.46)	$	(1.18)
Weighted-average common shares outstanding, basic and diluted	58,239,958		55,392,383		57,983,790		54,169,464

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

2

RAPID7, INC.

Consolidated Statements of Comprehensive Loss (Unaudited)

(in thousands)

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Net loss	$	(39,606)	$	(34,164)	$	(84,605)	$	(64,009)
Other comprehensive income (loss):
Change in fair value of cash flow hedges	(3,027)		(72)		(3,925)		(201)
Adjustments for net losses (gains) realized and included in net loss	761		(174)		1,077		(378)
Total change in unrealized losses on cash flow hedges	(2,266)		(246)		(2,848)		(579)
Change in unrealized losses on investments	(220)		(3)		(878)		(12)
Total other comprehensive loss	(2,486)		(249)		(3,726)		(591)
Comprehensive loss	$	(42,092)	$	(34,413)	$	(88,331)	$	(64,600)

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

3

RAPID7, INC.

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

(in thousands)

	Common stock			Treasury stock			Additional paid-in-capital		Accumulated other comprehensive gain (loss)		Accumulated deficit		Total stockholders’ (deficit)
	Shares	Amount		Shares	Amount
Balance, March 31, 2022	58,242	$	582	487	$	(4,764)	$	650,710	$	(2,052)	$	(781,027)	$	(136,551)
Stock-based compensation expense	—	—		—	—		31,890		—		—		31,890
Vesting of restricted stock units	364	4		—	—		(4)		—		—		—
Shares withheld for employee taxes	(24)	—		—	—		(1,645)		—		—		(1,645)
Issuance of common stock upon exercise of stock options	21	—		—	—		246		—		—		246
Issuance of common stock in connection with conversion of convertible senior notes	—	—		—	—		(3)		—		—		(3)
Issuance of common stock related to acquisition	33	—		—	—		—		—		—		—
Other comprehensive loss	—	—		—	—		—		(2,486)		—		(2,486)
Net loss	—	—		—	—		—		—		(39,606)		(39,606)
Balance, June 30, 2022	58,636	$	586	487	$	(4,764)	$	681,194	$	(4,538)	$	(820,633)	$	(148,155)

	Common stock			Treasury stock			Additional paid-in-capital		Accumulated other comprehensive gain (loss)		Accumulated deficit		Total stockholders’ (deficit)
	Shares	Amount		Shares	Amount
Balance, March 31, 2021	55,091	$	551	487	$	(4,764)	$	542,415	$	112	$	(619,539)	$	(81,225)
Stock-based compensation expense	—	—		—	—		22,487		—		—		22,487
Vesting of restricted stock units	500	5		—	—		(5)		—		—		—
Shares withheld for employee taxes	(42)	(1)		—	—		(3,346)		—		—		(3,347)
Issuance of common stock upon exercise of stock options	109	1		—	—		1,102		—		—		1,103
Issuance of common stock in connection with conversion of convertible senior notes	23	—		—	—		—		—		—		—
Issuance of common stock related to acquisition	67	1		—	—		(1)		—		—		—
Other comprehensive loss	—	—		—	—		—		(249)		—		(249)
Net loss	—	—		—	—		—		—		(34,164)		(34,164)
Balance, June 30, 2021	55,748	$	557	487	$	(4,764)	$	562,652	$	(137)	$	(653,703)	$	(95,395)

4

	Common stock			Treasury stock			Additional paid-in-capital		Accumulated other comprehensive gain (loss)		Accumulated deficit		Total stockholders’ (deficit)
	Shares	Amount		Shares	Amount
Balance, December 31, 2021	57,695	$	577	487	$	(4,764)	$	615,032	$	(812)	$	(736,028)	$	(125,995)
Stock-based compensation expense	—	—		—	—		64,365		—		—		64,365
Issuance of common stock under employee stock purchase plan	81	1		—	—		5,709		—		—		5,710
Vesting of restricted stock units	766	8		—	—		(8)		—		—		—
Shares withheld for employee taxes	(59)	(1)		—	—		(5,105)		—		—		(5,106)
Issuance of common stock upon exercise of stock options	120	1		—	—		1,204		—		—		1,205
Issuance of common stock in connection with conversion of convertible senior notes	—	—		—	—		(3)		—		—		(3)
Issuance of common stock related to acquisition	33	—		—	—		—		—		—		—
Other comprehensive loss	—	—		—	—		—		(3,726)		—		(3,726)
Net loss	—	—		—	—		—		—		(84,605)		(84,605)
Balance, June 30, 2022	58,636	$	586	487	$	(4,764)	$	681,194	$	(4,538)	$	(820,633)	$	(148,155)

	Common stock			Treasury stock			Additional paid-in-capital		Accumulated other comprehensive gain (loss)		Accumulated deficit		Total stockholders’ equity (deficit)
	Shares	Amount		Shares	Amount
Balance, December 31, 2020	52,225	$	522	487	$	(4,764)	$	692,603	$	454	$	(617,279)	$	71,536
Stock-based compensation expense	—	—		—	—		44,771		—		—		44,771
Issuance of common stock under employee stock purchase plan	148	1		—	—		4,466		—		—		4,467
Vesting of restricted stock units	874	9		—	—		(9)		—		—		—
Shares withheld for employee taxes	(80)	(1)		—	—		(6,670)		—		—		(6,671)
Issuance of common stock upon exercise of stock options	279	3		—	—		2,518		—		—		2,521
Purchase of capped calls related to convertible senior notes	—	—		—	—		(76,020)		—		—		(76,020)
Issuance of common stock in connection with repurchase and conversion of convertible senior notes	2,200	22		—	—		(2,720)		—		—		(2,698)
Issuance of common stock in connection with inducement of convertible senior notes	35	—		—	—		2,740		—		—		2,740
Issuance of common stock related to acquisition	67	1		—	—		(1)		—		—		—
Cumulative-effect adjustment for the adoption of ASU 2020-06	—	—		—	—		(99,026)		—		27,585		(71,441)
Other comprehensive loss	—	—		—	—		—		(591)		—		(591)
Net loss	—	—		—	—		—		—		(64,009)		(64,009)
Balance, June 30, 2021	55,748	$	557	487	$	(4,764)	$	562,652	$	(137)	$	(653,703)	$	(95,395)

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

5

RAPID7, INC.

Consolidated Statements of Cash Flows (Unaudited)

(in thousands)

	Six Months Ended June 30,
	2022		2021
Cash flows from operating activities:
Net loss	$	(84,605)	$	(64,009)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	20,392		13,768
Amortization of debt issuance costs	1,990		1,791
Stock-based compensation expense	61,333		44,676
Deferred income taxes	—		3,924
Induced conversion expense	—		2,740
Other	2,281		1,446
Changes in operating assets and liabilities:
Accounts receivable	18,147		12,816
Deferred contract acquisition and fulfillment costs	(5,080)		(5,453)
Prepaid expenses and other assets	(10,527)		394
Accounts payable	3,557		(1,329)
Accrued expenses	(12,493)		(7,592)
Deferred revenue	23,183		22,220
Other liabilities	(326)		4,389
Net cash provided by operating activities	17,852		29,781
Cash flows from investing activities:
Business acquisition, net of cash acquired	—		(52,420)
Purchases of property and equipment	(7,224)		(2,671)
Capitalization of internal-use software costs	(8,058)		(4,205)
Purchases of investments	(58,997)		(59,308)
Sales/maturities of investments	60,329		87,938
Other investments	(500)		(1,500)
Net cash used in investing activities	(14,450)		(32,166)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $14,560 for the six months ended June 30, 2021	—		585,440
Purchase of capped calls related to convertible senior notes	—		(76,020)
Payments of debt issuance costs	(71)		—
Payments for repurchase and conversion of convertible senior notes	(12)		(184,649)
Payments related to business acquisitions	(300)		(2,431)
Taxes paid related to net share settlement of equity awards	(5,106)		(6,671)
Proceeds from employee stock purchase plan	5,710		4,467
Proceeds from stock option exercises	1,205		2,530
Net cash provided by financing activities	1,426		322,666
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(3,671)		(293)
Net increase in cash, cash equivalents and restricted cash	1,157		319,988
Cash, cash equivalents and restricted cash, beginning of period	165,017		173,617
Cash, cash equivalents and restricted cash, end of period	$	166,174	$	493,605
Supplemental cash flow information:
Cash paid for interest on convertible senior notes	$	3,337	$	4,025
Cash paid for income taxes, net of refunds	$	564	$	632
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	$	163,469	$	493,568
Restricted cash included in prepaid expenses and other assets	2,705		$	37
Total cash, cash equivalents and restricted cash	$	166,174	$	493,605

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

6

RAPID7, INC.

Notes to 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 Insight Platform. 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.

Basis of Presentation and Consolidation

The accompanying unaudited 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 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, 2021 filed with the SEC on February 24, 2022.

The 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 six months ended June 30, 2022 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 the estimated economic life of perpetual licenses for revenue recognition, the determination of standalone selling prices in revenue transactions with multiple performance obligations, the estimated period of benefit for deferred contract acquisition and fulfillment 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 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.

The COVID-19 pandemic has resulted in a sustained global slowdown of economic activity that has decreased demand for a broad variety of goods and services, including from our customers. While we have not experienced significant disruptions from the COVID-19 pandemic during the three and six months ended June 30, 2022, we are unable to accurately predict the extent to which the ongoing COVID-19 pandemic may impact our business, results of operations and financial condition going forward. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, assumptions and judgments or revise the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained and will be recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

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, 2021. There have been no changes to the significant accounting policies during the three and six-month periods ended June 30, 2022.

7

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which clarified the accounting for acquired revenue contracts with customers in a business combination. ASU 2021-08 requires acquirers to measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. As a result, it is generally expected that an acquirer will recognize and measure contract assets and liabilities in a manner consistent with how they were recognized by the acquiree in its preacquisition financial statements. This standard is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We early adopted this standard on January 1, 2022. This guidance will be applied prospectively to all business combinations that occur on or after January 1, 2022.

Accounting Pronouncements Not Yet Effective

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to GAAP guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") to alternative reference rates. We may elect to apply the amendments prospectively through December 31, 2022. The impact to our consolidated financial statements from the adoption of this standard is expected to be immaterial.

Note 2. Revenue from Contracts with Customers

We generate revenue primarily from: (1) subscriptions from the sale of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with our software licenses, (2) perpetual software licenses, and (3) professional services from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Subscriptions	$	157,771	$	117,014	$	305,238	$	224,181
Perpetual software licenses	1,106		2,036		2,467		4,150
Professional services	8,333		7,274		16,692		15,440
Other	245		97		442		101
Total revenue	$	167,455	$	126,421	$	324,839	$	243,872

Subscriptions

Subscriptions consists 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. For our term software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered

8

distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

•Content subscriptions and our maintenance and support services are sold with our perpetual and term software licenses. Revenue related to our content subscriptions associated with our software licenses is recognized ratably over the contractual period. Maintenance and support services are distinct from the perpetual and term software license and revenue attributable to maintenance and support services is recognized ratably over the contractual period.

Perpetual Software Licenses

For our perpetual software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, the content subscription renewal options result in a material right with respect to the perpetual software license. As a result, the revenue attributable to the perpetual software license is recognized ratably over the customer’s estimated economic life of five years, which represents a longer period of time in comparison to the initial contractual period of maintenance and support. The estimated economic life of five years represents the period which the customer is expected to benefit from the material right. We estimated this period of benefit by taking into consideration several factors, including the terms and conditions of our customer contracts and renewals and the expected useful life of our technology.

For our perpetual software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

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.

Contracts with Multiple Performance Obligations

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The majority of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine SSP of our products and services based on our overall pricing objectives using all information reasonably available to us, taking into consideration market conditions and other factors, including the geographic locations of our customers, negotiated discounts from price lists and selling method (i.e., partner or direct). When available, we use directly observable stand-alone transactions to determine SSP. When not regularly sold on a stand-alone basis, we estimate SSP for our products and services utilizing historical sales data, including discounts from list price. The historical data is aggregated and analyzed by geographic location and selling method to establish a median or average price. Once SSP is established it is applied consistently to all transactions including that product or service utilizing a portfolio approach.

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 June 30, 2022 and 2021, we recognized revenue of $143.7 million and $108.2 million, respectively, and for the six months ended June 30, 2022 and 2021, we recognized $250.4 million and $181.3 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. 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 record a contract asset. As of June 30, 2022 and December 31, 2021, unbilled receivables of $1.0 million and $1.2 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet. As of June 30, 2022 and December 31, 2021, we had no contract assets recorded on our consolidated balance sheet.

9

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 June 30, 2022. The estimated revenues do not include unexercised contract renewals.

	Next Twelve Months		Thereafter
	(in thousands)
Subscriptions	$	432,603	$	147,895
Perpetual software licenses	1,548		273
Professional services	18,197		2,928
Total	$	452,348	$	151,096

Note 3. Business Combinations

IntSights

On July 16, 2021, we acquired IntSights Cyber Intelligence Ltd. (“IntSights”), a provider of contextualized external threat intelligence and proactive threat remediation, for a purchase price with an aggregate fair value of $322.3 million. The purchase consideration consisted of $319.2 million in cash paid at closing, $3.4 million in deferred cash payments and a $0.3 million receivable for purchase price adjustments. The deferred cash payments will be held by us to satisfy indemnification obligations payable within eighteen months of the acquisition date.

The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the assets acquired and liabilities assumed was recorded as goodwill. The fair value of net assets acquired, goodwill and intangible assets were $61.1 million, $260.9 million and $65.2 million, respectively. These preliminary amounts are subject to subsequent adjustment as we obtain additional information to finalize certain components of working capital and deferred income taxes. The goodwill was allocated to our one reporting unit. The acquired goodwill and intangible assets were not deductible for tax purposes.

Our revenue attributable to the IntSights business for the three and six months ended June 30, 2022 was $8.1 million and $15.0 million, respectively, and our net loss attributable to the IntSights business for the three and six months ended June 30, 2022 was $10.4 million and $21.3 million, respectively.

Pro Forma Financial Information

The unaudited pro forma financial information in the table below summarizes the combined results of our operations and IntSights, on a pro forma basis, as though we had acquired IntSights on January 1, 2020. The unaudited pro forma financial information for all periods presented also includes the effects of business combination accounting resulting from the acquisition, including an adjustment to revenue for the deferred revenue fair value adjustment, amortization expense from acquired intangibles assets, reversal of acquisition-related expenses and the stock-compensation expense recorded to retain certain employees.

	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
	(in thousands)
Revenue	$	132,963	$	256,393
Net loss	$	(47,222)	$	(84,232)

Velocidex Enterprises Pty Ltd

On April 12, 2021, we acquired Velocidex Enterprises Pty Ltd (“Velocidex”), a leading open-source technology and community used for endpoint monitoring, digital forensics, and incident response. The purchase price consisted of $2.7 million paid in cash and $0.3 million in deferred cash payments. The purchase price was allocated to developed technology intangible asset which has an estimated useful life of 6 years.

Alcide.IO Ltd.

On January 28, 2021, we acquired Alcide.IO Ltd. (“Alcide”), a leading provider of Kubernetes security, for a purchase consideration of $50.5 million, which was funded in cash.

10

The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the assets acquired and liabilities assumed was recorded as goodwill. The fair value of net assets acquired, goodwill and intangible assets were $(0.7) million, $40.8 million and $10.4 million, respectively. The goodwill was allocated to our one reporting unit. The acquired goodwill and intangible asset were not deductible for tax purposes.

Note 4. Investments

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

	As of June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Description:
U.S. government agencies	$	65,670	$	—	$	(608)	$	65,062
Corporate bonds	16,932		—		(310)		16,622
Commercial paper	8,164		—		—		8,164
Agency bonds	750		—		(24)		726
Total	$	91,516	$	—	$	(942)	$	90,574

	As of December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Description:
Commercial paper	$	37,778	$	—	$	—	$	37,778
Corporate bonds	32,059		—		(32)		32,027
U.S government agencies	22,396		—		(31)		22,365
Agency bonds	749		—		(1)		748
Total	$	92,982	$	—	$	(64)	$	92,918

As of June 30, 2022, our available-for-sale investments had maturities ranging from 1 to 17 months. As of December 31, 2021, our available-for-sale investments had maturities ranging from 2 to 23 months.

For all of our investments for which the amortized cost basis was greater than the fair value at June 30, 2022 and December 31, 2021, 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 we consider an inactive market to be one in which there are

11

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.

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

	As of June 30, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Description:
Assets:
Money market funds	$	62,007	$	—	$	—	$	62,007
U.S. Government agencies	65,062		—		—		65,062
Corporate bonds	—		16,622		—		16,622
Commercial paper	—		8,164		—		8,164
Agency bonds	—		726		—		726
Total	$	127,069	$	25,512	$	—	$	152,581
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	$	—	$	3,598	$	—	$	3,598
Total	$	—	$	3,598	$	—	$	3,598

	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Description:
Assets:
Money market funds	$	86,835	$	—	$	—	$	86,835
Commercial paper	—		37,778		—		37,778
Corporate bonds	—		32,027		—		32,027
U.S. Government agencies	22,365		—		—		22,365
Agency bonds	—		748		—		748
Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets)	—		73		—		73
Total assets	$	109,200	$	70,626	$	—	$	179,826
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	$	—	$	823	$	—	$	823
Total liabilities	$	—	$	823	$	—	$	823

As of June 30, 2022, the fair value of our 2.25% and 0.25% convertible senior notes due 2025 and 2027, as further described in Note 10, Debt, was $292.9 million and $540.6 million, respectively, based upon quoted market prices. We consider the fair value of the Notes to be a Level 2 measurement due to limited trading activity of the Notes.

12

Note 6. Property and Equipment

Property and equipment are recorded at cost and consist of the following:

	As of June 30, 2022		As of December 31, 2021
	(in thousands)
Computer equipment and software	$	23,038	$	19,879
Furniture and fixtures	10,667		10,360
Leasehold improvements	55,249		51,983
Total	88,954		82,222
Less accumulated depreciation	(38,421)		(31,997)
Property and equipment, net	$	50,533	$	50,225

Depreciation expense was $3.2 million and $3.1 million for the three months ended June 30, 2022 and 2021, respectively, and $6.5 million and $6.0 million for the six months ended June 30, 2022 and 2021, respectively.

Note 7. Goodwill and Intangible Assets

Goodwill was $515.6 million and $515.3 million as of June 30, 2022 and December 31, 2021, respectively. The following table displays the changes in the gross carrying amount of goodwill:

	Amount
	(in thousands)
Balance at December 31, 2021	$	515,258
IntSights acquisition adjustments	373
Balance at June 30, 2022	$	515,631

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

		As of June 30, 2022						As of December 31, 2021
	Weighted- Average Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
		(in thousands)
Intangible assets subject to amortization:
Developed technology	5.2	$	122,555	$	(49,840)	$	72,715	$	122,555	$	(40,152)	$	82,403
Customer relationships	4.5	12,000		(3,805)		8,195		12,000		(2,436)		9,564
Trade names	3.1	2,619		(1,484)		1,135		2,619		(1,094)		1,525
Total acquired intangible assets		137,174		(55,129)		82,045		137,174		(43,682)		93,492
Internal-use software	3.0	33,915		(10,175)		23,740		25,857		(7,758)		18,099
Total intangible assets		$	171,089	$	(65,304)	$	105,785	$	163,031	$	(51,440)	$	111,591

Amortization expense was $7.0 million and $4.0 million for the three months ended June 30, 2022 and 2021, respectively, and $13.9 million and $7.7 million for the six months ended June 30, 2022 and 2021, respectively.

13

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of June 30, 2022 was as follows (in thousands):

2022 (for the remaining six months)	$	12,738
2023	23,566
2024	19,176
2025	16,253
2026	12,478
2027 and thereafter	5,206
Total	$	89,417

The table above excludes the impact of $16.4 million of capitalized internal-use software costs for projects that have not been completed as of June 30, 2022, and therefore, we have not determined the useful life of the software, nor have all the costs associated with these projects been incurred.

Note 8. Deferred Contract Acquisition and Fulfillment Costs

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs for the six months ended June 30, 2022 and 2021:

	Six Months Ended June 30,
	2022		2021
	(in thousands)
Beginning balance	$	87,165	$	64,639
Capitalization of contract acquisition and fulfillment costs	22,036		17,587
Amortization of deferred contract acquisition and fulfillment costs	(16,955)		(12,134)
Ending balance	$	92,246	$	70,092

Note 9. Derivatives 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 eighteen months or less, and as of June 30, 2022 and December 31, 2021, outstanding forward contracts had a total notional value of $47.7 million and $34.7 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 six months ended June 30, 2022, all cash flow hedges were considered effective. Refer to Note 5, Fair Value Measurements, for the fair values of our outstanding derivative instruments.

Note 10. 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”) and in March 2021, we issued $600.0 million aggregate principal amount of convertible senior notes due March 15, 2027 (the “2027 Notes”) (collectively, the “Notes”). 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	3.8
2027 Notes	March 15, 2027	0.25	%	September 15, 2021	0.67	%	March 15 and September 15	9.6734	$	103.38	5.8

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

14

Terms of the Notes

The holders of the Notes may convert their respective Notes at their option at any time prior to the close of business on the business day immediately preceding their respective convertible dates only under the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 for the 2025 Notes and March 20, 2024 for the 2027 Notes (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the respective Notes on each applicable trading day;

•during the five business day period after any five consecutive trading day period for the 2025 Notes and any ten consecutive trading day period for the 2027 Notes (the “measurement periods”) in which the trading price (as defined in the Indentures) per $1,000 principal amount of the applicable series of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate of the respective Notes on each such trading day;

•if we call any or all of the respective Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the respective redemption date; or

•upon the occurrence of specified corporate events (as set forth in the Indentures).

During the six months ended June 30, 2022, the 2025 Notes were convertible at the option of the holders. During this period an immaterial principal amount of the 2025 Notes were requested for conversion, which was settled during the quarter ended June 30, 2022 in cash. As of June 30, 2022, the 2025 Notes and 2027 Notes were not convertible at the option of the holder.

The holders may convert the 2025 Notes and the 2027 Notes at any time on or after November 1, 2024 and December 15, 2026, 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.

The 2025 Notes and the 2027 Notes are redeemable after May 6, 2023 and March 20, 2024 (the “Redemption Dates”), respectively. On or after the respective Redemption Dates, we may redeem for cash all or any portion of the 2025 Notes or the 2027 Notes, at our option, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including the trading day immediately preceding, the date on which we provide the redemption notice at a redemption price equal to 100% principal amount of the 2025 Notes or the 2027 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Accounting for the Notes

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

15

The net carrying amount of the Notes as of June 30, 2022 and December 31, 2021 was as follows (in thousands):

	2025 Notes						2027 Notes
	Principal		Unamortized debt issuance costs		Total		Principal		Unamortized debt issuance costs		Total
Balance at December 31, 2021	$	230,000	$	(4,905)	$	225,095	$	600,000	$	(13,032)	$	586,968
Amortization of debt issuance costs	—		681		681		—		1,214		1,214
Conversion of Notes	(8)		—		(8)		—		—		—
Balance at June, 30, 2022	$	229,992	$	(4,224)	$	225,768	$	600,000	$	(11,818)	$	588,182

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

	Three Months Ended June 30,
	2022								2021
	2025 Notes		2027 Notes		Total		2023 Notes		2025 Notes		2027 Notes		Total
Contractual interest expense	$	1,294	$	375	$	1,669	$	148	$	1,294	$	375	$	1,817
Amortization of debt issuance costs	351		612		963		153		341		602		1,096
Total interest expense	$	1,645	$	987	$	2,632	$	301	$	1,635	$	977	$	2,913

	Six Months Ended June 30,
	2022								2021
	2025 Notes		2027 Notes		Total		2023 Notes		2025 Notes		2027 Notes		Total
Contractual interest expense	$	2,588	$	750	$	3,338	$	706	$	2,588	$	425	$	3,719
Amortization of debt issuance costs	681		1,214		1,895		374		660		682		1,716
Induced conversion expense	—		—		—		2,740		—		—		2,740
Total interest expense	$	3,269	$	1,964	$	5,233	$	3,820	$	3,248	$	1,107	$	8,175

During the first quarter of 2021, we used a portion of the proceeds from the issuance of the 2027 Notes, together with 2.2 million shares of our common stock, to repurchase and retire $182.6 million aggregate principal amount of the convertible senior notes due August 1, 2023 (the “2023 Notes”), and paid accrued and unpaid interest thereon. In addition, during the first quarter of 2021, holders of the 2023 Notes elected to convert Notes with a principal amount of $2.0 million. Cash was paid for the principal and the excess conversion spread was paid in 23,123 shares of our common stock. During the fourth quarter of 2021, we redeemed the remaining $45.4 million aggregate principal amount outstanding of the 2023 Notes. We paid $43.4 million in cash and issued 697,262 shares of our common stock to the holders of the 2023 Notes who submitted conversion notices, and the remaining $2.0 million of 2023 Notes were redeemed in cash, plus accrued and unpaid interest.

Capped Calls     

In connection with the offering of the 2023 Notes, the 2025 Notes and the 2027 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2023 Capped Calls, “2025 Capped Calls” and “2027 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.

16

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 2023 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
Initial strike price, subject to certain adjustments	$	41.59	$	61.02	$	103.38
Cap price, subject to certain adjustments	$	63.98	$	93.88	$	159.04
Total premium paid (in thousands)	$	26,910	$	27,255	$	76,020

The 2023 Capped Calls were not redeemed with the repayment of the 2023 Notes and remain outstanding.

For accounting purposes, the 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls are separate transactions, and not part of the terms of the 2023 Notes, the 2025 Notes and the 2027 Notes. The 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

Credit Agreement

In April 2020, we entered into a Credit and Security Agreement (the “Credit Agreement”), with KeyBank National Association that provides for a $30.0 million revolving credit facility, with a letter of credit sublimit of $15.0 million and an accordion feature under which we could increase the credit facility to up to $70.0 million. In May 2020, we utilized the accordion feature to increase the credit facility to $50.0 million.

In December 2021, we entered into an amendment (the “Amendment”) in respect of our Credit and Security Agreement (as amended by the Amendment, the “Credit Agreement”), with KeyBank National Association, to, among other things, increase the credit facility from $50.0 million to $100.0 million and extend the maturity date to December 22, 2024. The Credit Agreement provides for a $100.0 million revolving credit facility, with a letter of credit sublimit of $15.0 million, and an accordion feature under which we can increase the credit facility to up to $150.0 million. We incurred fees of $0.4 million in connection with entering into the Credit Agreement. The fees are recorded in other current assets on the consolidated balance sheet and are amortized on a straight-line basis over the contractual term of the arrangement. The commitment fee of 0.2% per annum on the unused portion of the credit facility is expensed as incurred and included within interest expense on the consolidated statement of operations. The Credit Agreement contains certain financial covenants including a requirement that we maintain specified minimum recurring revenue and liquidity amounts.

The borrowings under the Credit Agreement bear interest, at our option, at a rate equal to either (i) term SOFR plus a credit spread adjustment of 0.10% per annum plus a margin of 2.50% per annum or (ii) the alternate base rate (subject to a floor), plus an applicable margin equal to 0% per annum.

As of June 30, 2022, we did not have any outstanding borrowings and we were in compliance with all covenants under the Credit Agreement.

As of June 30, 2022, we had a total of $9.8 million in letters of credit outstanding as collateral for certain office space leases and corporate credit card programs which reduce the amount of borrowing available under our Credit Agreement.

Note 11. Leases

Our leases primarily relate to office facilities that have remaining terms of up to 9.8 years, some of which include one or more options to renew with renewal terms of up to 7 years and some of which include options to terminate the leases within the next 5.2 years. All of our leases are classified as operating leases.

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Operating lease cost	$	5,230	$	3,779	$	10,243	$	7,545
Short-term lease costs	463		154		854		319
Variable lease costs	2,147		1,317		4,532		2,780
Total lease costs	$	7,840	$	5,250	$	15,629	$	10,644

17

Supplemental balance sheet information related to the operating leases was as follows:

	As of June 30, 2022		As of December 31, 2021
Weighted average remaining lease term (in years) - operating leases	6.9		7.2
Weighted average discount rate - operating leases	6.1	%	6.2	%

Supplemental cash flow information related to leases was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	4,908	$	4,177	$	8,036	$	8,324
ROU assets obtained in exchange for new lease obligations	$	—	$	909	$	8,864	$	1,061

Maturities of operating lease liabilities as of June 30, 2022 were as follows (in thousands):

2022 (for the remaining six months)	$	8,442
2023	16,405
2024	18,532
2025	17,711
2026	16,321
2027 and thereafter	48,258
Total lease payments	$	125,669
Less: imputed interest	(24,387)
Total	$	101,282

Note 12. Stock-Based Compensation Expense

(a)General

Stock-based compensation expense for RSUs, performance-based PSUs, stock options and issuances of common stock pursuant to our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Stock-based compensation expense:
Cost of revenue	$	2,775	$	1,812	$	4,865	$	3,366
Research and development	13,925		9,420		26,949		17,235
Sales and marketing	8,430		6,038		15,204		11,784
General and administrative	7,281		6,544		14,315		12,291
Total stock-based compensation expense	$	32,411	$	23,814	$	61,333	$	44,676

We recognize compensation cost of all awards on a straight-line basis over the applicable vesting period, which is generally four years.

Our Compensation Committee adopted and approved the performance goals, targets and payout formulas for our 2022 and 2021 bonus plans, including permitting our 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 months ended June 30, 2022 and 2021, we recognized stock-based compensation expense related to such bonuses in the amount of $0.5 million and $1.0 million, and during the six months ended June 30, 2022 and 2021 we recognized stock-based compensation expense related to such bonuses in the amount of $1.5 million and $2.3 million, based on the probable expected performance against the pre-established corporate financial objectives

18

as of June 30, 2022 and 2021. For all 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 Units and Performance-Based Restricted Stock Units

RSUs and PSUs activity during the six months ended June 30, 2022 was as follows:

	Shares	Weighted-Average Grant Date Fair Value
Unvested balance as of December 31, 2021	2,778,877	$	74.40
Granted	1,960,840	94.72
Vested	(765,625)	61.16
Forfeited	(288,670)	80.63
Unvested balance as of June 30, 2022	3,685,422	$	87.47

As of June 30, 2022, the unrecognized compensation expense related to our unvested RSUs and PSUs was $298.8 million. This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 2.9 years.

(c)Stock Options

Stock option activity during the six months ended June 30, 2022 was as follows:

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2021	1,411,387	$	10.74	3.4	$	150,951
Granted	—	—
Exercised	(119,720)	10.07			$	10,062
Forfeited/cancelled	—	—
Outstanding as of June 30, 2022	1,291,667	$	10.80	2.9	$	72,334
Vested and exercisable as of June 30, 2022	1,291,667	$	10.80	2.9	$	72,334

    

The total fair value of stock options vested in the six months ended June 30, 2022 was $0.1 million.

(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 stock 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 15, 2022, we issued 80,747 shares of common stock to employees, with purchase prices of $67.59 or $81.37 per share, for aggregate proceeds of $5.7 million.

19

Note 13. Net Loss per Share

The following table summarizes the computation of basic and diluted net loss per share of our common stock for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands, except share and per share data)
Numerator:
Net loss	$	(39,606)	$	(34,164)	$	(84,605)	$	(64,009)
Denominator:
Weighted-average common shares outstanding, basic and diluted	58,239,958		55,392,383		57,983,790		54,169,464
Net loss per share, basic and diluted	$	(0.68)	$	(0.62)	$	(1.46)	$	(1.18)

We intend to settle any conversion of our 2025 Notes and 2027 Notes in cash, shares, or a combination thereof. The dilutive impact of the Notes for our calculation of diluted net income (loss) per share is considered using the if-converted method. For the three and six months ended June 30, 2022 and 2021, the shares underlying the Notes were not considered in the calculation of diluted net loss per share as the effect would have been anti-dilutive.

In connection with the issuance of the 2023 Notes, the 2025 Notes and the 2027 Notes, we entered into 2023 Capped Calls, 2025 Capped Calls and 2027 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 further described in Note 10, Debt, the 2023 Capped Calls were not redeemed with the redemption of the 2023 Notes.

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 and Six Months Ended June 30,
	2022	2021
Options to purchase common stock	1,291,667	1,653,897
Unvested restricted stock units	3,685,422	3,488,275
Common stock to be issued to DivvyCloud founders	33,433	133,730
Common stock issued to IntSights founders	206,608	—
Shares to be issued under ESPP	57,281	50,382
Convertible senior notes	9,572,955	10,663,519
Total	14,847,366	15,989,803

Note 14. Commitments and Contingencies

(a)Warranty

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

(b)Litigation and Claims

In October 2018, Finjan, Inc. (“Finjan”) filed a complaint against us and our wholly-owned subsidiary, Rapid7 LLC, in the United States District Court, District of Delaware, alleging patent infringement of seven patents held by them. In the complaint, Finjan sought unspecified damages, attorneys' fees and injunctive relief. We intend to vigorously contest Finjan's claims. The final outcome, including our liability, if any, with respect to Finjan's claims, is uncertain. 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.

In addition, 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.

20

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.

(c)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.

Note 15. Segment Information and Information about Geographic Areas

We operate in one segment. Our chief operating decision maker is our Chief Executive Officer, who makes operating decisions, assesses performance and allocates resources on a consolidated basis.

Net revenues by geographic area presented based upon the location of the customer were as follows: 

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
United States	$	126,001	$	99,256	$	245,124	$	191,765
Other	41,454		27,165		79,715		52,107
Total	$	167,455	$	126,421	$	324,839	$	243,872

Property and equipment, net by geographic area was as follows:

	As of June 30, 2022		As of December 31, 2021
	(in thousands)
United States	$	35,660	$	37,682
Other	14,873		12,543
Total	$	50,533	$	50,225

21

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 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, 2021 included in our Annual Report on Form 10-K, filed with the SEC on February 24, 2022. 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 the ongoing COVID-19 pandemic 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 adapt to technological change and effectively enhance, innovate and scale our solutions;

• our ability to effectively manage or sustain our growth and to attain and 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 related to security breaches in our customers; systems, unscheduled downtime or outages;

• 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;

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

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

These statements represent the beliefs and assumptions of our management based on information currently available to us. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included under Part II, Item 1A. Furthermore, such forward-looking statements

22

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 advancing security with visibility, analytics, and automation delivered through our Insight Platform. Our solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for misconfigurations and malicious behavior, investigate and shut down attacks, and automate routine tasks.

In the over 20 years that Rapid7 has been in business, security companies and trends have come and gone, while broader technology innovation continues to advance rapidly. Every company is now a technology company, and rampant innovation inevitably creates security risk. The migration of businesses to the cloud, more distributed workforces, and ubiquitous connected devices present security teams with an increasingly complex, ever-changing, and unpredictable attack surface.

We believe as cybersecurity challenges continue to rise exponentially, two key factors can prevent organizations from effectively managing their growing security exposure. First, the tools to manage complex security problems are often equally complicated to use. Second, there is a scarcity of cybersecurity professionals who are qualified to successfully manage these sophisticated tools. These two factors compound the difficulties that resource-constrained organizations face when attempting to minimize their security exposure, meet security compliance regulations and provide visibility to their leadership. We call the expanding divide between risk created through innovation and risk effectively managed by security teams the security achievement gap.

We believe Rapid7 is uniquely positioned to improve how security challenges are addressed. Our solutions and services are built with and supported by the expertise of our dedicated team of security researchers, expert SOC analysts and consultants, who bring knowledge of attacker behavior and emerging vulnerabilities directly to customers. We also continue to invest in further simplifying our technology to improve usability, lowering the barrier for teams and organizations who lack resources to manage their security posture.

While our security technology is the foundation of our mission to make successful security accessible to all, technology alone will not solve today’s cybersecurity challenges. Our ongoing commitment to researching and partnering with the technology community helps to curb new security risks born through innovation. We are also investing in under-served, at risk communities, like non-profits and hospitals, to better understand their needs and make security technology and services accessible. By continuously improving our technology, stemming the creation of risk in the community, and making security more usable and accessible, Rapid7 aims to close the security achievement gap.

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 June 30, 2022, we had over 10,000 customers in 141 countries, including 49% 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 six months ended June 30, 2022 or 2021.

Recent Developments

COVID-19 Response

Rapid7 remains focused on supporting its customers, partners, employees and communities during the ongoing COVID-19 pandemic. The impact of COVID-19 on the global economy and on our business continues to be a fluid situation. In response to the COVID-19 pandemic, we have taken, and continue to take, a variety of actions to ensure the continued availability and functioning of our business operations, promote the safety and security of our employees and support the communities in which we operate.

We will continue to actively monitor the evolving situation related to COVID-19 and may take further actions that alter our business operations, including those that may be required by federal, foreign, state or local authorities, or that we determine are in the best interests of our employees, customers, partners, suppliers, vendors and stockholders. At this point, the extent to which the COVID-19 pandemic may impact our business, results of operations and financial condition is uncertain. While we have not experienced significant disruptions from the COVID-19 pandemic during the three and six months ended June 30, 2022, we are unable to accurately predict the full impact that COVID-19 will have due to numerous uncertainties, including the

23

duration of the outbreak, the result of vaccination efforts, the spread and reemergence of the pandemic, including any new variants, actions that may be taken by governmental authorities, the impact on our business including our sales cycle, sales execution and marketing efforts, and the impact to the business of our customers, vendors and partners. Furthermore, due to our subscription model, any effect of the COVID-19 pandemic may not be fully reflected in our results of operations until future periods. For further discussion of the challenges and risks we confront related to the COVID-19 pandemic, please refer to Part II, Item 1A Risk Factors of this Quarterly Report on Form 10-Q.

Our Business Model

We have offerings in six key areas: (1) Incident Detection and Response, (2) Cloud Security, (3) Vulnerability Risk Management, (4) Application Security, (5) Threat Intelligence and (6) Security Orchestration and Automation Response.

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 Intelligence products are offered as cloud-based subscriptions, generally with a one-year term.

•Managed services, through which we operate our products and provide our capabilities on behalf of our customers. Our Managed Vulnerability Management, Managed Application Security and Managed Detection and Response products are offered on a managed service basis, generally pursuant to one-year agreements.

•Licensed software consists of term licenses and to a lesser extent perpetual licenses. When a term license is purchased, maintenance and support and content subscriptions, as applicable, are bundled with the license for the term period. Our Nexpose, Metasploit, AppSpider and InsightCloudSec products are offered through term software licenses. When a perpetual license is purchased, a customer typically purchases maintenance and support and content subscriptions, as applicable. 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. Our maintenance and support and content subscription agreements are typically for one-year terms.

We also offer various professional services across all of our offerings, including deployment and training services related to our software and cloud-based products, incident response services, penetration testing and security advisory services. Customers can purchase our professional services together with our product offerings or on a stand-alone basis pursuant to fixed fee or time-and-materials agreements.

For the three months ended June 30, 2022 and 2021, recurring revenue, defined as revenue from term software licenses, content subscriptions, managed services, cloud-based subscriptions and maintenance and support, was 94% and 93%, respectively, of total revenue. For the six months ended June 30, 2022 and 2021, recurring revenue was 94% and 92%, respectively, of total revenue.

24

Key Metrics

We monitor the following key metrics to help us measure and evaluate the effectiveness of our operations and as a means to evaluate period-to-period comparisons. We believe that both management and investors benefit from referring to these key metrics as supplemental information in assessing our performance and when planning, forecasting, and analyzing future periods. These key metrics also facilitate management's internal comparisons to our historical performance as well as comparisons to certain competitors' operating results. We believe these key metrics are useful to investors both because they allow for greater transparency with respect to key metrics used by management in their financial and operational decision-making and also because they are used by institutional investors and the analyst community to help evaluate the health of our business:

	Three Months Ended June 30,						Six Months Ended June 30,
	2022			2021			2022			2021
	(dollars in thousands)
Total revenue	$	167,455		$	126,421		$	324,839		$	243,872
Year-over-year revenue growth	32.5		%	27.8		%	33.2		%	26.2		%
Non-GAAP income (loss) from operations	$	3,483		$	6,070		$	(2,136)		$	7,976
Free cash flow	$	(1,258)		$	5,040		$	2,570		$	22,905

	As of June 30,
	2022			2021
	(dollars in thousands)
Number of customers	10,624			9,315
Year-over-year customer growth	14		%	13		%
Annualized recurring revenue (ARR)	$	658,172		$	488,860
Year-over-year ARR growth	34.6		%	28.7		%

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

Non-GAAP Income (Loss) from Operations. We monitor non-GAAP income (loss) from operations, a non-GAAP financial measure, to analyze our financial results. We believe non-GAAP income (loss) from operations is useful to investors, as a supplement to GAAP measures, in evaluating our ongoing operational performance and enhancing an overall understanding of our past financial performance and allowing for greater transparency with respect to metrics used by our management in its financial and operational decision-making. See Non-GAAP Financial Results below for further information on non-GAAP income (loss) from operations and a reconciliation of non-GAAP income (loss) from operations to the comparable GAAP financial measure.

Free Cash Flow. Free cash flow is a non-GAAP measure that we define as net cash provided by operating activities less purchases of property and equipment and capitalization of internal-use software costs. We consider free cash flow to be a liquidity measure that provides useful information to management and investors about the amount of cash generated by the business after necessary capital expenditures. See Non-GAAP Financial Results below for a reconciliation of non-GAAP free cash flow to the comparable GAAP financial measure.

Annualized Recurring Revenue and Growth. Annualized Recurring Revenue (“ARR”) is defined as the annual value of all recurring revenue related to contracts in place at the end of the quarter. ARR should be viewed independently of revenue and deferred revenue as ARR is an operating metric and is not intended to be combined with or replace these items. ARR is not a forecast of future revenue, which can be impacted by contract start and end dates and renewal rates and does not include revenue reported as perpetual license or professional services revenue in our consolidated statement of operations. We use ARR and believe it is useful to investors as a measure of the overall success of our business.

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

25

Non-GAAP Financial Results

To supplement our consolidated financial statements, which are prepared and presented in accordance with GAAP, we provide investors with certain non-GAAP financial measures, including non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss), non-GAAP net income (loss) per share, adjusted EBITDA and free cash flow. The presentation of the non-GAAP financial measures is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP. We use these non-GAAP financial measures for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons, and use certain non-GAAP financial measures as performance measures under our executive bonus plan. We believe that these non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making. While our non-GAAP financial measures are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, you should review the reconciliation of our non-GAAP financial measures to the comparable GAAP financial measures included below, and not rely on any single financial measure to evaluate our business.

We define non-GAAP gross profit, non-GAAP income (loss) from operations, non-GAAP net income (loss) and non-GAAP net income (loss) per share as the respective GAAP balances excluding the effect of stock-based compensation expense, amortization of acquired intangible assets, amortization of debt issuance costs and certain other items such as acquisition-related expenses, litigation-related expenses and induced conversion expense. Non-GAAP net income (loss) per basic and diluted share is calculated as non-GAAP net income (loss) divided by the weighted average shares used to compute net income (loss) per share, with the number of weighted average shares decreased, when applicable, to reflect the anti-dilutive impact of the capped call transactions entered into in connection with our convertible senior notes.

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

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

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

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

•Induced conversion expense. In conjunction with the first quarter of 2021 partial repurchase of our 1.25% convertible senior notes due 2023 (the “2023 Notes”), we incurred an induced conversion expense of $2.7 million. We exclude induced conversion expense because this amount is not indicative of the performance of, or trends in, our business and is neither comparable to the prior period nor predictive of future results.

•Litigation-related expenses. We exclude certain litigation-related expenses consisting of professional fees and related costs incurred by us related to significant litigation outside the ordinary course of business. We believe it is useful to exclude such expenses because we do not consider such amounts to be part of our ongoing operations.

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

•Anti-dilutive impact of capped call transaction. Our capped calls transactions are intended to offset potential dilution from the conversion features in our convertible senior notes. Although we cannot reflect the anti-dilutive impact of the capped call transactions under GAAP, we do reflect the anti-dilutive impact of the capped call transactions in non-GAAP net income (loss) per diluted share, when applicable, to provide investors with useful information in evaluating our financial performance on a per share basis.

We define adjusted EBITDA as net loss before (1) interest income, (2) interest expense, (3) other income (expense), net, (4) provision for income taxes, (5) depreciation expense, (6) amortization of intangible assets, (7) stock-based compensation expense, and (8) certain other items. We believe that the use of adjusted EBITDA is useful to investors and other users of our

26

financial statements in evaluating our operating performance because it provides them with an additional tool to compare business performance across companies and across periods.

Our non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in our industry, as other companies in our industry may calculate non-GAAP financial results differently, particularly related to non-recurring, unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP, may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact upon our reported financial results. Further, stock-based compensation expense has been and will continue to be for the foreseeable future a significant recurring expense in our business and an important part of the compensation provided to our employees.

The following tables reconcile GAAP gross profit to non-GAAP gross profit for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
GAAP total gross profit	$	113,180	$	87,113	$	219,275	$	168,275
Stock-based compensation expense	2,775		1,812		4,865		3,366
Amortization of acquired intangible assets	4,844		2,920		9,688		5,661
Non-GAAP total gross profit	$	120,799	$	91,845	$	233,828	$	177,302
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
GAAP gross profit – products	$	113,255	$	85,978	$	218,808	$	165,613
Stock-based compensation expense	2,012		1,200		3,507		2,218
Amortization of acquired intangible assets	4,844		2,920		9,688		5,661
Non-GAAP gross profit – products	$	120,111	$	90,098	$	232,003	$	173,492
	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
GAAP gross profit – professional services	$	(75)	$	1,135	$	467	$	2,662
Stock-based compensation expense	763		612		1,358		1,148
Non-GAAP gross profit – professional services	$	688	$	1,747	$	1,825	$	3,810

The following table reconciles GAAP loss from operations to non-GAAP income (loss) from operations for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
GAAP loss from operations	$	(34,651)	$	(21,926)	$	(75,030)	$	(45,042)
Stock-based compensation expense	32,411		23,814		61,333		44,676
Amortization of acquired intangible assets	5,723		3,068		11,446		5,957
Acquisition-related expenses	—		863		—		2,031
Litigation-related expenses	—		251		115		354
Non-GAAP income (loss) from operations	$	3,483	$	6,070	$	(2,136)	$	7,976

27

The following table reconciles GAAP net loss to non-GAAP net (loss) income for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands, except share and per share data)
GAAP net loss	$	(39,606)	$	(34,164)	$	(84,605)	$	(64,009)
Stock-based compensation expense	32,411		23,814		61,333		44,676
Amortization of acquired intangible assets	5,723		3,068		11,446		5,957
Acquisition-related expenses	—		9,828		—		10,996
Litigation-related expenses	—		251		115		354
Amortization of debt issuance costs	1,011		1,133		1,990		1,791
Induced conversion expense	—		—		—		2,740
Non-GAAP net (loss) income	$	(461)	$	3,930	$	(9,721)	$	2,505
Reconciliation of net (loss) income per share, basic:
GAAP net loss per share, basic	$	(0.68)	$	(0.62)	$	(1.46)	$	(1.18)
Non-GAAP adjustments to net loss	0.67		0.69		1.29		1.23
Non-GAAP net (loss) income per share, basic	$	(0.01)	$	0.07	$	(0.17)	$	0.05
Reconciliation of net (loss) income per share, diluted:
GAAP net loss per share, diluted	$	(0.68)	$	(0.62)	$	(1.46)	$	(1.18)
Non-GAAP adjustments to net loss	0.67		0.69		1.29		1.22
Non-GAAP net (loss) income per share, diluted	$	(0.01)	$	0.07	$	(0.17)	$	0.04
Weighted average shares used in GAAP and non-GAAP per share calculation, basic and diluted	58,239,958		55,392,383		57,983,790		54,169,464
Weighted average shares used in GAAP and non-GAAP per share calculation:
Basic	58,239,958		55,392,383		57,983,790		54,169,464
Diluted	58,239,958		57,731,694		57,983,790		56,626,465

The following table reconciles GAAP net loss to adjusted EBITDA for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
GAAP net loss	$	(39,606)	$	(34,164)	$	(84,605)	$	(64,009)
Interest income	(243)		(122)		(355)		(218)
Interest expense	2,758		3,059		5,451		8,453
Other (income) expense, net	2,403		(148)		3,006		919
Provision for income taxes	37		9,449		1,473		9,813
Depreciation expense	3,226		3,053		6,529		6,047
Amortization of intangible assets	6,997		3,975		13,863		7,721
Stock-based compensation expense	32,411		23,814		61,333		44,676
Acquisition-related expenses	—		863		—		2,031
Litigation-related expenses	—		251		115		354
Adjusted EBITDA	$	7,983	$	10,030	$	6,810	$	15,787

28

The following table reconciles net cash provided by operating activities to free cash flow for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Net cash provided by operating activities	$	7,449	$	9,186	$	17,852	$	29,781
Purchases of property and equipment	(4,171)		(1,699)		(7,224)		(2,671)
Capitalized internal-use software costs	(4,536)		(2,447)		(8,058)		(4,205)
Free cash flow	$	(1,258)	$	5,040	$	2,570	$	22,905

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.

Products

We generate products 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 consist of revenues from term licenses, and to a lesser extent perpetual licenses. When a term license is purchased, maintenance and support and content subscription, as applicable, is bundled with the license for the term period. When a perpetual license is purchased, a customer typically purchases maintenance and support and content subscription, as applicable.

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 products 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 Products

Cost of products 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.

29

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

Operating Expenses

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

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.

We expect research and development expense to increase on an absolute dollar basis in the near term as we continue to increase investments in our products and technology platform innovation, but to remain relatively consistent as a percentage of total revenue.

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.

We expect sales and marketing expense to increase on an absolute dollar basis in the near term as we continue to increase investments to drive our revenue growth, but to decrease as a percentage of total revenue.

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.

We expect general and administrative expense to increase on an absolute dollar basis in the near term as we continue to increase investments to support our growth, but to remain relatively consistent as a percentage of total revenue.

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 and revolving credit facility.

Other Income (Expense), Net

Other income (expense), net consists primarily of unrealized and realized gains and losses related to changes in foreign currency exchange rates.

30

Provision for Income Taxes

Provision for income taxes consists of income taxes in foreign jurisdictions where we conduct business, withholding taxes, and state income taxes in the United States. We maintain a full valuation allowance for domestic and certain foreign deferred tax assets, including net operating loss carryforwards and tax credits. Based on our history of losses, we expect to maintain this full valuation allowance for the foreseeable future as it is more likely than not that some or all of those deferred tax assets may not be realized.

31

Results of Operations

The following table sets forth our selected consolidated statements of operations data:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Consolidated Statement of Operations Data:
Revenue:
Products	$	159,122	$	119,147	$	308,147	$	228,432
Professional services	8,333		7,274		16,692		15,440
Total revenue	167,455		126,421		324,839		243,872
Cost of revenue:(1)
Products	45,867		33,169		89,339		62,819
Professional services	8,408		6,139		16,225		12,778
Total cost of revenue	54,275		39,308		105,564		75,597
Operating expenses:(1)
Research and development	48,907		35,305		98,719		68,385
Sales and marketing	78,034		56,246		153,180		111,224
General and administrative	20,890		17,488		42,406		33,708
Total operating expenses	147,831		109,039		294,305		213,317
Loss from operations	(34,651)		(21,926)		(75,030)		(45,042)
Interest income	243		122		355		218
Interest expense	(2,758)		(3,059)		(5,451)		(8,453)
Other income (expense), net	(2,403)		148		(3,006)		(919)
Loss before income taxes	(39,569)		(24,715)		(83,132)		(54,196)
Provision for income taxes	37		9,449		1,473		9,813
Net loss	$	(39,606)	$	(34,164)	$	(84,605)	$	(64,009)

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Stock-based compensation expense:
Cost of revenue	$	2,775	$	1,812	$	4,865	$	3,366
Research and development	13,925		9,420		26,949		17,235
Sales and marketing	8,430		6,038		15,204		11,784
General and administrative	7,281		6,544		14,315		12,291
Total stock-based compensation expense	$	32,411	$	23,814	$	61,333	$	44,676

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Depreciation and amortization expense:
Cost of revenue	$	6,733	$	4,385	$	13,328	$	8,536
Research and development	973		871		1,966		1,729
Sales and marketing	1,877		1,305		3,811		2,574
General and administrative	640		467		1,287		929
Total depreciation and amortization expense	$	10,223	$	7,028	$	20,392	$	13,768

32

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

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
Consolidated Statement of Operations Data:
Revenue:
Products	95.0		94.2	%	94.9	%	93.7	%
Professional services	5.0		5.8		5.1		6.3
Total revenue	100.0		100.0		100.0		100.0
Cost of revenue:
Products	27.4		26.2		27.5		25.8
Professional services	5.0		4.9		5.0		5.2
Total cost of revenue	32.4		31.1		32.5		31.0
Operating expenses:
Research and development	29.2		27.9		30.4		28.0
Sales and marketing	46.6		44.5		47.1		45.6
General and administrative	12.5		13.8		13.1		13.8
Total operating expenses	88.3		86.3		90.6		87.5
Loss from operations	(20.7)		(17.3)		(23.1)		(18.5)
Interest income	0.1		0.1		0.1		0.1
Interest expense	(1.7)		(2.4)		(1.7)		(3.5)
Other income (expense), net	(1.4)		0.1		(0.9)		(0.4)
Loss before income taxes	(23.6)		(19.5)		(25.6)		(22.2)
Provision for income taxes	—		7.5		0.5		4.0
Net loss	(23.7)	%	(27.0)	%	(26.0)	%	(26.2)	%

Comparison of the Three Months Ended June 30, 2022 and 2021

Revenue

	Three Months Ended June 30,				Change
	2022		2021		$		%
	(dollars in thousands)
Revenue:
Products	$	159,122	$	119,147	$	39,975	33.6	%
Professional services	8,333		7,274		1,059		14.6
Total revenue	$	167,455	$	126,421	$	41,034	32.5	%

Total revenue increased by $41.0 million in the three months ended June 30, 2022 compared to the same period in 2021 and consisted of $32.9 million of organic growth and $8.1 million related to the acquisition of IntSights in July 2021. The $32.9 million increase in revenue related to organic growth consisted of a $1.2 million increase in revenue from new customers and a $31.7 million increase in revenue from existing customers. The $31.7 million increase from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of our growing base of existing customers. Revenue from new customers represents the revenue recognized from the customer's initial purchase. All renewals, upsells and cross-sells are considered revenue from existing customers.

The increase in total revenue in the three months ended June 30, 2022 compared to the same period in 2021 was comprised of $29.1 million generated from sales in North America and $11.9 million generated from sales from the rest of the world.

33

Cost of Revenue

	Three Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Cost of revenue:
Products	$	45,867		$	33,169		$	12,698	38.3	%
Professional services	8,408			6,139			2,269		37.0
Total cost of revenue	$	54,275		$	39,308		$	14,967	38.1	%
Gross margin %:
Products	71.2		%	72.2		%
Professional services	(0.9)			15.6
Total gross margin %	67.6		%	68.9		%

Total cost of revenue increased by $15.0 million in the three months ended June 30, 2022 compared to the same period in 2021, primarily due to a $3.6 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue and a $5.9 million increase in personnel costs, inclusive of a $1.0 million increase in stock-based compensation expense, resulting from an increase in headcount to support our growing customer base and $0.9 million of additional costs attributable to the employees acquired in the IntSights acquisition in July 2021. Our increase in total cost of revenue also included a $1.9 million increase in amortization expense for acquired intangible assets, a $1.7 million increase in allocated overhead driven largely by an increase in IT and facilities costs, a $0.9 million increase in third-party professional service consulting costs, a $0.4 million increase in amortization expense for capitalized internally-developed software, and a $0.6 million increase in other expenses.

Total gross margin percentage decreased for the three months ended June 30, 2022 compared to the same period in 2021. The decrease in products gross margin was primarily due to an increase in amortization expense for the developed technology acquired intangible asset related to the acquisition of IntSights. The decrease in professional services gross margin for the three months ended June 30, 2022 was due to an increase in personnel costs.

Operating Expenses

Research and Development Expense

	Three Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Research and development	$	48,907		$	35,305		$	13,602	38.5	%
% of revenue	29.2		%	27.9		%

Research and development expense increased by $13.6 million in the three months ended June 30, 2022 compared to the same period in 2021, primarily due to a $10.1 million increase in personnel costs, a $2.4 million increase in allocated overhead driven largely by an increase in IT and facilities costs, and a $1.1 million increase in other expenses. The $10.1 million increase in personnel costs was primarily due to a $5.6 million increase in salaries and related costs driven by growth in headcount, inclusive of $2.9 million in additional salaries and related costs attributable to the employees acquired in the acquisition of IntSights in July 2021, and a $4.5 million increase in stock-based compensation expense, including $3.7 million of stock-based compensation expense related to the restricted stock units (“RSUs”) issued to retained employees and common stock issued to the IntSights founders as part of the acquisition.

Sales and Marketing Expense

	Three Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Sales and marketing	$	78,034		$	56,246		$	21,788	38.7	%
% of revenue	46.6		%	44.5		%

Sales and marketing expense increased by $21.8 million in the three months ended June 30, 2022 compared to the same period in 2021, primarily due to a $10.3 million increase in personnel costs, a $3.6 million increase in commission expense, a $3.3 million increase in allocated overhead driven largely by an increase in IT and facilities costs, a $2.4 million increase in marketing and advertising costs, a $1.0 million increase in travel and entertainment expense and a $1.2 million increase in other

34

expenses. The $10.3 million increase in personnel costs was primarily due to a $7.9 million increase in salaries and related costs driven by growth in headcount, inclusive of $2.6 million of additional costs attributable to the employees acquired in the IntSights acquisition in July 2021, and a $2.4 million increase in stock-based compensation expense, inclusive of $0.5 million in stock-based compensation expense related to RSUs issued to retained employees acquired in the acquisition of IntSights.

General and Administrative Expense 

	Three Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
General and administrative	$	20,890		$	17,488		$	3,402	19.5	%
% of revenue	12.5		%	13.8		%

General and administrative expense increased by $3.4 million in the three months ended June 30, 2022 compared to the same period in 2021, primarily due to a $3.0 million increase in personnel costs due to an increase in headcount, inclusive of a $0.7 million increase in stock-based compensation expense, and a $1.3 million increase in other expenses. These increases were partially offset by a $0.9 million decrease in professional fees primarily due to acquisition-related expenses and other professional consulting fees.

Interest Income

	Three Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Interest income	$	243		$	122		$	121	99.2	%
% of revenue	0.1		%	0.1		%

Interest income in the three months ended June 30, 2022 remained consistent with the same period in 2021.

Interest Expense

	Three Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Interest expense	$	(2,758)		$	(3,059)		$	301	(9.8)	%
% of revenue	(1.7)		%	(2.4)		%

Interest expense decreased by $0.3 million in the three months ended June 30, 2022 compared to the same period in 2021 primarily due to a decrease in contractual interest and amortization of debt issuance costs related to the 2023 Notes which were repurchased in the first quarter of 2021.

Other Income (Expense), Net

	Three Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Other income (expense), net	$	(2,403)		$	148		$	(2,551)	(1,723.6)	%
% of revenue	(1.4)		%	0.1		%

Other income (expense), net changed from $0.1 million of other income in the three months ended June 30, 2021 to $2.4 million of other expense in the three months ended June 30, 2022 due to realized and unrealized foreign currency losses, primarily related to the euro and British pound sterling.

35

Provision for Income Taxes

	Three Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Provision for income taxes	$	37		$	9,449		$	(9,412)	(99.6)	%
% of revenue	—		%	7.5		%

Provision for income taxes decreased by $9.4 million in the three months ended June 30, 2022 compared to the same period in 2021 primarily due to $9.0 million of tax expense recorded in the prior period for the 2021 intercompany sale of intellectual property as part of post-acquisition tax planning related to the Alcide acquisition.

Comparison of the Six Months Ended June 30, 2022 and 2021

Revenue

	Six Months Ended June 30,				Change
	2022		2021		$		%
	(dollars in thousands)
Revenue:
Products	$	308,147	$	228,432	$	79,715	34.9	%
Professional services	16,692		15,440		1,252		8.1
Total revenue	$	324,839	$	243,872	$	80,967	33.2	%

Total revenue increased by $81.0 million in the six months ended June 30, 2022 compared to the same period in 2021 and consisted of $66.0 million of organic growth and $15.0 million related to the acquisition of IntSights in July 2021. The $66.0 million increase in revenue related to organic growth consisted of a $2.9 million increase in revenue from new customers and a $63.1 million increase in revenue from existing customers. The $63.1 million increase from existing customers was due to an increase in revenue from renewals, upsells and cross-sells as a result of our growing base of existing customers. Revenue from new customers represents the revenue recognized from the customer's initial purchase. All renewals, upsells and cross-sells are considered revenue from existing customers.

The increase in total revenue in the six months ended June 30, 2022 compared to the same period in 2021 was comprised of $57.7 million generated from sales in North America and $23.3 million generated from sales from the rest of the world.

Cost of Revenue

	Six Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Cost of revenue:
Products	$	89,339		$	62,819		$	26,520	42.2	%
Professional services	16,225			12,778			3,447		27.0
Total cost of revenue	$	105,564		$	75,597		$	29,967	39.6	%
Gross margin %:
Products	71.0		%	72.5		%
Professional services	2.8			17.2
Total gross margin %	67.5		%	69.0		%

Total cost of revenue increased by $30.0 million in the six months ended June 30, 2022 compared to the same period in 2021, primarily due to a $10.7 million increase in personnel costs, inclusive of a $1.5 million increase in stock-based compensation expense, resulting from an increase in headcount to support our growing customer base and $1.6 million of additional costs attributable to the employees acquired in the IntSights acquisition in July 2021. Our increase in total cost of revenue also included an $8.5 million increase in cloud computing costs related to growing cloud-based subscription and managed services revenue, a $4.1 million increase in allocated overhead driven largely by an increase in IT and facilities costs, a $4.0 million increase in amortization expense for acquired intangible assets, a $1.0 million increase in third-party professional service consulting costs, a $0.7 million increase in amortization expense for capitalized internally-developed software, and a $1.0 million increase in other expenses.

36

Total gross margin percentage decreased for the six months ended June 30, 2022 compared to the same period in 2021. The decrease in products gross margin was primarily due to an increase in amortization expense for the developed technology acquired intangible asset related to the acquisition of IntSights and an increase in stock-based compensation expense. The decrease in professional services gross margin for the six months ended June 30, 2022 was due to an increase in personnel costs.

Operating Expenses

Research and Development Expense

	Six Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Research and development	$	98,719		$	68,385		$	30,334	44.4	%
% of revenue	30.4		%	28.0		%

Research and development expense increased by $30.3 million in the six months ended June 30, 2022 compared to the same period in 2021, primarily due to a $22.9 million increase in personnel costs, a $5.6 million increase in allocated overhead driven largely by an increase in IT and facilities costs, and a $1.8 million increase in other expenses. The $22.9 million increase in personnel costs was primarily due to a $13.2 million increase in salaries and related costs driven by growth in headcount, inclusive of $5.6 million in additional salaries and related costs attributable to the employees acquired in the acquisition of IntSights in July 2021, and a $9.7 million increase in stock-based compensation expense, including $7.0 million of stock-based compensation expense related to the RSUs issued to retained employees and common stock issued to the IntSights founders as part of the acquisition.

Sales and Marketing Expense

	Six Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Sales and marketing	$	153,180		$	111,224		$	41,956	37.7	%
% of revenue	47.1		%	45.6		%

Sales and marketing expense increased by $42.0 million in the six months ended June 30, 2022 compared to the same period in 2021, primarily due to a $18.7 million increase in personnel costs, a $7.4 million increase in allocated overhead driven largely by an increase in IT and facilities costs, a $6.9 million increase in commission expense, a $4.6 million increase in marketing and advertising costs, a $1.5 million increase in travel and entertainment expense, a $0.6 million increase in amortization expense for acquired intangible assets and a $2.3 million increase in other expenses. The $18.7 million increase in personnel costs was primarily due to a $15.3 million increase in salaries and related costs driven by growth in headcount, inclusive of $5.1 million of additional costs attributable to the employees acquired in the IntSights acquisition in July 2021, and a $3.4 million increase in stock-based compensation expense, inclusive of $0.9 million in stock-based compensation expense related to RSUs issued to retained employees acquired in the acquisition of IntSights.

General and Administrative Expense 

	Six Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
General and administrative	$	42,406		$	33,708		$	8,698	25.8	%
% of revenue	13.1		%	13.8		%

General and administrative expense increased by $8.7 million in the six months ended June 30, 2022 compared to the same period in 2021, primarily due to a $6.3 million increase in personnel costs due to an increase in headcount, inclusive of a $2.0 million increase in stock-based compensation expense, a $0.7 million increase in allocated overhead driven largely by an increase in IT and facilities costs and a $3.2 million increase in other expenses. These increases were partially offset by a $1.5 million decrease in professional fees primarily due to acquisition-related expenses and other professional consulting fees.

37

Interest Income

	Six Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Interest income	$	355		$	218		$	137	62.8	%
% of revenue	0.1		%	0.1		%

Interest income in the six months ended June 30, 2022 remained consistent with the same period in 2021.

Interest Expense

	Six Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Interest expense	$	(5,451)		$	(8,453)		$	3,002	(35.5)	%
% of revenue	(1.7)		%	(3.5)		%

Interest expense decreased by $3.0 million in the six months ended June 30, 2022 compared to the same period in 2021 primarily due to a $2.7 million decrease of induced conversion expense incurred in conjunction with the partial repurchase of the 2023 Notes in March 2021 as well as a decrease in contractual interest expense related to the 2023 Notes which were repurchased in the first quarter of 2021.

Other Income (Expense), Net

	Six Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Other income (expense), net	$	(3,006)		$	(919)		$	(2,087)	227.1	%
% of revenue	(0.9)		%	(0.4)		%

Other income (expense), net increased by $2.1 million in expense for the six months ended June 30, 2022 compared to the same period in 2021 due to realized and unrealized foreign currency losses, primarily related to the euro and British pound sterling.

Provision for Income Taxes

	Six Months Ended June 30,						Change
	2022			2021			$		%
	(dollars in thousands)
Provision for income taxes	$	1,473		$	9,813		$	(8,340)	(85.0)	%
% of revenue	0.5		%	4.0		%

Provision for income taxes decreased by $8.3 million in the six months ended June 30, 2022 compared to the same period in 2021 primarily due to $9.0 million of tax expense recorded in the prior period for the 2021 intercompany sale of intellectual property as part of post-acquisition tax planning related to the Alcide acquisition, partially offset by an increase of $0.7 million due to our increased operations in foreign jurisdictions.

38

Liquidity and Capital Resources

As of June 30, 2022, we had $163.5 million in cash and cash equivalents, $90.6 million in short- and long-term investments that have maturities ranging from one to twenty months and an accumulated deficit of $820.6 million. Since our inception, we have generated significant losses and expect to continue to generate losses for the foreseeable future. Our principal sources of liquidity are cash and cash equivalents, short and long-term investments and our Credit and Security Agreement, as amended (the “Credit Agreement”). To date, we have financed our operations primarily through private and public equity financings, issuance of convertible senior notes and through cash generated by operating activities.

We believe that our existing cash and cash equivalents, our short and long-term investments, our available borrowings under our Credit Agreement and cash generated by operating activities will be sufficient to meet our operating and capital requirements for at least the next 12 months as well as our longer-term expected future cash requirements and obligations. Our foreseeable cash needs, in addition to our recurring operating expenses, include our expected capital expenditures to support expansion of our infrastructure and workforce, office facilities lease obligations, purchase commitments, including our cloud infrastructure services (including with Amazon Web Services (“AWS”)), potential future acquisitions of technology businesses and any election we make to redeem our convertible senior notes.

Our future capital requirements will depend on many factors, including our growth rate, the timing and extent of spending to support research and development efforts, the expansion of sales and marketing activities, particularly internationally, the introduction of new and enhanced products and service offerings, the cost of any future acquisitions of technology or businesses and any election we make to redeem our convertible senior notes. In the event that additional financing is required from outside sources, we may be unable to raise the funds on acceptable terms, if at all. If we are unable to raise additional capital on terms satisfactory to us when we require it, our business, operating results and financial condition could be adversely affected.

The following table shows a summary of our cash flows for the six months ended June 30, 2022 and 2021:

	Six Months Ended June 30,
	2022		2021
	(in thousands)
Cash, cash equivalents and restricted cash at beginning of period	$	165,017	$	173,617
Net cash provided by operating activities	17,852		29,781
Net cash used in investing activities	(14,450)		(32,166)
Net cash provided by financing activities	1,426		322,666
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(3,671)		(293)
Cash, cash equivalents and restricted cash at end of period	$	166,174	$	493,605

Uses of Funds

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

Operating Activities

Operating activities provided $17.9 million of cash and cash equivalents in the six months ended June 30, 2022, which reflects the timing of working capital adjustments and our continued growth in revenue partially offset by our continued investments in our operations. Cash provided by operating activities reflected our net loss of $84.6 million, offset by a decrease in our net operating assets of $16.5 million and non-cash charges of $86.0 million related primarily to depreciation and amortization, stock-based compensation expense, amortization of debt issuance costs and other non-cash charges. The decrease in our net operating assets was primarily due to a $23.2 million increase in deferred revenue, a $18.1 million decrease in accounts receivable due to an increase in collections and a $3.6 million increase in accounts payable, which each had a positive impact on operating cash flow. These factors were partially offset by a $12.5 million decrease in accrued expenses, primarily as a result of the payout of annual bonuses and year-end commissions, a $10.5 million increase in prepaid expenses, a $5.1 million

39

increase in deferred contract acquisition and fulfillment costs and a $0.3 million decrease in other liabilities, which each had a negative impact on operating cash flow.

Operating activities provided $29.8 million of cash and cash equivalents in the six months ended June 30, 2021, which reflects the timing of working capital adjustments and our continued growth in revenue partially offset by our continued investments in our operations. Cash provided by operating activities reflected our net loss of $64.0 million, offset by a decrease in our net operating assets of $25.5 million and non-cash charges of $68.3 million related primarily to depreciation and amortization, stock-based compensation expense, deferred income taxes, induced conversion expense, amortization of debt issuance costs and other non-cash charges. The decrease in our net operating assets was primarily due to a $22.2 million increase in deferred revenue due to increased billings, a $12.8 million decrease in accounts receivable due to an increase in collections, a $4.4 million increase in other liabilities and a $0.4 million decrease in prepaid expenses and other assets, which each had a positive impact on operating cash flow. These factors were partially offset by a $7.6 million decrease in accrued expenses, primarily as a result of the payout of annual bonuses and year-end commissions, a $5.5 million increase in deferred contract acquisition and fulfillment costs, and a $1.3 million decrease in accounts payable, which each had a negative impact on operating cash flow.

Investing Activities

Investing activities used $14.5 million of cash in the six months ended June 30, 2022, consisting of $8.1 million for capitalization of internal-use software costs, $7.2 million in capital expenditures to purchase computer equipment and leasehold improvements and $0.5 million of other investments, partially offset by $1.3 million of investment sales and maturities, net of purchases.

Investing activities used $32.2 million of cash in the six months ended June 30, 2021, consisting of $52.4 million of cash paid for the acquisitions of Alcide and Velocidex, net of cash acquired, $4.2 million for capitalization of internal-use software costs, $1.5 million for other investing activities, $2.7 million in capital expenditures to purchase computer equipment, furniture and fixtures and leasehold improvements, partially offset by $28.6 million of investment sales and maturities, net of purchases.

Financing Activities

Financing activities provided $1.4 million of cash in the six months ended June 30, 2022, which consisted primarily of $5.7 million in proceeds from the issuance of common stock purchased by employees under the Rapid7, Inc. 2015 Employee Stock Purchase Plan (“ESPP”) and $1.2 million in proceeds from the exercise of stock options, partially offset by $5.1 million in withholding taxes paid for the net share settlement of equity awards, $0.3 million in payments related to the acquisition of Velocidex and $0.1 million in payments of debt issuance costs.

Financing activities provided $322.7 million of cash in the six months ended June 30, 2021, which consisted primarily of $585.4 million in proceeds from the issuance of the 2027 Notes, net of issuance costs paid of $14.6 million, $4.5 million in proceeds from the issuance of common stock purchased by employees under the ESPP and $2.5 million in proceeds from the exercise of stock options, partially offset by $184.6 million for the repurchase and conversion of the 2023 Notes, $76.0 million for the purchase of 2027 Capped Calls, $6.7 million in withholding taxes paid for the net share settlement of equity awards and $2.4 million for payments related to the acquisition of Alcide.

Contractual Obligations and Commitments

In March 2022, we entered into a new agreement with AWS for cloud infrastructure services. The agreement is for a 36-month period beginning on April 1, 2022 for a total commitment of $300.0 million.

As of June 30, 2022, there were no additional material changes other than that noted above in our contractual obligations and commitments from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 24, 2022 (the “Annual Report”).

Off-Balance Sheet Arrangements

We do not have any relationships with unconsolidated entities or financial partnerships, including entities sometimes referred to as structured finance or special purpose entities that were established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. We do not engage in off-balance sheet financing arrangements.

40

Recent Accounting Pronouncements

See Note 1 in the notes to the unaudited consolidated financial statements for a discussion of recent accounting pronouncements.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”). The preparation of our consolidated financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts of assets, liabilities, revenue, costs and expenses. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates. There have been no material changes in our critical accounting policies from those disclosed in our Annual Report.

41

Item 3.    Quantitative and Qualitative Disclosures About Market Risk.

Foreign Currency Exchange Risk

Our results of operations and cash flows are subject to fluctuations due to changes in foreign currency exchange rates. A majority of our customers enter into contracts that are denominated in U.S. dollars. Our expenses are generally denominated in the currencies of the countries where our operations are located, which is primarily in the United States and to a lesser extent in the United Kingdom, other Euro-zone countries within mainland Europe, Canada, Australia, Israel, Singapore and Japan. Our results of operations and cash flows are, therefore, subject to fluctuations due to changes in foreign currency exchange rates and may be adversely affected in the future due to changes in foreign currency exchange rates. The effect of a hypothetical 10% adverse change in foreign currency exchange rates on monetary assets and liabilities at June 30, 2022 would not have been material to our financial condition or results of operations. We enter into forward contracts designated as cash flow hedges to manage the foreign currency exchange rate risk associated with certain of our foreign currency denominated expenditures. The effectiveness of our existing hedging transactions and the availability and effectiveness of any hedging transactions we may decide to enter into in the future may be limited, and we may not be able to successfully hedge our exposure, which could adversely affect our financial condition and operating results. For further information, see Note 9, Derivatives and Hedging Activities, in the Notes to our Consolidated Financial Statements included in this Quarterly Report on Form 10-Q. As our international operations grow, we will continue to reassess our approach to manage our risk relating to fluctuations in foreign currency rates.

Interest Rate Risk

As of June 30, 2022, we had cash and cash equivalents of $163.5 million consisting of bank deposits and money market funds and short- and long-term investments of $90.6 million consisting of U.S. government agencies, corporate bonds, commercial paper and agency bonds. Our investments are made for capital preservation purposes. We do not enter into investments for trading or speculative purposes.

Our cash and cash equivalents and short- and long-term investments are subject to market risk due to changes in interest rates, which may affect our interest income and the fair value of our investments. Due in part to these factors, our future investment income may fluctuate due to changes in interest rates or we may suffer losses in principal if we are forced to sell securities that decline in market value due to changes in interest rates. However, because we classify our investments as available-for-sale securities, no gains or losses are recognized due to the changes in interest rates unless securities are sold prior to maturity or declines in fair value are determined to be other-than-temporary.

The fair values of our convertible senior notes are subject to interest rate risk, market risk and other factors due to the conversion features of the notes. The fair values of the convertible senior notes may increase or decrease for various reasons, including fluctuations in the market price of our common stock, fluctuations in market interest rates and fluctuations in general economic conditions. The interest and market value changes affect the fair values of the convertible senior notes but does not impact our financial position, cash flows or results of operations due to the fixed nature of the debt obligation. Based upon the quoted market price as of June 30, 2022, the fair values of our 2025 Notes and 2027 Notes were $292.9 million and $540.6 million, respectively.

As of June 30, 2022, the effect of a hypothetical 10% increase or decrease in interest rates would not have had a material impact on our financial statements.

Inflation Risk

As of June 30, 2022, we do not believe that inflation had a material effect on our business, financial condition or results of operations. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Item 4.    Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act of 1934, as amended (the “Exchange Act”), that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits

42

under the Exchange Act is accumulated and communicated to the company's management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.

Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, evaluated the effectiveness of the design and operations of our disclosure controls and procedures as of June 30, 2022. Based on the evaluation of our disclosure controls and procedures as of June 30, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Inherent Limitations of Internal Controls

Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision making can be faulty, and that breakdowns can occur because of a simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Over time, controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

43

PART II—OTHER INFORMATION

Item 1.    Legal Proceedings.

In October 2018, Finjan, Inc. (“Finjan”) filed a complaint against us and our wholly-owned subsidiary, Rapid7 LLC, in the United States District Court, District of Delaware, alleging patent infringement of seven patents held by them. In the complaint, Finjan sought unspecified damages, attorneys' fees and injunctive relief. We intend to vigorously contest Finjan's claims. The final outcome, including our liability, if any, with respect to Finjan's claims, is uncertain. 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.

In addition, from time to time, we are 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, financial condition or results of operations. 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.

Item 1A. Risk Factors.

Our operations and financial results are subject to various risks and uncertainties including those described below. You should consider carefully the risks and uncertainties described below, in addition to other information contained in this Quarterly Report on Form 10-Q as well as our other public filings with the Securities and Exchange Commission (the "SEC"), including our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 24, 2022. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties that we are unaware of, or that we currently believe are not material, may also become important factors that adversely affect our business. If any of the following risks or others not specified below materialize, our business, financial condition and results of operations could be materially adversely affected. In that event, the trading price of our common stock could decline. 

Summary of Risk Factors

Our business is subject to numerous risks and uncertainties which include, but are not limited to, the following:

•Our quarterly operating results may vary from period to period, which could result in our failure to meet expectations with respect to operating results and cause the trading price of our stock to decline.

•We are a rapidly growing company, which makes it difficult to evaluate our future operating and financial results and may increase the risk that we will not be successful.

•If we are do not effectively manage our future growth rate, our business and results of operations may be adversely affected.

•The ongoing COVID-19 pandemic could materially and adversely affect our business, results of operations and financial condition, and we could be subject to risks from further health pandemics or epidemics, as well as uncertainty regarding returning to work and re-openings.

•Real or perceived failures, errors or defect in our solutions could adversely affect our brand and reputation, which could have an adverse effect on our business and results of operations.

•Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable performance of our products and network infrastructure.

•Our business and growth depend substantially on customers renewing their subscriptions with us. Any decline in our customer renewals or failure to convince customers to expand their use of our subscription offerings could adversely affect our future operating results.

•If we or our third party service providers experience a security breach or unauthorized parties otherwise obtain access to our customers’ data, our reputation may be harmed, demand for our solutions may be reduced and we may incur significant liabilities.

•We face intense competition in our market.

•If we are unable to successfully hire, train, and retain qualified personnel our business may suffer.

•If we fail to continue to effectively scale and manage our operations infrastructure, our customers may experience service outages and/or delays.

44

•A component of our growth strategy is dependent on our continued international expansion, which adds complexity to our operations.

•Because our products collect and store user and related information, domestic and international privacy and cybersecurity concerns, and other laws and regulations, could have a material adverse effect on our business.

•If our customers are unable to implement our products successfully, customer perceptions of our offerings may be impaired or our reputation and brand may suffer.

•We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which would cause our stock price to decline.

•If we are not able to maintain and enhance our brand, our business and operating results may be adversely affected.

•Failure to maintain high-quality customer support could have a material adverse effect on our business.

•We rely on third-party software to operate certain functions of our business.

•We use third-party software and data that may be difficult to replace or that may cause errors or failures of our solutions, which could lead to lost customers or harm to our reputation and our operating results.

•Assertions by third parties of infringement or other violations by us of their intellectual property rights, whether or not correct, could result in significant costs and harm our business and operating results.

•Organizations may be reluctant to purchase our cloud-based offerings due to the actual or perceived vulnerability of cloud solutions.

•We have a significant amount of debt that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur additional debt in the future, which may adversely affect our operations and financial results. We may not have sufficient cash flow from our business to pay our substantial debt when due.

•We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

The summary risk factors described above should be read together with the text of the full risk factors below and our unaudited consolidated financial statements and the related notes, as well as in other documents that we file with the SEC. The risks summarized above or described in full below are not the only risks that we face. Additional risks and uncertainties not precisely known to us or that we currently deem to be immaterial may also materially adversely affect our business, financial condition, results of operations, and future growth prospects.

Risks Related to Our Business and Industry

Our quarterly operating results may vary from period to period, which could result in our failure to meet expectations with respect to operating results and cause the trading price of our stock to decline.

Our operating results, including the levels of our revenue, ARR, cash flow, deferred revenue and gross margins, have historically varied from period to period, and we expect that they will continue to do so as a result of a number of factors, many of which are outside of our control, including:

•the level of demand for our products and professional services;

•customer renewal rates and ability to attract new customers;

•the extent to which customers purchase additional products or professional services;

•the mix of our products, as well as professional services, sold during a period;

•the ability to successfully grow our sales of our cloud-based solutions;

•the level of perceived threats to organizations’ cybersecurity;

•network outages, security breaches, technical difficulties or interruptions with our products;

•changes in the growth rate of the markets in which we compete;

•sales of our products and professional services due to seasonality and customer demand;

•the timing and success of new product or service introductions by us or our competitors or any other changes in the competitive landscape of our industry, including consolidation among our competitors;

•the introduction or adoption of new technologies that compete with our offerings;

45

•decisions by potential customers to purchase cybersecurity products or professional services from other vendors;

•the amount and timing of operating costs and capital expenditures related to the operations and expansion of our business;

•price competition;

•our ability to successfully manage and integrate any acquired businesses, including IntSights Cyber Intelligence Ltd. (“IntSights”), and including without limitation, the amount and timing of expenses and potential future charges for impairment of goodwill from acquired companies;

•business disruptions in regions affecting our operations, stemming from actual, imminent or perceived outbreak or reemergence of contagious disease, including the COVID-19 pandemic;

•our ability to increase, retain and incentivize the channel partners that market and sell our products and professional services;

•our continued international expansion and associated exposure to changes in foreign currency exchange rates;

•the amount and timing of operating expenses related to the maintenance and expansion of our business, operations and infrastructure;

•the announcement or adoption of new regulations and policy mandates or changes to existing regulations and policy mandates that impact our business or industry;

•the cost or results of existing or unforeseen litigation and intellectual property infringement;

•the strength of regional, national and global economies;

•the impact of climate change, natural disasters or manmade problems, including terrorism or war (such as the armed conflict between Russia and Ukraine); and

•future accounting pronouncements or changes in our accounting policies or practices.

Each factor above or discussed elsewhere herein or the cumulative effect of some of these factors may result in fluctuations in our operating results. This variability and unpredictability could result in our failure to meet expectations with respect to operating results, or those of securities analysts or investors, for a particular period. If we fail to meet or exceed expectations for our operating results for these or any other reasons, the market price of our stock could fall and we could face costly lawsuits, including securities class action suits.

We are a rapidly growing company, which makes it difficult to evaluate our future operating and financial results and may increase the risk that we will not be successful.

We are a rapidly growing company. Our ability to forecast our future operating and financial results is subject to a number of uncertainties, including our ability to plan for and model future growth. We have encountered and will continue to encounter risks and uncertainties frequently experienced by growing companies in rapidly evolving industries. If our assumptions regarding these uncertainties, which we use to plan our business, are incorrect or change in reaction to changes in our markets, or if we do not address these risks successfully, our operating and financial results could differ materially from our expectations, our business could suffer and the trading price of our common stock may decline.

If we do not effectively manage our future growth, our business and results of operations will be adversely affected.

From the year ended December 31, 2017 to the year ended December 31, 2021, our revenue grew from $200.9 million to $535.4 million and our headcount grew from 1,079 to 2,353 employees. Although we have experienced rapid growth historically, we may not sustain our current growth rates and our investments to support our growth may not be successful. The growth and expansion of our business will require us to invest significant financial and operational resources and will continue to place significant demands on our management team. Our future success will depend in part on our ability to manage our growth effectively, which will require us to, among other things:

•maintain and expand our customer base;

•increase revenues from existing customers through increased or broader use of our products and professional services within their organizations;

•improve the performance and capabilities of our products through research and development;

•continue to develop our cloud-based solutions;

46

•maintain the rate at which customers purchase and renew subscriptions to our cloud-based solutions, content subscriptions, maintenance and support and managed services;

•continue to successfully expand our business domestically and internationally;

•continue to improve our key business applications, processes and IT infrastructure to support our business needs and appropriately documenting such systems and processes;

•continue to effectively attract, integrate and retain a large number of new employees, particularly members of our sales and marketing and research and development teams;

•enhance our information and communication systems to ensure that our employees and offices around the world are well coordinated and can effectively communicate with each other and our growing base of customers and partners;

•improve our financial, management, and compliance systems and controls; and

•successfully compete with other companies.

If we fail to achieve these objectives effectively, our ability to manage our expected growth may be impaired and we may be unable to maintain the quality of our offerings, consistent revenue or revenue growth, our stock price could be volatile, and it may be difficult to achieve and maintain profitability. You should not rely on our prior quarterly or annual periods performance as any indication of our future growth.

We have not been profitable historically and may not achieve or maintain profitability in the future.

We have posted a net loss in each year since inception, including net losses of $146.3 million, $98.8 million and $53.8 million in the years ended December 31, 2021, 2020 and 2019, respectively. As of June 30, 2022, we had an accumulated deficit of $820.6 million. While we have experienced significant revenue growth in recent periods, we may not obtain a high enough volume of sales of our products and professional services to sustain or increase our growth or achieve or maintain profitability in the future. We also expect our costs to increase in future periods, which could negatively affect our future operating results if our revenue does not increase. In particular, we expect to continue to expend financial and other resources on:

•research and development related to our offerings, including investments in our research and development team;

•sales and marketing, including a continued expansion of our sales organization, both domestically and internationally;

•continued international expansion of our business;

•strategic acquisitions and expansion of our partner ecosystem; and

•general and administrative expenses as we continue to implement and enhance our administrative, financial and operational systems, procedures and controls.

These investments may not result in increased revenue or growth in our business. If we are unable to increase our revenue at a rate sufficient to offset the expected increase in our costs, our business, financial position and results of operations will be harmed, and we may not be able to achieve or maintain profitability over the long term. Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays and other unknown factors that may result in losses in future periods. If our revenue growth does not meet our expectations in future periods, our financial performance may be harmed, and we may not achieve or maintain profitability in the future.

The ongoing COVID-19 pandemic could materially and adversely affect our business, results of operations and financial condition, and we could be subject to risks from further health pandemics or epidemics, as well as uncertainty regarding returning to work and re-openings.

Our business could be adversely affected by the effects of health pandemics or epidemics, including the ongoing COVID-19 pandemic, which continues to have a negative impact on the local, regional, national and global scale. The implementation of measures to help contain the virus has impacted our day-to-day operations and could continue to disrupt our business and operations, as well as that of our customers, partners, suppliers and others with whom we work, for an indefinite period of time.

The full extent of the COVID-19 pandemic’s impact on our operations and financial performance depends on future developments that are uncertain and unpredictable, including the ultimate duration, spread and reemergence of the pandemic, including any new variants, its impact on capital and financial markets, the timing of economic recovery and any new information that may emerge concerning the severity of the virus, its spread to or reemergence in other geographic regions as well as the actions taken to contain it, including the distribution and acceptance of vaccines, among others. Any of these impacts could have a material adverse impact on our business, results of operations and financial condition and ability to execute and capitalize on our strategies. Due to the current uncertainty regarding the severity and duration of the COVID-19 pandemic, we cannot predict whether our response to date or the actions we may take in the future will be effective in

47

mitigating the effects of COVID-19 pandemic on our business, results of operations or financial condition. Accordingly, we are unable at this time to predict the impact of the COVID-19 pandemic on our operations, liquidity, and financial results, and, depending on the magnitude and duration of the COVID-19 pandemic, such impact may be material.

Negative conditions in the general economy both in the United States and abroad resulting from health pandemics or epidemics, such as the COVID-19 pandemic, could cause a decrease in consumer discretionary spending and business investment and diminish growth expectations in the U.S. economy and abroad. As a result of the COVID-19 pandemic, we have and may continue to see delays in our sales cycle, failures of customers to renew at all or to renew the anticipated scope their subscriptions with us, requests from customers for payment term deferrals as well as pricing or bundling concessions, which, if significant, could materially and adversely affect our business, results of operations and financial condition. More generally, the COVID-19 pandemic continues to present the possibility of an extended global economic downturn and has caused volatility in financial markets, which could materially and adversely affect demand for our products and professional services and could materially and adversely impact our results and financial condition even after the pandemic is contained.

Although we expect that current cash and cash equivalent balances, including the proceeds of our convertible senior notes offering in March 2021, together with cash flows that are generated from operations and availability under our revolving credit facility, will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if our access to capital is restricted or our borrowing costs increase, our operations and financial condition could be adversely impacted.

A health pandemic or epidemic, such as the COVID-19 pandemic, may also have the effect of heightening many of the other risks described in this “Risk Factors” section, including risks associated with our guidance, our customers, our potential customers, our market opportunity, renewals and sales cycle, among others. We will continue to evaluate the nature and extent of the impact of the COVID-19 pandemic on our business.

Our business and growth depend substantially on customers renewing their subscriptions with us. Any decline in our customer renewals or failure to convince customers to expand their use of our subscription offerings could adversely affect our future operating results.

Our subscription offerings are sold on a term basis. In order for us to improve our operating results, it is important that our existing customers renew their subscriptions with us when the existing subscription term expires, and renew on the same or more favorable terms. Our customers have no obligation to renew their subscriptions with us and we may not be able to accurately predict customer renewal rates. Our customers’ renewal rates may decline or fluctuate as a result of a number of factors, including their satisfaction or dissatisfaction with our new or current product offerings, our pricing, the effects of economic conditions, including due to a global economic slowdown, inflation, foreign currency exchange rate fluctuation, the armed conflict between Russia and Ukraine and the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic, competitive offerings, our customers' perception of their exposure, or alterations or reductions in their spending levels. If our customers do not renew their agreements with us or renew on terms less favorable to us, our revenues and results of operations may be adversely impacted.

Our future growth is also affected by our ability to sell additional offerings to our existing customers, which depends on a number of factors, including customers’ satisfaction with our products and services and general economic conditions. If our efforts to cross-sell and upsell to our customers are unsuccessful, the rate at which our business grows might decline.

If our new and existing product offerings and product enhancements do not achieve sufficient market acceptance, our financial results and competitive position will suffer.

Our business substantially depends on, and we expect our business to continue to substantially depend on, sales of our Insight Platform solutions. As such, market acceptance of our Insight Platform is critical to our continued success. Demand for Insight Platform solutions are affected by a number of factors beyond our control, including continued market acceptance of cloud-based offerings, the timing of development and release of new products by our competitors, technological change, and growth or contraction in our market and the economy in general. If we are unable to continue to meet customer demands or to achieve more widespread market acceptance of our Insight Platform solutions, our business operations, financial results and growth prospects will be materially and adversely affected.

We spend substantial amounts of time and money to research and develop or acquire new offerings and enhanced versions of our existing offerings to incorporate additional features, improve functionality or other enhancements in order to meet our customers’ rapidly evolving demands. In addition, we continue to invest in solutions that can be deployed on top of our platform to target specific use cases and to cultivate our community. When we develop a new or enhanced version of an existing offering, we typically incur expenses and expend resources upfront to market, promote and sell the new offering. Therefore, when we develop or acquire new or enhanced offerings, their introduction must achieve high levels of market acceptance in order to justify the amount of our investment in developing and bringing them to market. For example, if our

48

recent product expansions and offerings, such as our Cloud Security and Threat Intelligence offerings, do not garner widespread market adoption and implementation, our financial results and competitive position could suffer.

Further, we may make changes to our offerings that our customers do not like, find useful or agree with. We may also discontinue certain features, begin to charge for certain features that are currently free or increase fees for any of our features or usage of our offerings.

Our new and existing offerings or product enhancements and changes to our existing offerings could fail to attain sufficient market acceptance for many reasons, including:

•our failure to predict market demand accurately in terms of product functionality and to supply offerings that meet this demand in a timely fashion, including changes in demand as a result of the COVID-19 pandemic;

•real or perceived defect, errors or failures;

•negative publicity about their performance or effectiveness;

•delays in releasing to the market our new offerings or enhancements to our existing offerings;

•introduction or anticipated introduction of competing products by our competitors;

•inability to scale and perform to meet customer demands;

•poor business conditions for our customers, causing them to delay IT purchases, including as a result of the COVID-19 pandemic; and

•reluctance of customers to purchase cloud-based offerings.

If our new or existing offerings or enhancements and changes do not achieve adequate acceptance in the market, our competitive position will be impaired, and our revenue, business and financial results will be negatively impacted. The adverse effect on our financial results may be particularly acute because of the significant research, development, marketing, sales and other expenses we will have incurred in connection with the new offerings or enhancements.

We face intense competition in our market.

The market for SecOps solutions is highly fragmented, intensely competitive and constantly evolving. We compete with an array of established and emerging security software and services vendors. With the introduction of new technologies and market entrants, we expect the competitive environment to remain intense going forward. Our primary competitors in Vulnerability Risk Management include Qualys and Tenable; in Incident Detection and Response include Splunk, Micro Focus, LogRhythm and Microsoft (Sentinel); in Application Security include Micro Focus and IBM; in Security Orchestration and Automation Response include Splunk and Palo Alto Networks; in Cloud Security include Palo Alto Networks and Check Point Software Technologies; in Threat Intelligence include Recorded Future and Digital Shadows and finally, while the competition in our professional services business is diverse, our competitors include Mandiant, SecureWorks and NCC Group.

Some of our actual and potential competitors have advantages over us, such as longer operating histories, significantly greater financial, technical, marketing or other resources, stronger brand and business user recognition, larger and more mature intellectual property portfolios and broader global distribution and presence. In addition, our industry is evolving rapidly and is becoming increasingly competitive. Larger and more established companies may focus on security operations and could directly compete with us. Smaller companies could also launch new products and services that we do not offer and that could gain market acceptance quickly.

Our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. With the introduction of new technologies, the evolution of our offerings and new market entrants, we expect competition to intensify in the future. In addition, some of our larger competitors have substantially broader product offerings and can bundle competing products and services with other software offerings. As a result, customers may choose a bundled product offering from our competitors, even if individual products have more limited functionality than our solutions. These competitors may also offer their products at a lower price as part of this larger sale, which could increase pricing pressure on our offerings and cause the average sales price for our offerings to decline. These larger competitors are also often in a better position to withstand any significant reduction in spending by customers, and will therefore not be as susceptible to economic downturns. These competitive pressures in our market or our failure to compete effectively may result in price reductions, fewer orders, reduced renewals, reduced revenue and gross margins, and loss of market share. Any failure to meet and address these factors could seriously harm our business and operating results.

Furthermore, our current and potential competitors may establish cooperative relationships among themselves or with third parties that may further enhance their resources and product and services offerings in the markets we address. In addition, current or potential competitors may be acquired by third parties with greater available resources. As a result of such relationships and acquisitions, our current or potential competitors might be able to adapt more quickly to new technologies and

49

customer needs, devote greater resources to the promotion or sale of their products and services, initiate or withstand substantial price competition, take advantage of other opportunities more readily or develop and expand their product and service offerings more quickly than we do. For all of these reasons, we may not be able to compete successfully against our current or future competitors, or we may be required to expend significant resources in order to remain competitive. If our competitors are more successful than we are in developing new product and service offerings or in attracting and retaining customers, our business, financial condition and results of operations could be adversely affected.

If we are unable to successfully hire, train, and retain qualified personnel our business may suffer.

We continue to be substantially dependent on our sales force to obtain new customers and increase sales with existing customers. Our ability to successfully pursue our growth strategy will also depend on our ability to attract, motivate and retain our personnel, especially those in sales, marketing and research and development. In addition, in recent years, recruiting, hiring and retaining employees with expertise in the cybersecurity industry has become increasingly difficult as the demand for cybersecurity professionals has increased as a result of the recent cybersecurity attacks on global corporations and governments. We face intense competition for these employees from numerous technology, software and other companies, especially in certain geographic areas in which we operate, and we cannot ensure that we will be able to attract, motivate and/or retain sufficient qualified employees in the future particularly in tight labor markets. If we are unable to attract new employees and retain our current employees, we may not be able to adequately develop and maintain new products or professional services or market our existing products or professional services at the same levels as our competitors and we may, therefore, lose customers and market share. Our failure to attract and retain personnel, especially those in sales and marketing and research and development positions for which we have historically had a high turnover rate, could have an adverse effect on our ability to execute our business objectives and, as a result, our ability to compete could decrease, our operating results could suffer and our revenue could decrease. Even if we are able to identify and recruit a sufficient number of new hires, these new hires will require significant training before they achieve full productivity and they may not become productive as quickly as we would like or at all.

We believe that our corporate culture has been a critical component to our success. We have invested substantial time and resources in building our team. As we grow and mature as a public company, we may find it difficult to maintain our corporate culture. Any failure to preserve our culture could negatively affect our future success, including our ability to attract, motivate and retain personnel and effectively focus on and pursue our business strategy.

Our sales cycle may be unpredictable.

The timing of sales of our offerings is difficult to forecast because of the length and unpredictability of our sales cycle, particularly with large enterprises and with respect to certain of our products. We sell our products primarily to IT departments that are managing a growing set of user and compliance demands, which has increased the complexity of customer requirements to be met and confirmed during the sales cycle and prolonged our sales cycle. Further, the length of time that potential customers devote to their testing and evaluation, contract negotiation and budgeting processes varies significantly, depending on the size of the organization, budgetary constraints and nature of the product or service under consideration. In addition, we might devote substantial time and effort to a particular unsuccessful sales effort, and as a result, we could lose other sales opportunities or incur expenses that are not offset by an increase in revenue, which could harm our business.

If we fail to continue to effectively scale and manage our operations infrastructure, our customers may experience service outages and/or delays.

Our future growth is dependent upon our ability to continue to meet the expanding needs of our customers and to attract new customers. As existing customers gain more experience with our products, they may broaden their reliance on our products, which will require that we expand our operations infrastructure. We also seek to maintain excess capacity in our operations infrastructure to facilitate the rapid provision of new customer deployments. In addition, we need to properly manage our technological operations infrastructure in order to support changes in hardware and software parameters and the evolution of our products, all of which require significant lead time. If we do not accurately predict our infrastructure requirements, our existing customers may experience service outages that may subject us to financial penalties, financial liabilities and customer losses. If our operations infrastructure fails to keep pace with increased sales, customers may experience delays as we seek to obtain additional capacity, which could adversely affect our reputation and our revenue.

To date, we have derived a significant amount of our revenue from customers using our vulnerability management offerings. If we are unable to renew or increase sales of our vulnerability management offerings, or if we are unable to increase sales of our other offerings, our business and operating results could be adversely affected.

Although we continue to introduce and acquire new products and professional services, we derive and expect to continue to derive a significant amount of our revenue from customers using certain of our vulnerability management offerings (“VM”), InsightVM, Nexpose and Metasploit. Approximately half of our revenue was attributable to InsightVM, Nexpose and Metasploit for the year ended December 31, 2021. As a result, our operating results could suffer due to:

50

•any decline in demand for our vulnerability management offerings;

•failure of our vulnerability management offerings to detect vulnerabilities in our customers’ IT environments;

•the introduction of products and technologies that serve as a replacement or substitute for, or represent an improvement over, our vulnerability management offerings;

•technological innovations or new standards that our vulnerability management offerings do not address;

•sensitivity to current or future prices offered by us or competing solutions;

•our inability to release enhanced versions of our vulnerability management offerings on a timely basis in response to the dynamic threat landscape; and

•a decline in overall IT spending due to inflation, weakness or deterioration in global macroeconomic and market conditions, foreign currency exchange rate pressure and the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic.

Our inability to renew or increase sales of our vulnerability management offerings, including cloud-based subscriptions, content subscriptions, managed services and content and maintenance and support subscriptions, or a decline in prices of our vulnerability management offerings would harm our business and operating results more seriously than if we derived significant revenues from a variety of offerings. In addition, while we have introduced several non-VM subscription products, including InsightAppSec, InsightConnect, InsightCloudSec and Threat Intelligence, these products are relatively new, and it is uncertain whether they will gain the market acceptance we expect. Any factor adversely affecting sales of our non-VM products or professional services, including release cycles, market acceptance, competition, performance and reliability, reputation and economic and market conditions, could adversely affect our business and operating results.

A component of our growth strategy is dependent on our continued international expansion, which adds complexity to our operations.

We market and sell our products and professional services throughout the world and have personnel in many parts of the world. For each of the six-month periods ended June 30, 2022 and 2021, operations located outside of North America generated 18% of our revenue. Our growth strategy is dependent, in part, on our continued international expansion. We expect to conduct a significant amount of our business with organizations that are located outside the United States, particularly in Europe and Asia. We cannot assure you that our expansion efforts into international markets will be successful in creating further demand for our products and professional services or in effectively selling our products and professional services in the international markets that we enter. Our current international operations and future initiatives will involve a variety of risks, including:

•increased management, infrastructure and legal costs associated with having international operations;

•reliance on channel partners;

•trade and foreign exchange restrictions;

•economic or political instability or uncertainty in foreign markets and around the world;

•foreign currency exchange rate fluctuations;

•greater difficulty in enforcing contracts, accounts receivable collection and longer collection periods;

•changes in regulatory requirements, including, but not limited to data privacy, data protection and data security regulations;

•difficulties and costs of staffing and managing foreign operations;

•the uncertainty and limitation of protection for intellectual property rights in some countries;

•costs of compliance with foreign laws and regulations and the risks and costs of non-compliance with such laws and regulations;

•costs of compliance with U.S. laws and regulations for foreign operations, including the U.S. Foreign Corrupt Practices Act, import and export control laws, tariffs, trade barriers, economic sanctions and other regulatory or contractual limitations on our ability to sell or provide our solutions in certain foreign markets, and the risks and costs of non-compliance;

•heightened risks of unfair or corrupt business practices in certain geographies and of improper or fraudulent sales arrangements that may impact financial results and result in restatements of, and irregularities in, financial statements;

•the potential for political unrest, acts of terrorism, hostilities or war;

51

•management communication and integration problems resulting from cultural differences and geographic dispersion;

•costs associated with language localization of our products;

•increased exposure to climate change, natural disasters, acts of war (including the armed conflict between Russia and Ukraine), terrorism, epidemics, or pandemics and other health crises, including the ongoing COVID-19 pandemic; and

•costs of compliance with multiple and possibly overlapping tax structures.

Our business, including the sales of our products and professional services by us and our channel partners, may be subject to foreign governmental regulations, which vary substantially from country to country and change from time to time. Our failure, or the failure by our channel partners, to comply with these regulations could adversely affect our business. Further, in many foreign countries it is common for others to engage in business practices that are prohibited by our internal policies and procedures or U.S. regulations applicable to us. Although we have implemented policies and procedures designed to comply with these laws and policies, there can be no assurance that our employees, contractors, channel partners and agents have complied, or will comply, with these laws and policies. Violations of laws or key control policies by our employees, contractors, channel partners or agents could result in delays in revenue recognition, financial reporting misstatements, fines, penalties or the prohibition of the importation or exportation of our products and could have a material adverse effect on our business and results of operations.

Further, in late February 2022, Russian military forces launched a significant military action against Ukraine. While our business and operations have not been significantly impacted, it is not possible to predict the broader or longer-term consequences of this crisis. Consequences of the crisis could include further sanctions, embargoes, regional instability, geopolitical shifts and adverse effects on macroeconomic conditions, security conditions, currency exchange rates and financial markets. There can be no assurance that the armed conflict between Russia and the Ukraine, including any resulting sanctions, export controls or other restrictive actions, will not have a material adverse impact on our future operations and results.

If we are unable to successfully manage the challenges of international expansion and operations, our business and operating results could be adversely affected.

We recognize a significant percentage of our revenue ratably over the term of our agreements with customers, and as a result, downturns or upturns in sales may not be immediately reflected in our operating results.

We recognize a significant percentage of our revenue ratably over the various terms of our agreements with customers. As a result, a substantial portion of the revenue that we report in each period will be derived from the recognition of deferred revenue relating to agreements entered into during previous periods. Consequently, a decline in new sales or renewals in any one period may not be immediately reflected in our revenue results for that period. This decline, however, will negatively affect our revenue in future periods. Accordingly, the effect of significant downturns in sales and market acceptance of our products and potential changes in our rate of renewals may not be fully reflected in our results of operations until future periods. Our model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers generally will be recognized over the applicable term.

We also intend to increase our investment in research and development, sales and marketing, and general and administrative functions and other areas to grow our business. We are likely to recognize the costs associated with these increased investments earlier than some of the anticipated benefits and the return on these investments may be lower, or may develop more slowly, than we expect, which could adversely affect our operating results.

We may be unable to rapidly and efficiently adjust our cost structure in response to significant revenue declines, which could adversely affect our operating results.

If our customers are unable to implement our products successfully, customer perceptions of our offerings may be impaired or our reputation and brand may suffer.

Our products are deployed in a wide variety of IT environments, including large-scale, complex infrastructures. Some of our customers have experienced difficulties implementing our products in the past and may experience implementation difficulties in the future. If our customers are unable to implement our products successfully, customer perceptions of our offerings may be impaired or our reputation and brand may suffer.

In addition, in order for our products to achieve their functional potential, our products must effectively integrate into our customers’ IT infrastructures, which have different specifications, utilize varied protocol standards, deploy products from multiple different vendors and contain multiple layers of products that have been added over time. Our customers’ IT infrastructures are also dynamic, with a myriad of devices and endpoints entering and exiting the customers’ IT systems on a regular basis, and our products must be able to effectively adapt to and track these changes.

52

Any failure by our customers to appropriately implement our products or any failure of our products to effectively integrate and operate within our customers’ IT infrastructures could result in customer dissatisfaction, impact the perceived reliability of our products, result in negative press coverage, negatively affect our reputation and harm our financial results.

Our success in acquiring and integrating other businesses, products or technologies could impact our financial position.

In order to remain competitive, we have in the past and may in the future seek to acquire additional businesses, products or technologies. We also may not find suitable acquisition candidates, and acquisitions we complete may be unsuccessful.

Achieving the anticipated benefits of past or future acquisitions will depend in part upon whether we can integrate acquired operations, products and technology in a timely and cost-effective manner and successfully market and sell these as new product offerings, or as new features within our existing offerings. For example, on July 16, 2021, we acquired IntSights, a provider of contextualized external threat intelligence and proactive threat remediation which were intended to extend the cloud security capabilities of our Insight Platform. The integration of IntSights and any other acquisition may prove to be difficult due to the necessity of coordinating geographically separate organizations and integrating personnel with disparate business backgrounds and accustomed to different corporate cultures and business operations and internal systems. We may need to implement or improve controls, procedures, and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies. The acquisition and integration processes are complex, expensive and time consuming, and may cause an interruption of, or loss of momentum in, product development, sales activities and operations of both companies. Further, we may be unable to retain key personnel of an acquired company following the acquisition. If we are unable to effectively execute or integrate acquisitions, the anticipated benefits of such acquisition, including sales or growth opportunities or targeted synergies may not be realized, and our business, financial condition and operating results could be adversely affected.

In addition, we may only be able to conduct limited due diligence on an acquired company’s operations or may discover that the products or technology acquired were not as capable as we thought based upon the initial or limited due diligence. Following an acquisition, we may be subject to unforeseen liabilities arising from an acquired company’s past or present operations and these liabilities may be greater than the warranty and indemnity limitations that we negotiate. Any unforeseen liability that is greater than these warranty and indemnity limitations could have a negative impact on our financial condition.

We may fail to meet our publicly announced guidance or other expectations about our business and future operating results, which would cause our stock price to decline.

We have provided and may continue to provide guidance about our business, future operating results and key metrics, including ARR. In developing this guidance, our management must make certain assumptions and judgments about our future performance. Some of those key assumptions relate to the impact of the COVID-19 pandemic and the associated economic uncertainty on our business and the timing and scope of economic recovery globally, which are inherently difficult to predict. While presented with numerical specificity, this guidance is necessarily speculative in nature, and is inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to future business decisions or economic conditions, some of which may change. This guidance, which inherently consists of forward-looking statements, is also qualified by, and subject to, assumptions, estimates and expectations as of the date given. Forward-looking statements are subject to a number of risks, uncertainties, assumptions and other factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by the forward-looking statements including the risks described in this Risk Factors section and in the Risk Factors section of our future SEC filings. It can be expected that some or all of the assumptions, estimates and expectations of any guidance we furnished will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what management believes is realizable as of the date of release of such guidance.

Furthermore, analysts and investors may develop and publish their own projections of our business, which may form a consensus about our future performance. Our business results may vary significantly from such projections or that consensus due to a number of factors, many of which are outside of our control, including due to the global economic uncertainty and financial market conditions caused by the COVID-19 pandemic and which could adversely affect our operations and operating results. There are no comparable recent events that provide guidance as to the probable effect of the COVID-19 pandemic, and, as a result, the ultimate impact of the COVID-19 outbreak is highly uncertain and subject to change. If we fail to accurately predict the full impact that the COVID-19 pandemic will have on all aspects of our business, the guidance and other forward-looking statements provided may also be incorrect or incomplete. Furthermore, if we make downward revisions of our previously announced guidance, or if our publicly announced guidance of future operating results fails to meet expectations of securities analysts, investors or other interested parties, the price of our common stock would decline.

53

If we are unable to maintain successful relationships with our channel partners, our business operations, financial results and growth prospects could be adversely affected.

Our success is dependent in part upon establishing and maintaining relationships with a variety of channel partners that we utilize to extend our geographic reach and market penetration. We anticipate that we will continue to rely on these partners in order to help facilitate sales of our offerings as part of larger purchases in the United States and to grow our business internationally. For the years ended December 31, 2021, 2020 and 2019, we derived approximately 52%, 47%, and 43%, respectively, of our revenue from sales of products and professional services through channel partners, and the percentage of revenue derived from channel partners may increase in future periods. Our agreements with our channel partners are non-exclusive and do not prohibit them from working with our competitors or offering competing solutions, and some of our channel partners may have more established relationships with our competitors. If our channel partners choose to place greater emphasis on products of their own or those offered by our competitors or do not effectively market and sell our products and professional services, our ability to grow our business and sell our products and professional services, particularly in key international markets, may be adversely affected. In addition, our failure to recruit additional channel partners, or any reduction or delay in their sales of our products and professional services or conflicts between channel sales and our direct sales and marketing activities may harm our results of operations. Finally, even if we are successful, our relationships with channel partners may not result in greater customer usage of our products and professional services or increased revenue.

If we are not able to maintain and enhance our brand, our business and operating results may be adversely affected.

We believe that maintaining and enhancing our brand identity is critical to our relationships with our customers and channel partners and to our ability to attract new customers and channel partners. The successful promotion of our brand will depend largely upon our marketing efforts, our ability to continue to offer high-quality offerings and our ability to successfully differentiate our offerings from those of our competitors. Our brand promotion activities may not be successful or yield increased revenues. In addition, independent industry analysts often provide reviews of our offerings, as well as those of our competitors, and perception of our offerings in the marketplace may be significantly influenced by these reviews. If these reviews are negative, or less positive as compared to those of our competitors’ products and professional services, our brand may be adversely affected.

Moreover, it may be difficult to maintain and enhance our brand in connection with sales through channel or strategic partners. The promotion of our brand requires us to make substantial expenditures, and we anticipate that the expenditures will increase as our market becomes more competitive, as we expand into new markets and as more sales are generated through our channel partners. To the extent that these activities yield increased revenues, these revenues may not offset the increased expenses we incur. If we do not successfully maintain and enhance our brand, our business may not grow, we may have reduced pricing power relative to competitors with stronger brands, and we could lose customers and channel partners, all of which would adversely affect our business operations and financial results.

Failure to maintain high-quality customer support could have a material adverse effect on our business.

Once our products are deployed within our customers’ networks, our customers depend on our technical and other customer support services to resolve any issues relating to the implementation and maintenance of our products. If we do not effectively assist our customers in deploying our products, help our customers quickly resolve post-deployment issues or provide effective ongoing support, our ability to renew or sell additional products or professional services to existing customers would be adversely affected and our reputation with potential customers could be damaged. Further, to the extent that we are unsuccessful in hiring, training and retaining adequate technical and customer support and success personnel, our ability to provide adequate and timely support to our customers will be negatively impacted, and our customers’ satisfaction with our offerings will be adversely affected.

We are dependent on the continued services and performance of our senior management and other key employees, the loss of any of whom could adversely affect our business, operating results and financial condition.

Our future performance depends on the continued services and contributions of our senior management, particularly Corey Thomas, our Chief Executive Officer, and other key employees to execute on our business plan and to identify and pursue new opportunities and product innovations. From time to time, there may be changes in our senior management team resulting from the termination or departure of our executive officers and key employees. Our senior management and key employees are employed on an at-will basis, which means that they could terminate their employment with us at any time. Further, members of our management and other key personnel in critical functions across our organization may be unable to perform their duties or have limited availability due to COVID-19. The temporary or permanent loss of the services of our senior management, particularly Mr. Thomas, or other key employees for any reason could significantly delay or prevent the achievement of our development and strategic objectives and harm our business, financial condition and results of operations.

54

We rely on third-party software to operate certain functions of our business.

We rely on software vendors to operate certain critical functions of our business, including financial management, customer relationship management and human resource management. If we experience difficulties in implementing new software or if these services become unavailable due to extended outages or interruptions or because they are no longer available on commercially reasonable terms or prices, our expenses could increase, our ability to manage our finances could be interrupted and our processes for managing sales of our solutions and supporting our customers could be impaired until equivalent services, if available, are identified, obtained and integrated, all of which could harm our business.

We use third-party software and data that may be difficult to replace or that may cause errors or failures of our solutions, which could lead to lost customers or harm to our reputation and our operating results.

We license third-party software and security and compliance data from various third parties that are used in our solutions in order to deliver our offerings. In the future, this software or data may not be available to us on commercially reasonable terms, or at all. Any loss of the right to use any of this software or data could result in delays in the provisioning of our offerings until equivalent technology or data is either developed by us, or, if available, is identified, obtained and integrated, which could harm our business. In addition, any errors or defects in or failures of this third-party software could result in errors or defects in our products or cause our products to fail, which could harm our business and be costly to correct. Many of these providers attempt to impose limitations on their liability for such errors, defects or failures, and if enforceable, we may have additional liability to our customers or third-party providers that could harm our reputation and increase our operating costs.

We will need to maintain our relationships with third-party software and data providers, and to obtain software and data from such providers that do not contain errors or defects. Any failure to do so could adversely impact our ability to deliver effective solutions to our customers and could harm our operating results.

Our technology alliance partnerships expose us to a range of business risks and uncertainties that could have a material adverse impact on our business and financial results.

We have entered, and intend to continue to enter, into technology alliance partnerships with third parties to support our future growth plans, including with certain of our actual or potential competitors. For example, through these technology alliance partnerships, we integrate with certain third-party application program interfaces (“APIs”), which enhance our data collection capabilities in our customers’ IT environments. If these third parties no longer allow us to integrate with their APIs, or if we determine not to maintain these integrations, the functionality of our products may be reduced and our products may not be as marketable to certain potential customers. Technology alliance partnerships require significant coordination between the parties involved, particularly if a partner requires that we integrate its products with our products. Further, we have invested and will continue to invest significant time, money and resources to establish and maintain relationships with our technology alliance partners, but we have no assurance that any particular relationship will continue for any specific period of time, result in new offerings that we can effectively commercialize or result in enhancements to our existing offerings. In addition, while we believe that entering into technology alliance partnerships with certain of our actual or potential competitors is currently beneficial to our competitive position in the market, such partnerships may also give our competitors insight into our offerings that they may not otherwise have, thereby allowing them to compete more effectively against us.

If our products fail to help our customers achieve and maintain compliance with regulations and/or industry standards, our revenue and operating results could be harmed.

We generate a portion of our revenue from our vulnerability management offerings that help organizations achieve and maintain compliance with regulations and industry standards both domestically and internationally. For example, many of our customers subscribe to our vulnerability management offerings to help them comply with the security standards developed and maintained by the Payment Card Industry Security Standards Council (the “PCI Council”), which apply to companies that process, transmit or store cardholder data. In addition, our vulnerability management offerings are used by customers in the health care industry to help them comply with numerous federal and state laws and regulations related to patient privacy. In particular, HIPAA, and the 2009 Health Information Technology for Economic and Clinical Health Act include privacy standards that protect individual privacy by limiting the uses and disclosures of individually identifiable health information and implementing data security standards. The foregoing and other state, federal and international legal and regulatory regimes may affect our customers’ requirements for, and demand for, our products and professional services. Governments and industry organizations, such as the PCI Council, may also adopt new laws, regulations or requirements, or make changes to existing laws or regulations, that could impact the demand for, or value of, our products. If we are unable to adapt our products to changing legal and regulatory standards or other requirements in a timely manner, or if our products fail to assist with, or expedite, our customers’ cybersecurity defense and compliance efforts, our customers may lose confidence in our products and could switch to products offered by our competitors or threaten or bring legal actions against us. In addition, if laws, regulations or standards related to data security, vulnerability management and other IT security and compliance requirements are relaxed or the penalties for non-compliance are changed in a manner that makes them less onerous, our customers may view government and

55

industry regulatory compliance as less critical to their businesses, and our customers may be less willing to purchase our products. In any of these cases, our revenue and operating results could be harmed.

In addition, government and other customers may require our products to comply with certain privacy, security or other certifications and standards. If our products are late in achieving or fail to achieve or maintain compliance with these certifications and standards, or our competitors achieve compliance with these certifications and standards, we may be disqualified from selling our products to such customers, or may otherwise be at a competitive disadvantage, either of which would harm our business, results of operations, and financial condition.

A portion of our revenue is generated by sales to government entities, which are subject to a number of challenges and risks.

Selling to government entities can be highly competitive, expensive and time consuming, and often requires significant upfront time and expense without any assurance that we will win a sale. Government demand and payment for our products and professional services may also be impacted by public sector budgetary cycles and funding authorizations, with funding reductions or delays adversely affecting public sector demand for our offerings. Government entities also have heightened sensitivity surrounding the purchase of cybersecurity solutions due to the critical importance of their IT infrastructures, the nature of the information contained within those infrastructures and the fact that they are highly-visible targets for cyber attacks. Accordingly, increasing sales of our products and professional services to government entities may be more challenging than selling to commercial organizations. Further, in the course of providing our products and professional services to government entities, our employees and those of our channel partners may be exposed to sensitive government information. Any failure by us or our channel partners to safeguard and maintain the confidentiality of such information could subject us to liability and reputational harm, which could materially and adversely affect our results of operations and financial performance.

We are exposed to fluctuations in currency exchange rates, which could negatively affect our financial condition and results of operations.

Our reporting currency is the U.S. dollar and we generate a majority of our revenue in U.S. dollars. However, for the six months ended June 30, 2022 and 2021 we incurred 18% and 16%, respectively, of our expenses outside of the United States in foreign currencies, primarily the British pound sterling and euro, principally with respect to salaries and related personnel expenses associated with our sales and research and development operations. Additionally, for the six months ended June 30, 2022 and 2021, 10% and 9%, respectively, of our revenue was generated in foreign currencies. Accordingly, changes in exchange rates may have an adverse effect on our business, operating results and financial condition. The exchange rate between the U.S. dollar and foreign currencies has fluctuated in recent years and may fluctuate substantially in the future. Furthermore, a strengthening of the U.S. dollar could increase the cost in local currency of our products and services to customers outside the United States, which could adversely affect our business, results of operations, financial condition and cash flows. We implemented a hedging program during 2020 and have entered into forward contracts designated as cash flow hedges in order to mitigate our exposure to foreign currency fluctuations resulting from certain operating expenses denominated in certain foreign currencies. These forward contracts and other hedging strategies such as options and foreign exchange swaps related to transaction exposures that we may implement to mitigate this risk in the future may not eliminate our exposure to foreign exchange fluctuations.

Risks Related to Intellectual Property, Litigation and Government Regulation

Failure to protect our proprietary technology and intellectual property rights could substantially harm our business and operating results.

Our success and competitive position depend in part on our ability to protect our intellectual property and proprietary technologies. To safeguard these rights, we rely on a combination of patent, trademark, copyright and trade secret laws and contractual protections in the United States and other jurisdictions, all of which provide only limited protection and may not now or in the future provide us with a competitive advantage.

We cannot assure you that any patents will issue from any patent applications, that patents that issue from such applications will give us the protection that we seek or that any such patents will not be challenged, invalidated, or circumvented. Any patents that may issue in the future from our pending or future patent applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers. We have registered the “Rapid7,” “Nexpose” and “Metasploit” names and logos in the United States and certain other countries. We have registrations and/or pending applications for additional marks in the United States and other countries; however, we cannot assure you that any future trademark registrations will be issued for pending or future applications or that any registered trademarks will be enforceable or provide adequate protection of our proprietary rights. While we have copyrights in our software, we do not typically register such copyrights with the United States Copyright Office. This failure to register the copyrights in our software may preclude us from obtaining statutory damages for infringement under certain circumstances. We also license software from third parties for integration into our products, including open source software and other software available on commercially reasonable terms. We cannot assure you that such third parties will maintain such software or continue to make it available.

56

In order to protect our unpatented proprietary technologies and processes, we rely on trade secret laws and confidentiality agreements with our employees, consultants, channel partners, vendors and others. Despite our efforts to protect our proprietary technology and trade secrets, unauthorized parties may attempt to misappropriate, reverse engineer or otherwise obtain and use them. In addition, others may independently discover our trade secrets, in which case we would not be able to assert trade secret rights, or develop similar technologies and processes. Further, the contractual provisions that we enter into may not prevent unauthorized use or disclosure of our proprietary technology or intellectual property rights and may not provide an adequate remedy in the event of unauthorized use or disclosure of our proprietary technology or intellectual property rights. Moreover, policing unauthorized use of our technologies, trade secrets and intellectual property is difficult, expensive and time-consuming, particularly in foreign countries where the laws may not be as protective of intellectual property rights as those in the United States and where mechanisms for enforcement of intellectual property rights may be weak. We may be unable to determine the extent of any unauthorized use or infringement of our solutions, technologies or intellectual property rights.

From time to time, legal action by us may be necessary to enforce our patents and other intellectual property rights, to protect our trade secrets, to determine the validity and scope of the intellectual property rights of others or to defend against claims of infringement or invalidity. Such litigation could result in substantial costs and diversion of resources and could result in impairment or loss of portions of our intellectual property. Furthermore, our efforts to enforce our intellectual property rights may be met with defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual property rights. Our failure to secure, protect and enforce our intellectual property rights could negatively affect our brand and adversely impact our business, operating results and financial condition.

Assertions by third parties of infringement or other violations by us of their intellectual property rights, whether or not correct, could result in significant costs and harm our business and operating results.

Patent and other intellectual property disputes are common in our industry. We are periodically involved in disputes brought by non-practicing entities alleging patent infringement and we may, from time to time, be involved in other such disputes in the ordinary course of our business. Some companies, including some of our competitors, own large numbers of patents, copyrights and trademarks, which they may use to assert claims against us. Many of these companies have the capability to dedicate substantially greater resources to enforce their intellectual property rights. Third parties have in the past and may in the future assert claims of infringement, misappropriation or other violations of intellectual property rights against us and we are currently involved in legal proceedings with Finjan, Inc., which has filed a complaint against us and our wholly-owned subsidiary, Rapid7 LLC, in the United States District Court, District of Delaware, alleging patent infringement. Third parties may also assert claims against our customers or channel partners, whom we typically indemnify against claims that our solutions infringe, misappropriate or otherwise violate the intellectual property rights of third parties. As the numbers of products and competitors in our market increase and overlaps occur, claims of infringement, misappropriation and other violations of intellectual property rights may increase. Any claim of infringement, misappropriation or other violation of intellectual property rights by a third party, even those without merit, could cause us to incur substantial costs defending against the claim and could distract our management from our business.

The patent portfolios of our most significant competitors are larger than ours. This disparity may increase the risk that they may sue us for patent infringement and may limit our ability to counterclaim for patent infringement or settle through patent cross-licenses. In addition, future assertions of patent rights by third parties, and any resulting litigation, may involve patent holding companies or other adverse patent owners who have no relevant product revenues and against whom our own patents may therefore provide little or no deterrence or protection. There can be no assurance that we will not be found to infringe or otherwise violate any third-party intellectual property rights or to have done so in the past.

An adverse outcome of a dispute may require us to:

•pay substantial damages, including treble damages, if we are found to have willfully infringed a third party’s patents or copyrights;

•cease making, licensing or using solutions that are alleged to infringe or misappropriate the intellectual property of others;

•expend additional development resources to attempt to redesign our solutions or otherwise develop non-infringing technology, which may not be successful;

•enter into potentially unfavorable royalty or license agreements in order to obtain the right to use necessary technologies or intellectual property rights; and

•indemnify our partners and other third parties.

In addition, royalty or licensing agreements, if required or desirable, may be unavailable on terms acceptable to us, or at all, and may require significant royalty payments and other expenditures. Some licenses may also be non-exclusive, and therefore, our competitors may have access to the same technology licensed to us.

57

Any of the foregoing events could seriously harm our business, financial condition and results of operations.

Our products contain third-party open source software components, and our failure to comply with the terms of the underlying open source software licenses could restrict our ability to sell our products.

Our products contain software licensed to us by third parties under so-called “open source” licenses, including the GNU General Public License, the GNU Lesser General Public License, the BSD License, the Apache License and others. From time to time, there have been claims against companies that distribute or use open source software in their products and services, asserting that such open source software infringes the claimants’ intellectual property rights. We could be subject to suits by parties claiming that what we believe to be licensed open source software infringes their intellectual property rights. Use and distribution of open source software may entail greater risks than use of third-party commercial software, as open source licensors generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. In addition, certain open source licenses require that source code for software programs that are subject to the license be made available to the public and that any modifications or derivative works to such open source software continue to be licensed under the same terms.

Although we monitor our use of open source software in an effort both to comply with the terms of the applicable open source licenses and to avoid subjecting our products to conditions we do not intend, the terms of many open source licenses have not been interpreted by U.S. courts, and there is a risk that these licenses could be construed in a way that could impose unanticipated conditions or restrictions on our ability to commercialize our products. The terms of certain open source licenses require us to release the source code of our applications and to make our applications available under those open source licenses if we combine or distribute our applications with open source software in a certain manner. In the event that portions of our applications are determined to be subject to an open source license, we could be required to publicly release the affected portions of our source code, re-engineer all, or a portion of, those applications or otherwise be limited in the licensing of our applications. Disclosing our proprietary source code could allow our competitors to create similar products with lower development effort and time and ultimately, could result in a loss of sales for us. Disclosing the source code of our proprietary software could also make it easier for cyber attackers and other third parties to discover vulnerabilities in or to defeat the protections of our products, which could result in our products failing to provide our customers with the security they expect. Likewise, some open source projects have known security and other vulnerabilities and architecture instabilities, or are otherwise subject to security attacks due to their wide availability, and are provided on an “as-is” basis. Any of these events could have a material adverse effect on our business, operating results and financial condition.

We are subject to governmental export and import controls that could impair our ability to compete in international markets and/or subject us to liability if we are not in compliance with applicable laws.

Like other U.S.-based IT security products, our products are subject to U.S. export control and import laws and regulations, including the U.S. Export Administration Regulations and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Control. Exports of these products must be made in compliance with these laws and regulations. Although we take precautions to prevent our products from being provided in violation of these laws, our products could be provided inadvertently in violation of such laws, despite the precautions we take. Compliance with these laws and regulations is complex, and if we were to fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil and criminal penalties, including fines for our company and responsible employees or managers, and, in extreme cases, incarceration of responsible employees and managers and the possible loss of export privileges. Complying with export control laws and regulations, including obtaining the necessary licenses or authorizations, for a particular sale may be time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. Changes in export or import laws and regulations, shifts in the enforcement or scope of existing laws and regulations, or changes in the countries, governments, persons, products or services targeted by such laws and regulations, could also result in decreased use of our products by, or in our decreased ability to export or sell our products to, existing or potential customers. For example, in response to the armed conflict between Russia and Ukraine, countries such as Canada, the United Kingdom, the European Union, the United States and other countries and organizations have implemented new and stricter sanctions and export controls against officials, individuals, regions, and industries in Russia, Ukraine and Belarus. Each country’s potential response to such sanctions, export controls, tensions, and military actions could damage or disrupt international commerce and the global economy and could have a material adverse effect on our business and results of operations or impact our ability to continue to operate in affected regions.

A decreased use of our products or limitation on our ability to export or sell our products could adversely affect our business, financial condition and results of operations.

We also incorporate encryption technology into our products. These encryption products may be exported outside of the United States only with the required export authorizations, including by a license, a license exception or other appropriate government authorizations, including the filing of a product classification request. In addition, various countries regulate the import and domestic use of certain encryption technology, including through import permitting and licensing requirements, and have

58

enacted laws that could limit our ability to distribute our products or could limit our customers’ ability to implement our products in those countries. Governmental regulation of encryption technology and regulation of imports or exports of encryption products, or our failure to obtain required import or export approval for our products, when applicable, could harm our international sales and adversely affect our revenue. Compliance with applicable laws and regulations regarding the export and import of our products, including with respect to new products or changes in existing products, may create delays in the introduction of our products in international markets, prevent our customers with international operations from deploying our products globally or, in some cases, could prevent the export or import of our products to certain countries, governments, entities or persons altogether.

Our ability to use net operating losses to offset future taxable income may be subject to certain limitations.

As of December 31, 2021, we had federal and state net operating loss carryforwards (“NOLs”), of $510.3 million and $400.7 million, respectively, available to offset future taxable income, which expire in various years beginning in 2022 if not utilized. A lack of future taxable income would adversely affect our ability to utilize these NOLs before they expire. Under the provisions of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), substantial changes in our ownership may limit the amount of pre-change NOLs that can be utilized annually in the future to offset taxable income. Section 382 of the Internal Revenue Code imposes limitations on a company’s ability to use NOLs if a company experiences a more-than-50-percentage point ownership change over a three-year testing period. Based upon our historical analysis, we determined that although a limitation on our historical NOLs exists, we do not expect this limitation to impair our ability to use our NOLs prior to expiration. However, if changes in our ownership occur in the future, our ability to use our NOLs may be further limited. For these reasons, we may not be able to utilize a material portion of the NOLs, even if we achieve profitability. If we are limited in our ability to use our NOLs in future years in which we have taxable income, we will pay more taxes than if we were able to fully utilize our NOLs. This could adversely affect our operating results, cash balances and the market price of our common stock.

We could be subject to additional tax liabilities.

We are subject to U.S. federal, state, local and sales taxes in the United States and foreign income taxes, withholding taxes and transaction taxes in numerous foreign jurisdictions. We generally conduct our international operations through wholly-owned subsidiaries and report our taxable income in various jurisdictions worldwide based upon our business operations in those jurisdictions. Our intercompany relationships are and will continue to be subject to complex transfer pricing regulations administered by taxing authorities in various jurisdictions. Significant judgment is required in evaluating our tax positions and our worldwide provision for taxes. During the ordinary course of business, there are many activities and transactions for which the ultimate tax determination is uncertain and the relevant taxing authorities may disagree with our determinations as to the income and expenses attributable to specific jurisdictions. In addition, our tax obligations and effective tax rates could be adversely affected by changes in the relevant tax, accounting and other laws, regulations, principles and interpretations by recognizing tax losses or lower than anticipated earnings in jurisdictions where we have lower statutory rates and higher than anticipated earnings in jurisdictions where we have higher statutory rates, by changes in foreign currency exchange rates, or by changes in the valuation of our deferred tax assets and liabilities. We may be audited in various jurisdictions, and such jurisdictions may assess additional taxes, sales taxes and value-added taxes against us. Although we believe our tax estimates are reasonable, the final determination of any tax audits or litigation could be materially different from our historical tax provisions and accruals, which could have a material adverse effect on our operating results or cash flows in the period for which a determination is made.

Risks Related to Data Privacy and Cybersecurity

Real or perceived failures, errors or defects in our solutions could adversely affect our brand and reputation, which could have an adverse effect on our business and results of operations.

If our products or professional services fail to detect vulnerabilities in our customers’ cybersecurity infrastructure, or if our products or professional services fail to identify and respond to new and increasingly complex methods of cyber attacks, our business and reputation may suffer. There is no guarantee that our products or professional services will detect all vulnerabilities and threats, especially in light of the rapidly changing security landscape to which we must respond, including the constantly evolving techniques used by attackers to access or sabotage data. If we fail to update our solutions in a timely or effective manner to respond to these threats, our customers could experience security breaches. Many federal, state and foreign governments have enacted laws requiring companies to notify individuals of data security breaches involving their personal data. These mandatory disclosures regarding a security breach often lead to widespread negative publicity, and any association of us with such publicity may cause our customers to lose confidence in the effectiveness of our solutions. An actual or perceived security breach or theft of sensitive data of one of our customers, regardless of whether the breach is attributable to

59

the failure of our products or professional services, could adversely affect the market’s perception of our offerings and subject us to legal claims.

Additionally, our products may falsely detect vulnerabilities or threats that do not actually exist. For example, our Metasploit offering relies on information provided by an active community of security researchers who contribute new exploits, attacks and vulnerabilities. We expect that the continued contributions from these third parties will both enhance the robustness of Metasploit and also support our sales and marketing efforts. However, to the extent that the information from these third parties is inaccurate or malicious, the potential for false indications of security vulnerabilities and susceptibility to attack increases. These false positives, while typical in the industry, may impair the perceived reliability of our offerings and may therefore adversely impact market acceptance of our products and professional services and could result in negative publicity, loss of customers and sales and increased costs to remedy any problem. Further, to the extent that our community of third parties is reduced in size or participants become less active, we may lose valuable insight into the dynamic threat landscape and our ability to quickly respond to new exploits, attacks and vulnerabilities may be reduced.

Our products may also contain undetected errors or defects. Errors or defects may be more likely when a product is first introduced or as new versions are released, or when we introduce an acquired company's products. We have experienced these errors or defects in the past in connection with new products, acquired products and product upgrades and we expect that these errors or defects will be found from time to time in the future in new, acquired or enhanced products after commercial release. Defects may cause our products to be vulnerable to attacks, cause them to fail to detect vulnerabilities or threats, or temporarily interrupt customers’ networking traffic. Any errors, defects, disruptions in service or other performance problems with our products may damage our customers’ businesses and could hurt our reputation. If our products or professional services fail to detect vulnerabilities or threats for any reason, we may incur significant costs, the attention of our key personnel could be diverted, our customers may delay or withhold payment to us or elect not to renew or other significant customer relations problems may arise. We may also be subject to liability claims for damages related to errors or defects in our products. A material liability claim or other occurrence that harms our reputation or decreases market acceptance of our products may harm our business and operating results. Limitation of liability provisions in our standard terms and conditions and our other agreements may not adequately or effectively protect us from any claims related to errors or defects in our solutions, including as a result of federal, state or local laws or ordinances or unfavorable judicial decisions in the United States or other countries.

Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable performance of our products and network infrastructure.

Our brand, reputation and ability to attract, retain and serve our customers are dependent in part upon the reliable performance of our products and network infrastructure. We have experienced, and may in the future experience, disruptions, outages and other performance problems due to a variety of factors, including infrastructure changes, human or software errors, capacity constraints and fraud or security attacks. In some instances, we may not be able to identify the cause or causes of these performance problems within an acceptable period of time.

We utilize third-party data centers located in North America, Europe, Australia and Asia, in addition to operating and maintaining certain elements of our own network infrastructure. Some elements of our complex infrastructure are operated by third parties that we do not control and that could require significant time to replace. We expect this dependence on third parties to continue. More specifically, certain of our products, in particular our cloud-based products, are hosted on cloud providers such as Amazon Web Services, which provides us with computing and storage capacity. Interruptions in our systems or the third-party systems on which we rely, whether due to system failures, computer viruses, physical or electronic break-ins, or other factors, could affect the security or availability of our products, network infrastructure and website.

Prolonged delays or unforeseen difficulties in connection with adding capacity or upgrading our network architecture when required may cause our service quality to suffer. Problems with the reliability or security of our systems or third-party systems on which we rely could harm our reputation. Damage to our reputation and the cost of remedying these problems could negatively affect our business, financial condition, and operating results.

Additionally, our existing data center facilities and third-party hosting providers have no obligations to renew their agreements with us on commercially reasonable terms or at all, and certain of the agreements governing these relationships may be terminated by either party at any time. If we are unable to maintain or renew our agreements with these providers on commercially reasonable terms or if in the future we add additional data center facilities or third-party hosting providers, we may experience additional costs or downtime or delays as we transition our operations.

Any disruptions or other performance problems with our products could harm our reputation and business and may damage our customers’ businesses. Interruptions in our service delivery might reduce our revenue, cause us to issue credits to customers, due to our inability to meet stated service level commitments, subject us to potential liability and cause customers to not renew their purchases or our products.

60

If we or our third party service providers experience a security breach or unauthorized parties otherwise obtain access to our customers’ data, our reputation may be harmed, demand for our solutions may be reduced and we may incur significant liabilities.

We sell cybersecurity and data analytics products. As a result, we have been and will continue to be a target of cyber attacks designed to impede the performance of our products, penetrate our network security or the security of our cloud platform or our internal systems, or that of our customers, misappropriate proprietary information and/or cause interruptions to our services. For example, because Metasploit serves as an introduction to hacking for many individuals, a successful cyber attack on us may be perceived as a victory for the cyber attacker, thereby increasing the likelihood that we may be a target of cyber attacks, even absent financial motives.

We also process, store and transmit our own data as part of our business and operations, including personal, confidential or proprietary information. As many of our customers and employees will continue to work remotely, we expect there will continue to be an increased amount of such information that is stored in our solutions, which increases the exposure and risk of attempted security breaches, cyberattacks and other malicious internet-based activity. Additionally, we make use of third-party technology and systems for a variety of reasons, including, without limitation, encryption and authentication technology, employee email, content delivery to customers, back-office support, credit card processing, customer relationship management, human resources services and other functions.

Computer malware, ransomware, cyber viruses, social engineering (phishing attacks), supply-chain attacks, denial of service or other attacks, employee theft or misuse and increasingly sophisticated network attacks have become more prevalent in our industry, particularly against cloud services. In particular, ransomware attacks, including by organized criminal threat actors, nation-states, and nation-state-supported actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our operations, loss of data and income, reputational harm, and diversion of funds. While extortion payments may alleviate the negative impact of a ransomware attack, we may be unwilling or unable to make such payments due to, for example, applicable laws or regulations prohibiting such payments. Similarly, supply-chain attacks have increased in frequency and severity, and we cannot guarantee that third parties and infrastructure in our supply chain or our third-party partners’ supply chains have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information technology systems (including our products) or the third-party information technology systems that support us and our services. Such attacks may also include exploitation of vulnerabilities in third party or open source software code that may be incorporated into our own or our customers’ or supplier’s systems, such as the vulnerability in the Java logging library known as “log4j” identified in late 2021 that affected many in our industry. Further, if our systems or those of our third-party service providers are breached as a result of third-party action, employee error or misconduct, attackers could learn critical information about how our products operate to help protect our customers’ IT infrastructures from cyber risk, thereby making our customers more vulnerable to cyber attacks. While we maintain measures designed to protect the integrity, confidentiality and security of our data, our security measures could fail and those of our third-party service providers have failed and could fail, any of which could result in unauthorized access to or disclosure, modification, misuse, loss or destruction of such data or financial loss.

Additionally, the growth in state sponsored cyber activity, including those actions taken in connections with the armed conflict in Russia and Ukraine, demonstrates the increasing sophistication and evolution of cyber threats. As a result, we may be unable to anticipate the techniques used or implement adequate measures to prevent an electronic intrusion into our customers through our cloud platform or to prevent breaches and other security incidents affecting our cloud platform, internal networks, systems or data. Further, once identified, we may be unable to remediate or otherwise respond to a breach or other incident in a timely manner. Actual or perceived security breaches of our cloud platform could result in actual or perceived breaches of our customers’ networks and systems.

Since our business is focused on providing reliable security solutions to our customers, a security breach or other security incident, or the perception that one has occurred, could result in a loss of customer confidence in the security of our offerings and damage to our brand, reduce the demand for our offerings, disrupt normal business operations, require us to spend material resources to investigate or correct the breach and to prevent future security breaches and incidents, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity obligations, and adversely affect our revenues and operating results. These risks may increase as we continue to grow the number and scale of our cloud services, and process, store, and transmit increasing amounts of data.

Additionally, we cannot be certain that our insurance coverage will be adequate for data security liabilities actually incurred, that insurance will cover any indemnification claims against us relating to any incident, that insurance will continue to be available to us on economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium increases or the imposition of large deductible or co-insurance requirements, could have a material adverse effect on our business, including our financial condition, operating results, and reputation.

61

If Metasploit were to be used by attackers to exploit vulnerabilities in the cybersecurity infrastructures of third parties, our reputation and business could be harmed.

Although Metasploit is a penetration testing tool that is intended to allow organizations to test the effectiveness of their cybersecurity programs, Metasploit has in the past and may in the future be used to exploit vulnerabilities in the cybersecurity infrastructures of third parties. While we have incorporated certain features into Metasploit to deter misuse, there is no guarantee that these controls will not be circumvented or that Metasploit will only be used defensively or for research purposes. Any actual or perceived security breach, malicious intrusion or theft of sensitive data in which Metasploit is believed to have been used could adversely affect perception of, and demand for, our offerings. Further, the identification of new exploits and vulnerabilities by the Metasploit community may enhance the knowledge base of cyber attackers or enable them to undertake new forms of attacks. If any of the foregoing were to occur, we could suffer negative publicity and loss of customers and sales, as well as possible legal claims.

Because our products collect and store user and related information, domestic and international privacy and cybersecurity concerns, and other laws and regulations, could have a material adverse effect on our business.

We, and our customers, are subject to a number of stringent and changing obligations in domestic and international laws, regulations, guidance, industry standards, external and internal policies and contracts and other obligations that address a range of issues including data privacy and cybersecurity, and restrictions or technological requirements regarding the collection, use, storage, protection, retention or transfer of data. The regulatory framework for online services, data privacy and cybersecurity issues worldwide can vary substantially from jurisdiction to jurisdiction, is rapidly evolving and is likely to remain uncertain for the foreseeable future. This creates some uncertainty as to the effective legal frameworks and our obligations may be subject to differing applications and interpretations, which may be inconsistent or in conflict among jurisdictions. Preparation for and compliance with these obligations requires us to devote significant resources (including, without limitation, financial and time-related resources). These obligations may necessitate changes to our business including our information technologies, systems and practices and to those of any third parties that process personal data on our behalf. Although we strive to comply with all applicable data privacy and security obligations, we may at times fail (or be perceived to have failed) to do so. Moreover, despite our efforts, our personnel or third parties upon whom we rely may fail to comply with such obligations. If we (or third parties upon whom we rely) fail, or are perceived to have failed, to address and comply with data privacy and security obligations, we could face significant consequences. These consequences may include but are not limited to: government enforcement actions (e.g., investigations, fines, penalties, audits, inspections and similar consequences); litigation (including class-related claims); additional reporting requirements and oversight; bans on processing personal data; orders to destroy and not to use personal data; and imprisonment of company officials. Any of these events could have a material adverse effect on our reputation and our business, and financial condition, including but not limited to: loss of customers; interruptions or stoppages in our business or operations; inability to process personal data; inability to operate in specific jurisdictions; limitations in our ability to develop our products and professional services; management's time and other resource expenditures; adverse publicity; and revisions to our operations.

In the United States, federal, state and local governments have enacted numerous data privacy and cybersecurity laws (including data breach notification laws, personal data privacy laws and consumer protection laws). For example, the California Consumer Privacy Act of 2018 (“CCPA”), imposes obligations on businesses to which it applies. These obligations include but are not limited to providing specific disclosures in privacy notices and affording California residents certain rights related to their personal data. The CCPA allows for statutory fines for non-compliance (up to $7,500 per violation). Other states have proposed data privacy laws. If we become subject to new data privacy or security laws, the risk of enforcement action against us could increase because we may become subject to additional obligations, and the number of individuals or entities that can initiate actions against us may increase (including individuals, via a private right of action, and state actors).

Internationally, virtually every jurisdiction in which we operate has established its own data security and cyberprivacy legal frameworks with which we, and/or our customers, must comply, including the European Union's General Data Protection Regulation, 2016/679 (“GDPR”), laws implemented by European Union (“EU”) member states and, following the withdrawal of the United Kingdom (“UK”) from the EU, the so-called ‘UK GDPR’ (“European Data Protection Laws”). The UK’s decision to leave the EU and ongoing developments in the UK have created uncertainty with regard to data protection regulation in the UK. Going forward, there may be an increasing scope for divergence in the application, interpretation and enforcement of data protection laws as between the UK and EU. The European Data Protection Laws present significantly greater risks, compliance burdens and costs for companies with users and operations in the EU and UK. Under the GDPR, fines of up to 20 million euros or up to 4% of the annual global turnover of the infringer, whichever is greater, could be imposed for significant non-compliance and similar levels of fines could also be imposed under the UK GDPR.

The European Data Protection Laws are broad in their application and apply when we do business with EU- and UK-based customers and when our U.S.-based customers collect and use personal data that originates from individuals resident in the EU and UK. They also apply to transfers of personal data between us and our EU- and UK-based subsidiaries, including employee

62

information. Further, many U.S. federal and state and other foreign government bodies and agencies have introduced, and are currently considering, additional laws and regulations. Non-compliance with these laws could result in penalties or significant legal liability. We could be adversely affected if legislation or regulations are expanded to require changes in our business practices or if governing jurisdictions interpret or implement their legislation or regulations in ways that negatively affect our business, results of operations or financial condition.

In addition, certain jurisdictions have enacted data localization laws and cross-border personal data transfer laws. For example, European Data Protection Laws generally prohibit the transfer of personal data from the European Economic Area (“EEA”) and, the UK and Switzerland (collectively, “Europe”), to most other non-European countries unless the parties to the transfer have implemented specific safeguards to protect the transferred personal data. In particular, government regulators in Europe have found that the United States does not provide an adequate level of data privacy and cybersecurity protection and although there are legal mechanisms to allow for the transfer of personal data from Europe to the United States, uncertainty remains about compliance and such mechanisms may not be available or applicable with respect to our personal data processing activities. For example, the “Standard Contractual Clauses” (“SCCs”) that are designed to be a valid mechanism by which parties can transfer personal data out of Europe to jurisdictions that are not found to provide an adequate level of protection, must be assessed on a case-by-case basis taking into account the legal regime applicable in the destination country. Specifically, the parties to the cross-border personal data transfer must evaluate the importing jurisdiction’s laws and implement supplemental security measures as necessary to protect the at-issue personal data. It is likely that there will continue to be some uncertainty regarding the mechanisms by which parties transfer personal data out of Europe to jurisdictions such as the United States. At present, there are few if any viable alternatives to the SCCs. If we cannot implement and maintain a valid mechanism for cross-border personal data transfers, we may face increased exposure to regulatory actions, substantial fines and injunctions against processing (including prohibitions on transferring personal data out of the EU and UK). This may also reduce demand for our services from companies subject to European Data Protection Laws. Loss of our ability to import personal data from the EU and UK may also require us to increase our data processing capabilities in the EEA at significant expense.

The costs of compliance with, and other burdens imposed by, the laws, rules, regulations and policies that are applicable to the businesses of our customers may limit the use and adoption of, and reduce the overall demand for, our software. Privacy or cybersecurity concerns, whether valid or not valid, may inhibit market adoption of our products particularly in certain industries and foreign countries.

Further, there are active legislative discussions regarding the implementation of laws or regulations that could restrict the manner in which security research is conducted and that could restrict or possibly bar the conduct of penetration testing and the use of exploits, which are an essential component of our Metasploit product and our business strategy more generally. Our failure to comply with existing laws, rules or regulations, changes to existing laws or their interpretation, or the imposition of new laws, rules or regulations, could result in additional costs and may necessitate changes to our business practices and divergent operating models, which may have a material and adverse impact on our business, results of operations, and financial condition.

Organizations may be reluctant to purchase our cloud-based offerings due to the actual or perceived vulnerability of cloud solutions.

Some organizations have been reluctant to use cloud solutions for cybersecurity, such as our InsightVM, InsightIDR, InsightAppSec, InsightConnect, InsightCloudSec and Threat Intelligence, because they have concerns regarding the risks associated with the reliability or security of the technology delivery model associated with this solution. If we or other cloud service providers experience security incidents, breaches of customer data, disruptions in service delivery or other problems, the market for cloud solutions as a whole may be negatively impacted, which could harm our business.

Risks Related to our Common Stock

The market price of our common stock has been and is likely to continue to be volatile.

The market price of our common stock may be highly volatile and may fluctuate substantially as a result of a variety of factors, some of which are related in complex ways. Since shares of our common stock were sold in our initial public offering (“IPO”), in July 2015 at a price of $16.00 per share, our stock price has ranged from an intraday low of $9.05 to an intraday high of $145.00 through July 29, 2022. Factors that may affect the market price of our common stock include:

•actual or anticipated fluctuations in our financial condition and operating results;

•variance in our financial performance from expectations of securities analysts;

•changes in our projected operating and financial results;

•changes in the prices of our products and professional services;

•changes in laws or regulations applicable to our products or professional services;

63

•announcements by us or our competitors of significant business developments, acquisitions or new offerings;

•our involvement in any litigation or investigations by regulators;

•our sale of our common stock or other securities in the future;

•changes in our board of directors, senior management or key personnel;

•trading volume of our common stock;

•price and volume fluctuations in the overall stock market;

•effects of inflation and increased interest rates;

•changes in the anticipated future size and growth rate of our market;

•sales of shares of our common stock by us or our stockholders, including sales and purchases of any common stock issued upon conversion of our convertible senior notes; and

•general economic, regulatory and market conditions.

Recently, the stock markets, and in particular the market on which our common stock is listed, have experienced price and volume fluctuations that have affected and continue to affect the market prices of equity securities of many companies due to, among other factors, the actions of market participants or other actions outside of our control, including general market volatility caused by the COVID-19 pandemic. These fluctuations have often been unrelated or disproportionate to the operating performance of those companies. Broad market and industry fluctuations, as well as general economic, political, regulatory and market conditions, may negatively impact the market price of our common stock. In the past, companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future, which could result in substantial costs and divert our management’s attention.

If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, our stock price and trading volume could decline.

The trading market for our common stock depends, in part, on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. If our financial performance fails to meet analyst estimates or one or more of the analysts who cover us downgrade our shares or change their opinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.

We do not intend to pay dividends for the foreseeable future and, as a result, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investments.

Future sales of our common stock or equity-linked securities in the public market could lower the market price for our common stock and adversely impact the trading price of the Notes.

In the future, we may sell additional shares of our common stock or equity-linked securities to raise capital. In addition, a substantial number of shares of our common stock is reserved for issuance upon the exercise of stock options, settlement of other equity incentive awards and upon conversion of the 2025 Notes and 2027 Notes (the “Notes”). The indentures for the Notes do not restrict our ability to issue additional common stock or equity-linked securities in the future. We cannot predict the size of future issuances or the effect, if any, that they may have on the market price for our common stock. The issuance and sale of substantial amounts of common stock or equity-linked securities, or the perception that such issuances and sales may occur, could adversely affect the trading price of the Notes and the market price of our common stock and impair our ability to raise capital through the sale of additional equity or equity-linked securities.

64

Risks Related to our Indebtedness

We have a significant amount of debt that may decrease our business flexibility, access to capital, and/or increase our borrowing costs, and we may still incur additional debt in the future, which may adversely affect our operations and financial results. We may not have sufficient cash flow from our business to pay our substantial debt when due.

In May 2020, we issued $230.0 million aggregate principal amount of 2025 Notes and in March 2021, we issued $600.0 million aggregate principal amount of 2027 Notes. In addition, we may also incur indebtedness under our revolving credit facility. Our indebtedness may:

•limit our ability to borrow additional funds for working capital, capital expenditures, acquisitions or other general business purposes;

•limit our ability to use our cash flow or obtain additional financing for future working capital, capital expenditures, acquisitions or other general business purposes;

•require us to use a substantial portion of our cash flow from operations to make debt service payments;

•limit our flexibility to plan for, or react to, changes in our business and industry;

•place us at a competitive disadvantage compared to our less leveraged competitors; and

•increase our vulnerability to the impact of adverse economic and industry conditions.

Further, the indentures governing the Notes do not restrict our ability to incur additional indebtedness, secure existing or future debt, recapitalize our existing or future debt or take a number of other actions that could intensify the risks discussed above and below. Further, we and our subsidiaries may incur substantial additional indebtedness in the future, subject to the restrictions contained in our revolving credit facility and any future debt instruments existing at the time, some of which may be secured indebtedness. While our revolving credit facility restricts our ability to incur additional indebtedness, if our revolving credit facility is terminated, we may not be subject to such restriction under the terms of such indebtedness.

Our ability to pay our debt when due or to refinance our indebtedness, including the Notes, depends on our future performance, which is subject to economic, financial, competitive, and other factors beyond our control. Our business may not generate cash flow from operations in the future sufficient to service our debt and make necessary capital expenditures. In addition, any required repurchase of the Notes for cash as a result of a fundamental change or voluntary redemption (in each case, pursuant to the terms of the Notes) would lower our current cash on hand such that we would not have that cash available to fund operations. If we are unable to generate sufficient cash flow, we may be required to adopt one or more alternatives, such as selling assets, restructuring our debt or obtaining additional equity capital on terms that may be onerous or highly dilutive. Our ability to refinance our indebtedness will depend on the capital markets and our financial condition at such time. We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on our debt obligations.

In addition, our revolving credit facility contains, and any future additional indebtedness that we may incur may contain, financial and other restrictive covenants that limit our ability to operate our business, raise capital, pay dividends and/or make payments under our other indebtedness. If we fail to comply with these covenants or to make payments under our indebtedness when due, then we would be in default under that indebtedness, which could, in turn, result in that and our other indebtedness becoming immediately payable in full. Any such event of default under our revolving credit facility would give the lenders the right to terminate their commitments to provide additional loans under our revolving credit facility and to declare any and all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable. In addition, the lenders under our revolving credit facility would have the right to proceed against the collateral in which we granted a security interest to them, which consists of substantially all our assets. If the debt under our revolving credit facility were to be accelerated, we may not have sufficient cash or be able to borrow sufficient funds to refinance the debt or sell sufficient assets to repay the debt, which could immediately materially and adversely affect our cash flows, business, results of operations, financial condition and our ability to make payments under our indebtedness, including the Notes, when due. Further, the terms of any new or additional financing may be on terms that are more restrictive or on terms that are less desirable to us.

The conditional conversion feature of the Notes, if triggered, may adversely affect our financial condition and operating results.

In the event the conditional conversion feature of the Notes is triggered, holders of the Notes will be entitled to convert their Notes at any time during specified periods at their option. If one or more holders elect to convert their Notes, unless we elect to satisfy our conversion obligation by delivering solely shares of our common stock (other than paying cash in lieu of delivering any fractional share), we would be required to settle a portion or all of our conversion obligation in cash, which could adversely affect our liquidity. As disclosed in Note 10, Debt, to our consolidated financial statements, during the six months ended June 30, 2022, the 2025 Notes were convertible at the option of the holders. During this period an immaterial principal amount of the

65

2025 Notes were requested for conversion, which was settled during the quarter ended June 30, 2022 in cash. As of June 30, 2022, the 2025 Notes and the 2027 Notes were not convertible at the option of the holder. Whether the Notes will be convertible following the fiscal quarter ending June 30, 2022, will depend on the future satisfaction of a conversion condition. In addition, even if holders of Notes do not elect to convert their Notes, we could be required under applicable accounting rules to reclassify all or a portion of the outstanding principal of the Notes as a current rather than long-term liability, which would result in a material reduction of our net working capital.

The capped call transactions may affect the value of the Notes and our common stock.

In connection with the issuance of the 2023 Notes, the 2025 Notes and the 2027 Notes, we entered into capped call transactions with certain counterparties (the “Capped Calls”). The Capped Calls cover, subject to customary adjustments, the number of shares of our common stock initially underlying each of the 2023 Notes, the 2025 Notes and the 2027 Notes. The Capped Calls are expected to offset the potential dilution as a result of conversion of such Notes. In connection with establishing their initial hedge of the capped call transactions, the counterparties or their respective affiliates entered into various derivative transactions with respect to our common stock concurrently with or shortly after the pricings of the respective Notes, including with certain investors in the applicable Notes. The counterparties and/or or their respective affiliates may modify or unwind their hedge positions by entering into or unwinding various derivatives with respect to our common stock and/or purchasing or selling our common stock or other securities of ours in secondary market transactions prior to the maturity of the applicable Notes (and are likely to do so on each exercise date of the capped call transactions, which are scheduled to occur during the applicable observation period relating to any conversion of the 2025 Notes on or after November 1, 2024 or relating to any conversion of the 2027 Notes on or after December 15, 2026, in each case that is not in connection with a redemption). We redeemed the 2023 Notes in November 2021. As described elsewhere in this Quarterly Report on Form 10-Q, the 2023 capped calls were not redeemed with the redemption of the 2023 Notes. We cannot make any prediction as to the direction or magnitude of any potential effect that the transactions described above may have on the prices of the Notes or the shares of our common stock. Any of these activities could adversely affect the value of the Notes and our common stock.

We are subject to counterparty risk with respect to the capped call transactions.

The option counterparties are financial institutions, and we will be subject to the risk that one or more of the option counterparties may default or otherwise fail to perform, or may exercise certain rights to terminate, their obligations under the Capped Calls. Our exposure to the credit risk of the option counterparties will not be secured by any collateral. Recent global economic conditions have resulted in the actual or perceived failure or financial difficulties of many financial institutions. If an option counterparty becomes subject to insolvency proceedings, we will become an unsecured creditor in those proceedings with a claim equal to our exposure at the time under such transaction. Our exposure will depend on many factors but, generally, our exposure will increase if the market price or the volatility of our common stock increases. In addition, upon a default or other failure to perform, or a termination of obligations, by an option counterparty, we may suffer adverse tax consequences and more dilution than we currently anticipate with respect to our common stock. We can provide no assurances as to the financial stability or viability of the option counterparties.

Provisions in the indentures for the Notes may deter or prevent a business combination that may be favorable to our stockholders.

If a fundamental change occurs prior to the maturity date of the Notes, holders of the Notes, will have the right, at their option, to require us to repurchase all or a portion of their Notes. In addition, if a “make-whole fundamental change” (as defined in the indentures) occurs prior the maturity date, we will in some cases be required to increase the conversion rate of the Notes for a holder that elects to convert its Notes in connection with such make-whole fundamental change.

Furthermore, the indentures governing the Notes prohibit us from engaging in certain mergers or acquisitions unless, among other things, the surviving entity assumes our obligations under the Notes. These and other provisions in the indentures could deter or prevent a third party from acquiring us even when the acquisition may be favorable to our stockholders.

Conversion of the Notes will dilute the ownership interest of existing stockholders, including holders who had previously converted their Notes, or may otherwise depress the price of our common stock.

The conversion of some or all of the Notes will dilute the ownership interests of existing stockholders to the extent we deliver shares of our common stock upon conversion of any of the Notes. As disclosed in Note 10, Debt, to our consolidated financial statements, the conditional conversion features of the 2025 Notes were triggered as of March 31, 2022, and the 2025 Notes were convertible at the option of the holders, in whole or in part, between April 1, 2022 and June 30, 2022. As of June 30, 2022, the 2025 Notes and the 2027 Notes were not convertible at the option of the holder. Any sales in the public market of the common stock issuable upon such conversion could adversely affect prevailing market prices of our common stock. In addition, the existence of the Notes may encourage short selling by market participants because the conversion of the Notes could be

66

used to satisfy short positions, or anticipated conversion of the Notes into shares of our common stock could depress the price of our common stock.

General Risks

Failure to comply with governmental laws and regulations could harm our business.

Our business is subject to regulation by various federal, state, local and foreign governments. In certain jurisdictions, these regulatory requirements may be more stringent than those in the United States. Noncompliance with applicable regulations or requirements could subject us to investigations, sanctions, mandatory product recalls, enforcement actions, disgorgement of profits, fines, damages, civil and criminal penalties, injunctions or other collateral consequences. If any governmental sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations, and financial condition could be materially adversely affected. In addition, responding to any action will likely result in a significant diversion of management’s attention and resources and an increase in professional fees. Enforcement actions and sanctions could harm our business, reputation, results of operations and financial condition.

Our business is subject to the risks of climate change, pandemics, earthquakes, fire, power outages, floods and other catastrophic events, and to interruption by manmade problems such as terrorism.

A significant public health crisis, epidemic or pandemic (including the ongoing COVID-19 pandemic), or climate change, or a natural disaster, such as an earthquake, fire or a flood, or a significant power outage could have a material adverse impact on our business, operating results and financial condition. In addition, public health crises, climate change, or natural disasters could affect our channel partners’ ability to perform services for us on a timely basis. In the event we or our channel partners are hindered by any of the events discussed above, our ability to provide our products or professional services to customers could be delayed.

In addition, our facilities and those of our third-party data centers and hosting providers are vulnerable to damage or interruption from human error, intentional bad acts, pandemics, earthquakes, hurricanes, floods, fires, war (including the armed conflict between Russia and Ukraine), terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. The occurrence of a public health crisis, climate change, natural disaster, power failure or an act of terrorism, vandalism or other misconduct, a decision by a third party to close a facility on which we rely without adequate notice, or other unanticipated problems could result in lengthy interruptions in provision or delivery of our products, potentially leaving our customers vulnerable to cyber attacks. The occurrence of any of the foregoing events could damage our systems and hardware or could cause them to fail completely, and our insurance may not cover such events or may be insufficient to compensate us for the potentially significant losses, including the potential harm to the future growth of our business, that may result from interruptions in our service as a result of system failures.

All of the aforementioned risks may be exacerbated if our disaster recovery plans or the disaster recovery plans established for our third-party data centers and hosting providers prove to be inadequate. To the extent that any of the above results in delayed or reduced customer sales, our business, financial condition and results of operations could be adversely affected.

We are obligated to maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We have been and are required, pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting on an annual basis. This assessment includes disclosure of any material weaknesses identified by our management in our internal control over financial reporting. During the evaluation and testing process, if we identify one or more material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal controls are effective. While we have established certain procedures and control over our financial reporting processes, we cannot assure you that these efforts will prevent restatements of our financial statements in the future.

Our independent registered public accounting firm is also required, pursuant to Section 404, to report annually on the effectiveness of our internal control over financial reporting. This assessment is required to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. For future reporting periods, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our controls are documented, designed or operating. We may not be able to remediate any future material weaknesses, or to complete our evaluation, testing and any required remediation in a timely fashion.

If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion that our internal controls over financial reporting are effective, investors could lose confidence in the accuracy and completeness of our financial reports, which could cause the price of our common stock to decline, and we could be subject to sanctions or investigations by regulatory authorities, including the SEC and Nasdaq. Failure

67

to remediate any material weakness in our internal control over financial reporting, or to maintain other effective control systems required of public companies, could also restrict our future access to the capital markets.

Changes in financial accounting standards may adversely impact our reported results of operations.

A change in accounting standards or practices could adversely affect our operating results and may even affect our reporting of transactions completed before the change is effective. New accounting pronouncements and varying interpretations of accounting pronouncements have occurred and may occur in the future. Changes to existing rules or the questioning of current practices may adversely affect our operating results.

We may require additional capital to support business growth, and this capital might not be available on acceptable terms, if at all.

We intend to continue to make investments to support our business growth and may require additional funds to respond to business challenges, including the need to develop new features or enhance our products, improve our operating infrastructure or acquire complementary businesses and technologies. Accordingly, we may need to engage in equity or debt financings to secure additional funds. If we raise additional funds through future issuances of equity or convertible debt securities, our existing stockholders could suffer significant dilution, and any new equity securities we issue could have rights, preferences and privileges superior to those of holders of our common stock. Any debt financing that we may secure in the future could involve restrictive covenants relating to our capital raising activities and other financial and operational matters, which may make it more difficult for us to obtain additional capital and to pursue business opportunities, including potential acquisitions. We may not be able to obtain additional financing on terms favorable to us, if at all. For example, while the potential impact and duration of the COVID-19 pandemic on the global economy and our business in particular may be difficult to assess or predict, the pandemic has resulted in, and may continue to result in significant disruption of global financial markets, reducing our ability to access capital, which could in the future negatively affect our liquidity. Although we expect that current cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our domestic and international working capital needs and other capital and liquidity requirements for at least the next 12 months, if we are unable to obtain adequate financing or financing on terms satisfactory to us if and when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly impaired, and our business may be adversely affected.

Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

Provisions in our amended and restated certificate of incorporation and amended and restated bylaws may have the effect of delaying or preventing a change in control or changes in our management. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws include provisions that:

•authorize our board of directors to issue preferred stock without further stockholder action and with voting liquidation, dividend and other rights superior to our common stock;

•require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent, and limit the ability of our stockholders to call special meetings;

•establish an advance notice procedure for stockholder proposals to be brought before an annual meeting, including proposed nominations of persons for director nominees;

•establish that directors elected prior to our 2021 annual meeting serve three-year staggered terms and subsequent to the 2023 annual meeting, each director will hold office for a term of one year;

•as of June 30, 2022, require the approval of the holders of a majority of the voting power of all of the then-outstanding shares of capital stock of the Company entitled to vote generally at an election of directors, voting together as a single class, to adopt, amend or repeal our amended and restated bylaws or amend or repeal the provisions of our amended and restated certificate of incorporation regarding the election and removal of directors and the ability of stockholders to take action by written consent or call a special meeting;

•prohibit cumulative voting in the election of directors; and

•provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum.

These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any

68

of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Any of the foregoing provisions could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Pursuant to our amended and restated certificate of incorporation, unless we consent in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware is the sole and exclusive forum for (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers or other employees to us or our stockholders, (3) any action asserting a claim arising pursuant to any provision of the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws or (4) any action asserting a claim governed by the internal affairs doctrine. Our amended and restated certificate of incorporation further provides that any person or entity purchasing or otherwise acquiring any interest in shares of our common stock is deemed to have notice of and consented to the foregoing provision. The forum selection clause in our amended and restated certificate of incorporation may limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us.

Item 2.    Unregistered Sales of Equity Securities and Use of Proceeds.

(a) Recent Sales of Unregistered Equity Securities

None.

(b) Use of Proceeds from Initial Public Offering of Common Stock

None.

(c) Issuer Purchases of Equity Securities

None.

Item 3.    Defaults Upon Senior Securities.

Not applicable.

Item 4.    Mine Safety Disclosures.

Not applicable.

Item 5.    Other Information.

None.

69

Item 6.    Exhibits.

Exhibit Number	Description
3.1	Amended and Restated Certificate of Incorporation of Rapid7, Inc. (filed as Exhibit 3.1 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37496), filed with the Securities and Exchange Commission on August 10, 2020, and incorporated herein by reference).
3.2	Amended and Restated Bylaws of Rapid7, Inc. (filed as Exhibit 3.2 to the Registrant’s Quarterly Report on Form 10-Q (File No. 001-37496), filed with the Securities and Exchange Commission on August 10, 2020, and incorporated herein by reference).
31.1*	Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	Inline XBRL Instance Document - the instance document does not appear in the Interactive Data file because its XBRL tags are embedded within the inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data file (formatted as inline XBRL with applicable taxonomy extension information contained in Exhibits 101)

* Filed herewith.

** This certification is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liability of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended.

70

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

	RAPID7, INC.
Date: August 4, 2022	By:	/s/ Corey E. Thomas
		Name:  Corey E. Thomas
		Title:    Chief Executive Officer
		(Principal Executive Officer)
Date: August 4, 2022	By:	/s/ Tim Adams
		Name:  Tim Adams
		Title:    Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

71

EX-31.1

Exhibit 31.1

CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Corey E. Thomas, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Rapid7, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2022	By:	/s/ Corey E. Thomas
		Name:  Corey E. Thomas
		Title:    Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Tim Adams, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Rapid7, Inc.;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4.The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: August 4, 2022	By:	/s/ Tim Adams
		Name:  Tim Adams
		Title:    Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Corey E. Thomas, Chief Executive Officer of Rapid7, Inc., do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge, the Quarterly Report on Form 10-Q of Rapid7, Inc. for the quarter ended June 30, 2022 (the “Report”):

(1)fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Rapid7, Inc. for the period presented herein.

Date: August 4, 2022	By:	/s/ Corey E. Thomas
		Name:  Corey E. Thomas
		Title:    Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

I, Tim Adams, Chief Financial Officer of Rapid7, Inc., do hereby certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge, the Quarterly Report on Form 10-Q of Rapid7, Inc. for the quarter ended June 30, 2022 (the “Report”):

(1)fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Rapid7, Inc. for the period presented herein.

Date: August 4, 2022	By:	/s/ Tim Adams
		Name:  Tim Adams
		Title:    Chief Financial Officer
		(Principal Financial Officer and Principal Accounting Officer)

XML

Cover - shares	6 Months Ended
	Jun. 30, 2022	Jul. 29, 2022
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2022
Document Transition Report	false
Entity File Number	001-37496
Entity Registrant Name	RAPID7, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	35-2423994
Entity Address, Address Line One	120 Causeway Street
Entity Address, City or Town	Boston,
Entity Address, State or Province	MA
Entity Address, Postal Zip Code	02114
City Area Code	617
Local Phone Number	247-1717
Title of 12(b) Security	Common Stock, $0.01 par value per share
Trading Symbol	RPD
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		58,700,340
Entity Central Index Key	0001560327
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2022
Document Fiscal Period Focus	Q2
Amendment Flag	false

XML

Consolidated Balance Sheets (Unaudited) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Current assets:
Cash and cash equivalents	$ 163,469	$ 164,582
Short-term investments	76,244	58,850
Accounts receivable, net of allowance for credit losses of $2,266 and $1,978 at June 30, 2022 and December 31, 2021, respectively	124,701	146,094
Deferred contract acquisition and fulfillment costs, current portion	31,367	29,974
Prepaid expenses and other current assets	34,221	33,236
Total current assets	430,002	432,736
Long-term investments	14,330	34,068
Property and equipment, net	50,533	50,225
Operating lease right-of-use assets	84,937	83,751
Deferred contract acquisition and fulfillment costs, non-current portion	60,878	57,191
Goodwill	515,631	515,258
Intangible assets, net	105,785	111,591
Other assets	23,452	11,191
Total assets	1,285,548	1,296,011
Current liabilities:
Accounts payable	6,832	3,521
Accrued expenses	66,348	82,620
Operating lease liabilities, current portion	11,809	9,630
Deferred revenue, current portion	395,208	372,067
Other current liabilities	3,473	842
Total current liabilities	483,670	468,680
Convertible senior notes, non-current portion, net	813,950	812,063
Operating lease liabilities, non-current portion	89,473	90,865
Deferred revenue, non-current portion	33,098	33,056
Other long-term liabilities	13,512	17,342
Total liabilities	1,433,703	1,422,006
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized at June 30, 2022 and December 31, 2021; 0 shares issued at June 30, 2022 and December 31, 2021	0	0
Common stock, $0.01 par value per share; 100,000,000 shares authorized at June 30, 2022 and December 31, 2021; 59,122,773 and 58,181,816 shares issued at June 30, 2022 and December 31, 2021, respectively; 58,635,965 and 57,695,008 shares outstanding at June 30, 2022 and December 31, 2021, respectively	586	577
Treasury stock, at cost, 486,808 shares at June 30, 2022 and December 31, 2021	(4,764)	(4,764)
Additional paid-in-capital	681,194	615,032
Accumulated other comprehensive loss	(4,538)	(812)
Accumulated deficit	(820,633)	(736,028)
Total stockholders’ equity (deficit)	(148,155)	(125,995)
Total liabilities and stockholders’ equity (deficit)	$ 1,285,548	$ 1,296,011

XML

Consolidated Balance Sheets (Unaudited) (Parenthetical) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Statement of Financial Position [Abstract]
Net of allowance for doubtful accounts	$ 2,266	$ 1,978
Preferred stock, par value (in dollars per share)	$ 0.01	$ 0.01
Preferred stock, shares authorized (in shares)	10,000,000	10,000,000
Preferred stock, shares issued (in shares)	0	0
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	100,000,000	100,000,000
Common stock, shares issued (in shares)	59,122,773	58,181,816
Common stock, shares outstanding (in shares)	58,635,965	57,695,008
Treasury stock, shares (in shares)	486,808	486,808

XML

Consolidated Statements of Operations (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Revenue:
Total revenue	$ 167,455	$ 126,421	$ 324,839	$ 243,872
Cost of revenue:
Total cost of revenue	54,275	39,308	105,564	75,597
Total gross profit	113,180	87,113	219,275	168,275
Operating expenses:
Research and development	48,907	35,305	98,719	68,385
Sales and marketing	78,034	56,246	153,180	111,224
General and administrative	20,890	17,488	42,406	33,708
Total operating expenses	147,831	109,039	294,305	213,317
Loss from operations	(34,651)	(21,926)	(75,030)	(45,042)
Other income (expense), net:
Interest income	243	122	355	218
Interest expense	(2,758)	(3,059)	(5,451)	(8,453)
Other income (expense), net	(2,403)	148	(3,006)	(919)
Loss before income taxes	(39,569)	(24,715)	(83,132)	(54,196)
Provision for income taxes	37	9,449	1,473	9,813
Net loss	$ (39,606)	$ (34,164)	$ (84,605)	$ (64,009)
Net loss per share, basic (in dollars per share)	$ (0.68)	$ (0.62)	$ (1.46)	$ (1.18)
Net loss per share, diluted (in dollars per share)	$ (0.68)	$ (0.62)	$ (1.46)	$ (1.18)
Weighted-average common shares outstanding, basic (in Shares)	58,239,958	55,392,383	57,983,790	54,169,464
Weighted-average common shares outstanding, diluted (in Shares)	58,239,958	55,392,383	57,983,790	54,169,464
Products
Revenue:
Total revenue	$ 159,122	$ 119,147	$ 308,147	$ 228,432
Cost of revenue:
Total cost of revenue	45,867	33,169	89,339	62,819
Professional services
Revenue:
Total revenue	8,333	7,274	16,692	15,440
Cost of revenue:
Total cost of revenue	$ 8,408	$ 6,139	$ 16,225	$ 12,778

XML

Consolidated Statements of Comprehensive Loss (Unaudited) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Statement of Comprehensive Income [Abstract]
Net loss	$ (39,606)	$ (34,164)	$ (84,605)	$ (64,009)
Other comprehensive income (loss):
Change in fair value of cash flow hedges	(3,027)	(72)	(3,925)	(201)
Adjustments for net losses (gains) realized and included in net loss	761	(174)	1,077	(378)
Total change in unrealized losses on cash flow hedges	(2,266)	(246)	(2,848)	(579)
Change in unrealized losses on investments	(220)	(3)	(878)	(12)
Total other comprehensive loss	(2,486)	(249)	(3,726)	(591)
Comprehensive loss	$ (42,092)	$ (34,413)	$ (88,331)	$ (64,600)

XML

Consolidated Statements of Changes in Stockholders' (Deficit) (Unaudited) - USD ($) $ in Thousands	Total	Cumulative Effect, Period of Adoption, Adjustment	Common stock	Treasury stock	Additional paid-in-capital	Additional paid-in-capital Cumulative Effect, Period of Adoption, Adjustment	Accumulated other comprehensive gain (loss)	Accumulated deficit	Accumulated deficit Cumulative Effect, Period of Adoption, Adjustment
Common stock, beginning balance (in shares) at Dec. 31, 2020			52,225,000
Treasury stock, beginning balance (in shares) at Dec. 31, 2020				487,000
Beginning balance at Dec. 31, 2020	$ 71,536	$ (71,441)	$ 522	$ (4,764)	$ 692,603	$ (99,026)	$ 454	$ (617,279)	$ 27,585
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	44,771				44,771
Issuance of common stock under employee stock purchase plan (in shares)			148,000
Issuance of common stock under employee stock purchase plan	4,467		$ 1		4,466
Vesting of restricted stock units (in shares)			874,000
Vesting of restricted stock units	0		$ 9		(9)
Shares withheld for employee taxes (in shares)			(80,000)
Shares withheld for employee taxes	(6,671)		$ (1)		(6,670)
Issuance of common stock upon exercise of stock options (in shares)			279,000
Issuance of common stock upon exercise of stock options	2,521		$ 3		2,518
Purchase of capped calls related to convertible senior notes	(76,020)				(76,020)
Issuance of common stock in connection with repurchase of convertible senior notes (in shares)			2,200,000
Issuance of common stock in connection with conversion of convertible senior notes	(2,698)		$ 22		(2,720)
Issuance of common stock in connection with inducement of convertible senior notes (in shares)			35,000
Issuance of common stock in connection with inducement of convertible senior notes	2,740				2,740
Issuance of common stock related to acquisition (in shares)			67,000
Issuance of common stock related to acquisition	0		$ 1		(1)
Other comprehensive loss	(591)						(591)
Net loss	(64,009)							(64,009)
Common stock, ending balance (in shares) at Jun. 30, 2021			55,748,000
Treasury stock, ending balance (in shares) at Jun. 30, 2021				487,000
Ending balance at Jun. 30, 2021	(95,395)		$ 557	$ (4,764)	562,652		(137)	(653,703)
Common stock, beginning balance (in shares) at Mar. 31, 2021			55,091,000
Treasury stock, beginning balance (in shares) at Mar. 31, 2021				487,000
Beginning balance at Mar. 31, 2021	(81,225)		$ 551	$ (4,764)	542,415		112	(619,539)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	22,487				22,487
Vesting of restricted stock units (in shares)			500,000
Vesting of restricted stock units	0		$ 5		(5)
Shares withheld for employee taxes (in shares)			(42,000)
Shares withheld for employee taxes	(3,347)		$ (1)		(3,346)
Issuance of common stock upon exercise of stock options (in shares)			109,000
Issuance of common stock upon exercise of stock options	1,103		$ 1		1,102
Issuance of common stock in connection with repurchase of convertible senior notes (in shares)			23,000
Issuance of common stock in connection with conversion of convertible senior notes	0
Issuance of common stock in connection with inducement of convertible senior notes (in shares)			67,000
Issuance of common stock in connection with inducement of convertible senior notes	0		$ 1		(1)
Other comprehensive loss	(249)						(249)
Net loss	(34,164)							(34,164)
Common stock, ending balance (in shares) at Jun. 30, 2021			55,748,000
Treasury stock, ending balance (in shares) at Jun. 30, 2021				487,000
Ending balance at Jun. 30, 2021	$ (95,395)		$ 557	$ (4,764)	562,652		(137)	(653,703)
Common stock, beginning balance (in shares) at Dec. 31, 2021	58,181,816		57,695,000
Treasury stock, beginning balance (in shares) at Dec. 31, 2021	486,808			487,000
Beginning balance at Dec. 31, 2021	$ (125,995)		$ 577	$ (4,764)	615,032		(812)	(736,028)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	64,365				64,365
Issuance of common stock under employee stock purchase plan (in shares)			81,000
Issuance of common stock under employee stock purchase plan	5,710		$ 1		5,709
Vesting of restricted stock units (in shares)			766,000
Vesting of restricted stock units	0		$ 8		(8)
Shares withheld for employee taxes (in shares)			(59,000)
Shares withheld for employee taxes	(5,106)		$ (1)		(5,105)
Issuance of common stock upon exercise of stock options (in shares)			120,000
Issuance of common stock upon exercise of stock options	1,205		$ 1		1,204
Issuance of common stock in connection with conversion of convertible senior notes	(3)				(3)
Issuance of common stock related to acquisition (in shares)			33,000
Issuance of common stock related to acquisition	0
Other comprehensive loss	(3,726)						(3,726)
Net loss	$ (84,605)							(84,605)
Common stock, ending balance (in shares) at Jun. 30, 2022	59,122,773		58,636,000
Treasury stock, ending balance (in shares) at Jun. 30, 2022	486,808			487,000
Ending balance at Jun. 30, 2022	$ (148,155)		$ 586	$ (4,764)	681,194		(4,538)	(820,633)
Common stock, beginning balance (in shares) at Mar. 31, 2022			58,242,000
Treasury stock, beginning balance (in shares) at Mar. 31, 2022				487,000
Beginning balance at Mar. 31, 2022	(136,551)		$ 582	$ (4,764)	650,710		(2,052)	(781,027)
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock-based compensation expense	31,890				31,890
Vesting of restricted stock units (in shares)			364,000
Vesting of restricted stock units	0		$ 4		(4)
Shares withheld for employee taxes (in shares)			(24,000)
Shares withheld for employee taxes	(1,645)		$ 0		(1,645)
Issuance of common stock upon exercise of stock options (in shares)			21,000
Issuance of common stock upon exercise of stock options	246		$ 0		246
Issuance of common stock in connection with conversion of convertible senior notes	(3)				(3)
Issuance of common stock related to acquisition (in shares)			33,000
Issuance of common stock related to acquisition	0
Other comprehensive loss	(2,486)						(2,486)
Net loss	$ (39,606)							(39,606)
Common stock, ending balance (in shares) at Jun. 30, 2022	59,122,773		58,636,000
Treasury stock, ending balance (in shares) at Jun. 30, 2022	486,808			487,000
Ending balance at Jun. 30, 2022	$ (148,155)		$ 586	$ (4,764)	$ 681,194		$ (4,538)	$ (820,633)

XML

Consolidated Statements of Cash Flows (Unaudited) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Cash flows from operating activities:
Net loss	$ (84,605)	$ (64,009)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	20,392	13,768
Amortization of debt issuance costs	1,990	1,791
Stock-based compensation expense	61,333	44,676
Deferred income taxes	0	3,924
Induced conversion expense	0	2,740
Other	2,281	1,446
Changes in operating assets and liabilities:
Accounts receivable	18,147	12,816
Deferred contract acquisition and fulfillment costs	(5,080)	(5,453)
Prepaid expenses and other assets	(10,527)	394
Accounts payable	3,557	(1,329)
Accrued expenses	(12,493)	(7,592)
Deferred revenue	23,183	22,220
Other liabilities	(326)	4,389
Net cash provided by operating activities	17,852	29,781
Cash flows from investing activities:
Business acquisition, net of cash acquired	0	(52,420)
Purchases of property and equipment	(7,224)	(2,671)
Capitalization of internal-use software costs	(8,058)	(4,205)
Purchases of investments	(58,997)	(59,308)
Sales/maturities of investments	60,329	87,938
Other investments	(500)	(1,500)
Net cash used in investing activities	(14,450)	(32,166)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $14,560 for the six months ended June 30, 2021	0	585,440
Purchase of capped calls related to convertible senior notes	0	(76,020)
Payments of debt issuance costs	(71)	0
Payments for repurchase and conversion of convertible senior notes	(12)	(184,649)
Payments related to business acquisitions	(300)	(2,431)
Taxes paid related to net share settlement of equity awards	(5,106)	(6,671)
Proceeds from employee stock purchase plan	5,710	4,467
Proceeds from stock option exercises	1,205	2,530
Net cash provided by financing activities	1,426	322,666
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(3,671)	(293)
Net increase in cash, cash equivalents and restricted cash	1,157	319,988
Cash, cash equivalents and restricted cash, beginning of period	165,017	173,617
Cash, cash equivalents and restricted cash, end of period	166,174	493,605
Supplemental cash flow information:
Cash paid for interest on convertible senior notes	3,337	4,025
Cash paid for income taxes, net of refunds	564	632
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	163,469	493,568
Restricted cash included in prepaid expenses and other assets	2,705	37
Total cash, cash equivalents and restricted cash	$ 166,174	$ 493,605

XML

Consolidated Statements of Cash Flows (Unaudited) (Parenthetical) $ in Thousands	6 Months Ended
	Jun. 30, 2021 USD ($)
Convertible Debt
Payments of debt issuance costs	$ 14,560

XML

Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies

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 Insight Platform. 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.

Basis of Presentation and Consolidation

The accompanying unaudited 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 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, 2021 filed with the SEC on February 24, 2022.

The 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 six months ended June 30, 2022 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 the estimated economic life of perpetual licenses for revenue recognition, the determination of standalone selling prices in revenue transactions with multiple performance obligations, the estimated period of benefit for deferred contract acquisition and fulfillment 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 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.

The COVID-19 pandemic has resulted in a sustained global slowdown of economic activity that has decreased demand for a broad variety of goods and services, including from our customers. While we have not experienced significant disruptions from the COVID-19 pandemic during the three and six months ended June 30, 2022, we are unable to accurately predict the extent to which the ongoing COVID-19 pandemic may impact our business, results of operations and financial condition going forward. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, assumptions and judgments or revise the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained and will be recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

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, 2021. There have been no changes to the significant accounting policies during the three and six-month periods ended June 30, 2022.

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which clarified the accounting for acquired revenue contracts with customers in a business combination. ASU 2021-08 requires acquirers to measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. As a result, it is generally expected that an acquirer will recognize and measure contract assets and liabilities in a manner consistent with how they were recognized by the acquiree in its preacquisition financial statements. This standard is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We early adopted this standard on January 1, 2022. This guidance will be applied prospectively to all business combinations that occur on or after January 1, 2022.

Accounting Pronouncements Not Yet Effective

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to GAAP guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") to alternative reference rates. We may elect to apply the amendments prospectively through December 31, 2022. The impact to our consolidated financial statements from the adoption of this standard is expected to be immaterial.

XML

Revenue from Contracts with Customers

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Revenue from Contracts with Customers

Revenue from Contracts with Customers

We generate revenue primarily from: (1) subscriptions from the sale of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with our software licenses, (2) perpetual software licenses, and (3) professional services from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Subscriptions	$	157,771	$	117,014	$	305,238	$	224,181
Perpetual software licenses	1,106		2,036		2,467		4,150
Professional services	8,333		7,274		16,692		15,440
Other	245		97		442		101
Total revenue	$	167,455	$	126,421	$	324,839	$	243,872

Subscriptions

Subscriptions consists 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. For our term software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered

distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

•Content subscriptions and our maintenance and support services are sold with our perpetual and term software licenses. Revenue related to our content subscriptions associated with our software licenses is recognized ratably over the contractual period. Maintenance and support services are distinct from the perpetual and term software license and revenue attributable to maintenance and support services is recognized ratably over the contractual period.

Perpetual Software Licenses

For our perpetual software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, the content subscription renewal options result in a material right with respect to the perpetual software license. As a result, the revenue attributable to the perpetual software license is recognized ratably over the customer’s estimated economic life of five years, which represents a longer period of time in comparison to the initial contractual period of maintenance and support. The estimated economic life of five years represents the period which the customer is expected to benefit from the material right. We estimated this period of benefit by taking into consideration several factors, including the terms and conditions of our customer contracts and renewals and the expected useful life of our technology.

For our perpetual software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

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.

Contracts with Multiple Performance Obligations

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The majority of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine SSP of our products and services based on our overall pricing objectives using all information reasonably available to us, taking into consideration market conditions and other factors, including the geographic locations of our customers, negotiated discounts from price lists and selling method (i.e., partner or direct). When available, we use directly observable stand-alone transactions to determine SSP. When not regularly sold on a stand-alone basis, we estimate SSP for our products and services utilizing historical sales data, including discounts from list price. The historical data is aggregated and analyzed by geographic location and selling method to establish a median or average price. Once SSP is established it is applied consistently to all transactions including that product or service utilizing a portfolio approach.

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 June 30, 2022 and 2021, we recognized revenue of $143.7 million and $108.2 million, respectively, and for the six months ended June 30, 2022 and 2021, we recognized $250.4 million and $181.3 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. 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 record a contract asset. As of June 30, 2022 and December 31, 2021, unbilled receivables of $1.0 million and $1.2 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet. As of June 30, 2022 and December 31, 2021, we had no contract assets recorded on our consolidated balance sheet.

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 June 30, 2022. The estimated revenues do not include unexercised contract renewals.

	Next Twelve Months		Thereafter
	(in thousands)
Subscriptions	$	432,603	$	147,895
Perpetual software licenses	1,548		273
Professional services	18,197		2,928
Total	$	452,348	$	151,096

Deferred Contract Acquisition and Fulfillment CostsThe following table summarizes the activity of the deferred contract acquisition and fulfillment costs for the six months ended June 30, 2022 and 2021:

	Six Months Ended June 30,
	2022		2021
	(in thousands)
Beginning balance	$	87,165	$	64,639
Capitalization of contract acquisition and fulfillment costs	22,036		17,587
Amortization of deferred contract acquisition and fulfillment costs	(16,955)		(12,134)
Ending balance	$	92,246	$	70,092

XML

Business Combinations

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Business Combinations

Business Combinations

IntSights

On July 16, 2021, we acquired IntSights Cyber Intelligence Ltd. (“IntSights”), a provider of contextualized external threat intelligence and proactive threat remediation, for a purchase price with an aggregate fair value of $322.3 million. The purchase consideration consisted of $319.2 million in cash paid at closing, $3.4 million in deferred cash payments and a $0.3 million receivable for purchase price adjustments. The deferred cash payments will be held by us to satisfy indemnification obligations payable within eighteen months of the acquisition date.

The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the assets acquired and liabilities assumed was recorded as goodwill. The fair value of net assets acquired, goodwill and intangible assets were $61.1 million, $260.9 million and $65.2 million, respectively. These preliminary amounts are subject to subsequent adjustment as we obtain additional information to finalize certain components of working capital and deferred income taxes. The goodwill was allocated to our one reporting unit. The acquired goodwill and intangible assets were not deductible for tax purposes.

Our revenue attributable to the IntSights business for the three and six months ended June 30, 2022 was $8.1 million and $15.0 million, respectively, and our net loss attributable to the IntSights business for the three and six months ended June 30, 2022 was $10.4 million and $21.3 million, respectively.

Pro Forma Financial Information

The unaudited pro forma financial information in the table below summarizes the combined results of our operations and IntSights, on a pro forma basis, as though we had acquired IntSights on January 1, 2020. The unaudited pro forma financial information for all periods presented also includes the effects of business combination accounting resulting from the acquisition, including an adjustment to revenue for the deferred revenue fair value adjustment, amortization expense from acquired intangibles assets, reversal of acquisition-related expenses and the stock-compensation expense recorded to retain certain employees.

	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
	(in thousands)
Revenue	$	132,963	$	256,393
Net loss	$	(47,222)	$	(84,232)

Velocidex Enterprises Pty Ltd

On April 12, 2021, we acquired Velocidex Enterprises Pty Ltd (“Velocidex”), a leading open-source technology and community used for endpoint monitoring, digital forensics, and incident response. The purchase price consisted of $2.7 million paid in cash and $0.3 million in deferred cash payments. The purchase price was allocated to developed technology intangible asset which has an estimated useful life of 6 years.

Alcide.IO Ltd.

On January 28, 2021, we acquired Alcide.IO Ltd. (“Alcide”), a leading provider of Kubernetes security, for a purchase consideration of $50.5 million, which was funded in cash.

The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the assets acquired and liabilities assumed was recorded as goodwill. The fair value of net assets acquired, goodwill and intangible assets were $(0.7) million, $40.8 million and $10.4 million, respectively. The goodwill was allocated to our one reporting unit. The acquired goodwill and intangible asset were not deductible for tax purposes.

XML

Investments

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Investments

Investments

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

	As of June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Description:
U.S. government agencies	$	65,670	$	—	$	(608)	$	65,062
Corporate bonds	16,932		—		(310)		16,622
Commercial paper	8,164		—		—		8,164
Agency bonds	750		—		(24)		726
Total	$	91,516	$	—	$	(942)	$	90,574

	As of December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Description:
Commercial paper	$	37,778	$	—	$	—	$	37,778
Corporate bonds	32,059		—		(32)		32,027
U.S government agencies	22,396		—		(31)		22,365
Agency bonds	749		—		(1)		748
Total	$	92,982	$	—	$	(64)	$	92,918

As of June 30, 2022, our available-for-sale investments had maturities ranging from 1 to 17 months. As of December 31, 2021, our available-for-sale investments had maturities ranging from 2 to 23 months.

For all of our investments for which the amortized cost basis was greater than the fair value at June 30, 2022 and December 31, 2021, 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.

XML

Fair Value Measurements

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Fair Value Measurements

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 we 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.

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

	As of June 30, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Description:
Assets:
Money market funds	$	62,007	$	—	$	—	$	62,007
U.S. Government agencies	65,062		—		—		65,062
Corporate bonds	—		16,622		—		16,622
Commercial paper	—		8,164		—		8,164
Agency bonds	—		726		—		726
Total	$	127,069	$	25,512	$	—	$	152,581
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	$	—	$	3,598	$	—	$	3,598
Total	$	—	$	3,598	$	—	$	3,598

	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Description:
Assets:
Money market funds	$	86,835	$	—	$	—	$	86,835
Commercial paper	—		37,778		—		37,778
Corporate bonds	—		32,027		—		32,027
U.S. Government agencies	22,365		—		—		22,365
Agency bonds	—		748		—		748
Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets)	—		73		—		73
Total assets	$	109,200	$	70,626	$	—	$	179,826
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	$	—	$	823	$	—	$	823
Total liabilities	$	—	$	823	$	—	$	823

As of June 30, 2022, the fair value of our 2.25% and 0.25% convertible senior notes due 2025 and 2027, as further described in Note 10, Debt, was $292.9 million and $540.6 million, respectively, based upon quoted market prices. We consider the fair value of the Notes to be a Level 2 measurement due to limited trading activity of the Notes.

XML

Property and Equipment

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment [Abstract]

Property and Equipment

Property and Equipment

Property and equipment are recorded at cost and consist of the following:

	As of June 30, 2022		As of December 31, 2021
	(in thousands)
Computer equipment and software	$	23,038	$	19,879
Furniture and fixtures	10,667		10,360
Leasehold improvements	55,249		51,983
Total	88,954		82,222
Less accumulated depreciation	(38,421)		(31,997)
Property and equipment, net	$	50,533	$	50,225

Depreciation expense was $3.2 million and $3.1 million for the three months ended June 30, 2022 and 2021, respectively, and $6.5 million and $6.0 million for the six months ended June 30, 2022 and 2021, respectively

XML

Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Intangible Assets

Goodwill and Intangible Assets

Goodwill was $515.6 million and $515.3 million as of June 30, 2022 and December 31, 2021, respectively. The following table displays the changes in the gross carrying amount of goodwill:

	Amount
	(in thousands)
Balance at December 31, 2021	$	515,258
IntSights acquisition adjustments	373
Balance at June 30, 2022	$	515,631

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

		As of June 30, 2022						As of December 31, 2021
	Weighted- Average Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
		(in thousands)
Intangible assets subject to amortization:
Developed technology	5.2	$	122,555	$	(49,840)	$	72,715	$	122,555	$	(40,152)	$	82,403
Customer relationships	4.5	12,000		(3,805)		8,195		12,000		(2,436)		9,564
Trade names	3.1	2,619		(1,484)		1,135		2,619		(1,094)		1,525
Total acquired intangible assets		137,174		(55,129)		82,045		137,174		(43,682)		93,492
Internal-use software	3.0	33,915		(10,175)		23,740		25,857		(7,758)		18,099
Total intangible assets		$	171,089	$	(65,304)	$	105,785	$	163,031	$	(51,440)	$	111,591

Amortization expense was $7.0 million and $4.0 million for the three months ended June 30, 2022 and 2021, respectively, and $13.9 million and $7.7 million for the six months ended June 30, 2022 and 2021, respectively.

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of June 30, 2022 was as follows (in thousands):

2022 (for the remaining six months)	$	12,738
2023	23,566
2024	19,176
2025	16,253
2026	12,478
2027 and thereafter	5,206
Total	$	89,417

The table above excludes the impact of $16.4 million of capitalized internal-use software costs for projects that have not been completed as of June 30, 2022, and therefore, we have not determined the useful life of the software, nor have all the costs associated with these projects been incurred.

XML

Deferred Contract Acquisition and Fulfillment Costs

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Deferred Contract Acquisition and Fulfillment Costs

Revenue from Contracts with Customers

We generate revenue primarily from: (1) subscriptions from the sale of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with our software licenses, (2) perpetual software licenses, and (3) professional services from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Subscriptions	$	157,771	$	117,014	$	305,238	$	224,181
Perpetual software licenses	1,106		2,036		2,467		4,150
Professional services	8,333		7,274		16,692		15,440
Other	245		97		442		101
Total revenue	$	167,455	$	126,421	$	324,839	$	243,872

Subscriptions

Subscriptions consists 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. For our term software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered

distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

•Content subscriptions and our maintenance and support services are sold with our perpetual and term software licenses. Revenue related to our content subscriptions associated with our software licenses is recognized ratably over the contractual period. Maintenance and support services are distinct from the perpetual and term software license and revenue attributable to maintenance and support services is recognized ratably over the contractual period.

Perpetual Software Licenses

For our perpetual software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, the content subscription renewal options result in a material right with respect to the perpetual software license. As a result, the revenue attributable to the perpetual software license is recognized ratably over the customer’s estimated economic life of five years, which represents a longer period of time in comparison to the initial contractual period of maintenance and support. The estimated economic life of five years represents the period which the customer is expected to benefit from the material right. We estimated this period of benefit by taking into consideration several factors, including the terms and conditions of our customer contracts and renewals and the expected useful life of our technology.

For our perpetual software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.

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.

Contracts with Multiple Performance Obligations

If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The majority of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine SSP of our products and services based on our overall pricing objectives using all information reasonably available to us, taking into consideration market conditions and other factors, including the geographic locations of our customers, negotiated discounts from price lists and selling method (i.e., partner or direct). When available, we use directly observable stand-alone transactions to determine SSP. When not regularly sold on a stand-alone basis, we estimate SSP for our products and services utilizing historical sales data, including discounts from list price. The historical data is aggregated and analyzed by geographic location and selling method to establish a median or average price. Once SSP is established it is applied consistently to all transactions including that product or service utilizing a portfolio approach.

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 June 30, 2022 and 2021, we recognized revenue of $143.7 million and $108.2 million, respectively, and for the six months ended June 30, 2022 and 2021, we recognized $250.4 million and $181.3 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. 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 record a contract asset. As of June 30, 2022 and December 31, 2021, unbilled receivables of $1.0 million and $1.2 million, respectively, are included in prepaid expenses and other current assets in our consolidated balance sheet. As of June 30, 2022 and December 31, 2021, we had no contract assets recorded on our consolidated balance sheet.

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 June 30, 2022. The estimated revenues do not include unexercised contract renewals.

	Next Twelve Months		Thereafter
	(in thousands)
Subscriptions	$	432,603	$	147,895
Perpetual software licenses	1,548		273
Professional services	18,197		2,928
Total	$	452,348	$	151,096

Deferred Contract Acquisition and Fulfillment CostsThe following table summarizes the activity of the deferred contract acquisition and fulfillment costs for the six months ended June 30, 2022 and 2021:

	Six Months Ended June 30,
	2022		2021
	(in thousands)
Beginning balance	$	87,165	$	64,639
Capitalization of contract acquisition and fulfillment costs	22,036		17,587
Amortization of deferred contract acquisition and fulfillment costs	(16,955)		(12,134)
Ending balance	$	92,246	$	70,092

XML

Derivative and Hedging Activities	6 Months Ended
	Jun. 30, 2022
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Derivatives and Hedging Activities	Derivatives and Hedging ActivitiesTo 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 eighteen months or less, and as of June 30, 2022 and December 31, 2021, outstanding forward contracts had a total notional value of $47.7 million and $34.7 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 six months ended June 30, 2022, all cash flow hedges were considered effective. Refer to Note 5, Fair Value Measurements, for the fair values of our outstanding derivative instruments.

XML

Debt

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Debt

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”) and in March 2021, we issued $600.0 million aggregate principal amount of convertible senior notes due March 15, 2027 (the “2027 Notes”) (collectively, the “Notes”). 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	3.8
2027 Notes	March 15, 2027	0.25	%	September 15, 2021	0.67	%	March 15 and September 15	9.6734	$	103.38	5.8

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

Terms of the Notes

The holders of the Notes may convert their respective Notes at their option at any time prior to the close of business on the business day immediately preceding their respective convertible dates only under the following circumstances:

•during any calendar quarter commencing after the calendar quarter ending on September 30, 2020 for the 2025 Notes and March 20, 2024 for the 2027 Notes (and only during such calendar quarter), if the last reported sale price of our common stock for at least 20 trading days (whether or not consecutive) during a period of 30 consecutive trading days ending on, and including, the last trading day of the immediately preceding calendar quarter is greater than or equal to 130% of the conversion price of the respective Notes on each applicable trading day;

•during the five business day period after any five consecutive trading day period for the 2025 Notes and any ten consecutive trading day period for the 2027 Notes (the “measurement periods”) in which the trading price (as defined in the Indentures) per $1,000 principal amount of the applicable series of Notes for each trading day of the measurement period was less than 98% of the product of the last reported sale price of our common stock and the conversion rate of the respective Notes on each such trading day;

•if we call any or all of the respective Notes for redemption, at any time prior to the close of business on the scheduled trading day immediately preceding the respective redemption date; or

•upon the occurrence of specified corporate events (as set forth in the Indentures).

During the six months ended June 30, 2022, the 2025 Notes were convertible at the option of the holders. During this period an immaterial principal amount of the 2025 Notes were requested for conversion, which was settled during the quarter ended June 30, 2022 in cash. As of June 30, 2022, the 2025 Notes and 2027 Notes were not convertible at the option of the holder.

The holders may convert the 2025 Notes and the 2027 Notes at any time on or after November 1, 2024 and December 15, 2026, 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.

The 2025 Notes and the 2027 Notes are redeemable after May 6, 2023 and March 20, 2024 (the “Redemption Dates”), respectively. On or after the respective Redemption Dates, we may redeem for cash all or any portion of the 2025 Notes or the 2027 Notes, at our option, if the last reported sale price of our common stock has been at least 130% of the conversion price then in effect for at least 20 trading days (whether or not consecutive) during any 30 consecutive trading day period (including the last trading day of such period) ending on, and including the trading day immediately preceding, the date on which we provide the redemption notice at a redemption price equal to 100% principal amount of the 2025 Notes or the 2027 Notes to be redeemed, plus accrued and unpaid interest to, but excluding, the redemption date.

Accounting for the Notes

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

The net carrying amount of the Notes as of June 30, 2022 and December 31, 2021 was as follows (in thousands):

	2025 Notes						2027 Notes
	Principal		Unamortized debt issuance costs		Total		Principal		Unamortized debt issuance costs		Total
Balance at December 31, 2021	$	230,000	$	(4,905)	$	225,095	$	600,000	$	(13,032)	$	586,968
Amortization of debt issuance costs	—		681		681		—		1,214		1,214
Conversion of Notes	(8)		—		(8)		—		—		—
Balance at June, 30, 2022	$	229,992	$	(4,224)	$	225,768	$	600,000	$	(11,818)	$	588,182

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

	Three Months Ended June 30,
	2022								2021
	2025 Notes		2027 Notes		Total		2023 Notes		2025 Notes		2027 Notes		Total
Contractual interest expense	$	1,294	$	375	$	1,669	$	148	$	1,294	$	375	$	1,817
Amortization of debt issuance costs	351		612		963		153		341		602		1,096
Total interest expense	$	1,645	$	987	$	2,632	$	301	$	1,635	$	977	$	2,913

	Six Months Ended June 30,
	2022								2021
	2025 Notes		2027 Notes		Total		2023 Notes		2025 Notes		2027 Notes		Total
Contractual interest expense	$	2,588	$	750	$	3,338	$	706	$	2,588	$	425	$	3,719
Amortization of debt issuance costs	681		1,214		1,895		374		660		682		1,716
Induced conversion expense	—		—		—		2,740		—		—		2,740
Total interest expense	$	3,269	$	1,964	$	5,233	$	3,820	$	3,248	$	1,107	$	8,175

During the first quarter of 2021, we used a portion of the proceeds from the issuance of the 2027 Notes, together with 2.2 million shares of our common stock, to repurchase and retire $182.6 million aggregate principal amount of the convertible senior notes due August 1, 2023 (the “2023 Notes”), and paid accrued and unpaid interest thereon. In addition, during the first quarter of 2021, holders of the 2023 Notes elected to convert Notes with a principal amount of $2.0 million. Cash was paid for the principal and the excess conversion spread was paid in 23,123 shares of our common stock. During the fourth quarter of 2021, we redeemed the remaining $45.4 million aggregate principal amount outstanding of the 2023 Notes. We paid $43.4 million in cash and issued 697,262 shares of our common stock to the holders of the 2023 Notes who submitted conversion notices, and the remaining $2.0 million of 2023 Notes were redeemed in cash, plus accrued and unpaid interest.

Capped Calls     

In connection with the offering of the 2023 Notes, the 2025 Notes and the 2027 Notes, we entered into privately negotiated capped call transactions with certain counterparties (the “2023 Capped Calls, “2025 Capped Calls” and “2027 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 2023 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
Initial strike price, subject to certain adjustments	$	41.59	$	61.02	$	103.38
Cap price, subject to certain adjustments	$	63.98	$	93.88	$	159.04
Total premium paid (in thousands)	$	26,910	$	27,255	$	76,020

The 2023 Capped Calls were not redeemed with the repayment of the 2023 Notes and remain outstanding.

For accounting purposes, the 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls are separate transactions, and not part of the terms of the 2023 Notes, the 2025 Notes and the 2027 Notes. The 2023 Capped Calls, the 2025 Capped Calls and the 2027 Capped Calls are recorded in stockholders' equity and are not accounted for as derivatives.

Credit Agreement

In April 2020, we entered into a Credit and Security Agreement (the “Credit Agreement”), with KeyBank National Association that provides for a $30.0 million revolving credit facility, with a letter of credit sublimit of $15.0 million and an accordion feature under which we could increase the credit facility to up to $70.0 million. In May 2020, we utilized the accordion feature to increase the credit facility to $50.0 million.

In December 2021, we entered into an amendment (the “Amendment”) in respect of our Credit and Security Agreement (as amended by the Amendment, the “Credit Agreement”), with KeyBank National Association, to, among other things, increase the credit facility from $50.0 million to $100.0 million and extend the maturity date to December 22, 2024. The Credit Agreement provides for a $100.0 million revolving credit facility, with a letter of credit sublimit of $15.0 million, and an accordion feature under which we can increase the credit facility to up to $150.0 million. We incurred fees of $0.4 million in connection with entering into the Credit Agreement. The fees are recorded in other current assets on the consolidated balance sheet and are amortized on a straight-line basis over the contractual term of the arrangement. The commitment fee of 0.2% per annum on the unused portion of the credit facility is expensed as incurred and included within interest expense on the consolidated statement of operations. The Credit Agreement contains certain financial covenants including a requirement that we maintain specified minimum recurring revenue and liquidity amounts.

The borrowings under the Credit Agreement bear interest, at our option, at a rate equal to either (i) term SOFR plus a credit spread adjustment of 0.10% per annum plus a margin of 2.50% per annum or (ii) the alternate base rate (subject to a floor), plus an applicable margin equal to 0% per annum.

As of June 30, 2022, we did not have any outstanding borrowings and we were in compliance with all covenants under the Credit Agreement.

As of June 30, 2022, we had a total of $9.8 million in letters of credit outstanding as collateral for certain office space leases and corporate credit card programs which reduce the amount of borrowing available under our Credit Agreement.

XML

Leases

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Leases

Leases

Our leases primarily relate to office facilities that have remaining terms of up to 9.8 years, some of which include one or more options to renew with renewal terms of up to 7 years and some of which include options to terminate the leases within the next 5.2 years. All of our leases are classified as operating leases.

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Operating lease cost	$	5,230	$	3,779	$	10,243	$	7,545
Short-term lease costs	463		154		854		319
Variable lease costs	2,147		1,317		4,532		2,780
Total lease costs	$	7,840	$	5,250	$	15,629	$	10,644

Supplemental balance sheet information related to the operating leases was as follows:

	As of June 30, 2022		As of December 31, 2021
Weighted average remaining lease term (in years) - operating leases	6.9		7.2
Weighted average discount rate - operating leases	6.1	%	6.2	%

Supplemental cash flow information related to leases was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	4,908	$	4,177	$	8,036	$	8,324
ROU assets obtained in exchange for new lease obligations	$	—	$	909	$	8,864	$	1,061

Maturities of operating lease liabilities as of June 30, 2022 were as follows (in thousands):

2022 (for the remaining six months)	$	8,442
2023	16,405
2024	18,532
2025	17,711
2026	16,321
2027 and thereafter	48,258
Total lease payments	$	125,669
Less: imputed interest	(24,387)
Total	$	101,282

XML

Stock-Based Compensation Expense

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation Expense

Stock-Based Compensation Expense

(a)General

Stock-based compensation expense for RSUs, performance-based PSUs, stock options and issuances of common stock pursuant to our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Stock-based compensation expense:
Cost of revenue	$	2,775	$	1,812	$	4,865	$	3,366
Research and development	13,925		9,420		26,949		17,235
Sales and marketing	8,430		6,038		15,204		11,784
General and administrative	7,281		6,544		14,315		12,291
Total stock-based compensation expense	$	32,411	$	23,814	$	61,333	$	44,676

We recognize compensation cost of all awards on a straight-line basis over the applicable vesting period, which is generally four years.

Our Compensation Committee adopted and approved the performance goals, targets and payout formulas for our 2022 and 2021 bonus plans, including permitting our 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 months ended June 30, 2022 and 2021, we recognized stock-based compensation expense related to such bonuses in the amount of $0.5 million and $1.0 million, and during the six months ended June 30, 2022 and 2021 we recognized stock-based compensation expense related to such bonuses in the amount of $1.5 million and $2.3 million, based on the probable expected performance against the pre-established corporate financial objectives

as of June 30, 2022 and 2021. For all 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 Units and Performance-Based Restricted Stock Units

RSUs and PSUs activity during the six months ended June 30, 2022 was as follows:

	Shares	Weighted-Average Grant Date Fair Value
Unvested balance as of December 31, 2021	2,778,877	$	74.40
Granted	1,960,840	94.72
Vested	(765,625)	61.16
Forfeited	(288,670)	80.63
Unvested balance as of June 30, 2022	3,685,422	$	87.47

As of June 30, 2022, the unrecognized compensation expense related to our unvested RSUs and PSUs was $298.8 million. This unrecognized compensation expense will be recognized over an estimated weighted-average amortization period of 2.9 years.

(c)Stock Options

Stock option activity during the six months ended June 30, 2022 was as follows:

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2021	1,411,387	$	10.74	3.4	$	150,951
Granted	—	—
Exercised	(119,720)	10.07			$	10,062
Forfeited/cancelled	—	—
Outstanding as of June 30, 2022	1,291,667	$	10.80	2.9	$	72,334
Vested and exercisable as of June 30, 2022	1,291,667	$	10.80	2.9	$	72,334

    

The total fair value of stock options vested in the six months ended June 30, 2022 was $0.1 million.

(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 stock 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 15, 2022, we issued 80,747 shares of common stock to employees, with purchase prices of $67.59 or $81.37 per share, for aggregate proceeds of $5.7 million.

XML

Net Loss per Share

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Net Loss per Share

Net Loss per Share

The following table summarizes the computation of basic and diluted net loss per share of our common stock for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands, except share and per share data)
Numerator:
Net loss	$	(39,606)	$	(34,164)	$	(84,605)	$	(64,009)
Denominator:
Weighted-average common shares outstanding, basic and diluted	58,239,958		55,392,383		57,983,790		54,169,464
Net loss per share, basic and diluted	$	(0.68)	$	(0.62)	$	(1.46)	$	(1.18)

We intend to settle any conversion of our 2025 Notes and 2027 Notes in cash, shares, or a combination thereof. The dilutive impact of the Notes for our calculation of diluted net income (loss) per share is considered using the if-converted method. For the three and six months ended June 30, 2022 and 2021, the shares underlying the Notes were not considered in the calculation of diluted net loss per share as the effect would have been anti-dilutive.

In connection with the issuance of the 2023 Notes, the 2025 Notes and the 2027 Notes, we entered into 2023 Capped Calls, 2025 Capped Calls and 2027 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 further described in Note 10, Debt, the 2023 Capped Calls were not redeemed with the redemption of the 2023 Notes.

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 and Six Months Ended June 30,
	2022	2021
Options to purchase common stock	1,291,667	1,653,897
Unvested restricted stock units	3,685,422	3,488,275
Common stock to be issued to DivvyCloud founders	33,433	133,730
Common stock issued to IntSights founders	206,608	—
Shares to be issued under ESPP	57,281	50,382
Convertible senior notes	9,572,955	10,663,519
Total	14,847,366	15,989,803

XML

Commitments and Contingencies

6 Months Ended

Jun. 30, 2022

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

(a)Warranty

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

(b)Litigation and Claims

In October 2018, Finjan, Inc. (“Finjan”) filed a complaint against us and our wholly-owned subsidiary, Rapid7 LLC, in the United States District Court, District of Delaware, alleging patent infringement of seven patents held by them. In the complaint, Finjan sought unspecified damages, attorneys' fees and injunctive relief. We intend to vigorously contest Finjan's claims. The final outcome, including our liability, if any, with respect to Finjan's claims, is uncertain. 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.

In addition, 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.

(c)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.

XML

Segment Information and Information about Geographic Areas

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Segment Information and Information about Geographic Areas

Segment Information and Information about Geographic Areas

We operate in one segment. Our chief operating decision maker is our Chief Executive Officer, who makes operating decisions, assesses performance and allocates resources on a consolidated basis.

Net revenues by geographic area presented based upon the location of the customer were as follows: 

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
United States	$	126,001	$	99,256	$	245,124	$	191,765
Other	41,454		27,165		79,715		52,107
Total	$	167,455	$	126,421	$	324,839	$	243,872

Property and equipment, net by geographic area was as follows:

	As of June 30, 2022		As of December 31, 2021
	(in thousands)
United States	$	35,660	$	37,682
Other	14,873		12,543
Total	$	50,533	$	50,225

XML

Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2022

Accounting Policies [Abstract]

Basis of Presentation and Consolidation

Basis of Presentation and Consolidation

The accompanying unaudited 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 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, 2021 filed with the SEC on February 24, 2022.

The 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 six months ended June 30, 2022 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.

Use of Estimates

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 the estimated economic life of perpetual licenses for revenue recognition, the determination of standalone selling prices in revenue transactions with multiple performance obligations, the estimated period of benefit for deferred contract acquisition and fulfillment 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 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.

The COVID-19 pandemic has resulted in a sustained global slowdown of economic activity that has decreased demand for a broad variety of goods and services, including from our customers. While we have not experienced significant disruptions from the COVID-19 pandemic during the three and six months ended June 30, 2022, we are unable to accurately predict the extent to which the ongoing COVID-19 pandemic may impact our business, results of operations and financial condition going forward. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, assumptions and judgments or revise the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained and will be recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

Accounting Pronouncements Recently Adopted

In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which clarified the accounting for acquired revenue contracts with customers in a business combination. ASU 2021-08 requires acquirers to measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. As a result, it is generally expected that an acquirer will recognize and measure contract assets and liabilities in a manner consistent with how they were recognized by the acquiree in its preacquisition financial statements. This standard is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We early adopted this standard on January 1, 2022. This guidance will be applied prospectively to all business combinations that occur on or after January 1, 2022.

Accounting Pronouncements Not Yet Effective

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions to GAAP guidance on contract modifications to ease the financial reporting burdens related to the expected market transition from the London Interbank Offered Rate ("LIBOR") to alternative reference rates. We may elect to apply the amendments prospectively through December 31, 2022. The impact to our consolidated financial statements from the adoption of this standard is expected to be immaterial.

Revenue

We generate revenue primarily from: (1) subscriptions from the sale of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with our software licenses, (2) perpetual software licenses, and (3) professional services from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.

XML

Revenue from Contracts with Customers (Tables)

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Summary of Revenue from Contracts with Customers and Revenue by Region

The following table summarizes revenue from contracts with customers for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Subscriptions	$	157,771	$	117,014	$	305,238	$	224,181
Perpetual software licenses	1,106		2,036		2,467		4,150
Professional services	8,333		7,274		16,692		15,440
Other	245		97		442		101
Total revenue	$	167,455	$	126,421	$	324,839	$	243,872

Summary of Estimated Revenue Expected to be Recognized in Future Related to Performance Obligations

The estimated revenues do not include unexercised contract renewals.

	Next Twelve Months		Thereafter
	(in thousands)
Subscriptions	$	432,603	$	147,895
Perpetual software licenses	1,548		273
Professional services	18,197		2,928
Total	$	452,348	$	151,096

XML

Business Combinations (Tables)

6 Months Ended

Jun. 30, 2022

Business Combination and Asset Acquisition [Abstract]

Schedule of Unaudited Pro Forma Information

The unaudited pro forma financial information in the table below summarizes the combined results of our operations and IntSights, on a pro forma basis, as though we had acquired IntSights on January 1, 2020. The unaudited pro forma financial information for all periods presented also includes the effects of business combination accounting resulting from the acquisition, including an adjustment to revenue for the deferred revenue fair value adjustment, amortization expense from acquired intangibles assets, reversal of acquisition-related expenses and the stock-compensation expense recorded to retain certain employees.

	Three Months Ended June 30, 2021		Six Months Ended June 30, 2021
	(in thousands)
Revenue	$	132,963	$	256,393
Net loss	$	(47,222)	$	(84,232)

XML

Investments (Tables)

6 Months Ended

Jun. 30, 2022

Investments, Debt and Equity Securities [Abstract]

Summary of Investments Classified as Available-For-Sale

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

	As of June 30, 2022
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Description:
U.S. government agencies	$	65,670	$	—	$	(608)	$	65,062
Corporate bonds	16,932		—		(310)		16,622
Commercial paper	8,164		—		—		8,164
Agency bonds	750		—		(24)		726
Total	$	91,516	$	—	$	(942)	$	90,574

	As of December 31, 2021
	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
	(in thousands)
Description:
Commercial paper	$	37,778	$	—	$	—	$	37,778
Corporate bonds	32,059		—		(32)		32,027
U.S government agencies	22,396		—		(31)		22,365
Agency bonds	749		—		(1)		748
Total	$	92,982	$	—	$	(64)	$	92,918

XML

Fair Value Measurements (Tables)

6 Months Ended

Jun. 30, 2022

Fair Value Disclosures [Abstract]

Summary of Financial Assets Measured and Recorded at Fair Value on Recurring Basis

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

	As of June 30, 2022
	Level 1		Level 2		Level 3		Total
	(in thousands)
Description:
Assets:
Money market funds	$	62,007	$	—	$	—	$	62,007
U.S. Government agencies	65,062		—		—		65,062
Corporate bonds	—		16,622		—		16,622
Commercial paper	—		8,164		—		8,164
Agency bonds	—		726		—		726
Total	$	127,069	$	25,512	$	—	$	152,581
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	$	—	$	3,598	$	—	$	3,598
Total	$	—	$	3,598	$	—	$	3,598

	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
	(in thousands)
Description:
Assets:
Money market funds	$	86,835	$	—	$	—	$	86,835
Commercial paper	—		37,778		—		37,778
Corporate bonds	—		32,027		—		32,027
U.S. Government agencies	22,365		—		—		22,365
Agency bonds	—		748		—		748
Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets)	—		73		—		73
Total assets	$	109,200	$	70,626	$	—	$	179,826
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	$	—	$	823	$	—	$	823
Total liabilities	$	—	$	823	$	—	$	823

XML

Property and Equipment (Tables)

6 Months Ended

Jun. 30, 2022

Property, Plant and Equipment [Abstract]

Summary of Property and Equipment

Property and equipment are recorded at cost and consist of the following:

	As of June 30, 2022		As of December 31, 2021
	(in thousands)
Computer equipment and software	$	23,038	$	19,879
Furniture and fixtures	10,667		10,360
Leasehold improvements	55,249		51,983
Total	88,954		82,222
Less accumulated depreciation	(38,421)		(31,997)
Property and equipment, net	$	50,533	$	50,225

XML

Goodwill and Intangible Assets (Tables)

6 Months Ended

Jun. 30, 2022

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Goodwill

The following table displays the changes in the gross carrying amount of goodwill:

	Amount
	(in thousands)
Balance at December 31, 2021	$	515,258
IntSights acquisition adjustments	373
Balance at June 30, 2022	$	515,631

Schedule of Identifiable Intangible Assets

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

		As of June 30, 2022						As of December 31, 2021
	Weighted- Average Life (years)	Gross Carrying Amount		Accumulated Amortization		Net Book Value		Gross Carrying Amount		Accumulated Amortization		Net Book Value
		(in thousands)
Intangible assets subject to amortization:
Developed technology	5.2	$	122,555	$	(49,840)	$	72,715	$	122,555	$	(40,152)	$	82,403
Customer relationships	4.5	12,000		(3,805)		8,195		12,000		(2,436)		9,564
Trade names	3.1	2,619		(1,484)		1,135		2,619		(1,094)		1,525
Total acquired intangible assets		137,174		(55,129)		82,045		137,174		(43,682)		93,492
Internal-use software	3.0	33,915		(10,175)		23,740		25,857		(7,758)		18,099
Total intangible assets		$	171,089	$	(65,304)	$	105,785	$	163,031	$	(51,440)	$	111,591

Schedule of Estimated Amortization Expense

Estimated future amortization expense of the acquired identifiable intangible assets and completed capitalized internal-use software costs as of June 30, 2022 was as follows (in thousands):

2022 (for the remaining six months)	$	12,738
2023	23,566
2024	19,176
2025	16,253
2026	12,478
2027 and thereafter	5,206
Total	$	89,417

XML

Deferred Contract Acquisition and Fulfillment Costs (Tables)

6 Months Ended

Jun. 30, 2022

Revenue from Contract with Customer [Abstract]

Summary of Activity of Deferred Contract Acquisition and Fulfillment Costs

The following table summarizes the activity of the deferred contract acquisition and fulfillment costs for the six months ended June 30, 2022 and 2021:

	Six Months Ended June 30,
	2022		2021
	(in thousands)
Beginning balance	$	87,165	$	64,639
Capitalization of contract acquisition and fulfillment costs	22,036		17,587
Amortization of deferred contract acquisition and fulfillment costs	(16,955)		(12,134)
Ending balance	$	92,246	$	70,092

XML

Debt (Tables)

6 Months Ended

Jun. 30, 2022

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments

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	3.8
2027 Notes	March 15, 2027	0.25	%	September 15, 2021	0.67	%	March 15 and September 15	9.6734	$	103.38	5.8

Schedule of Liability and Equity Components of Convertible Debt

The net carrying amount of the Notes as of June 30, 2022 and December 31, 2021 was as follows (in thousands):

	2025 Notes						2027 Notes
	Principal		Unamortized debt issuance costs		Total		Principal		Unamortized debt issuance costs		Total
Balance at December 31, 2021	$	230,000	$	(4,905)	$	225,095	$	600,000	$	(13,032)	$	586,968
Amortization of debt issuance costs	—		681		681		—		1,214		1,214
Conversion of Notes	(8)		—		(8)		—		—		—
Balance at June, 30, 2022	$	229,992	$	(4,224)	$	225,768	$	600,000	$	(11,818)	$	588,182

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

	Three Months Ended June 30,
	2022								2021
	2025 Notes		2027 Notes		Total		2023 Notes		2025 Notes		2027 Notes		Total
Contractual interest expense	$	1,294	$	375	$	1,669	$	148	$	1,294	$	375	$	1,817
Amortization of debt issuance costs	351		612		963		153		341		602		1,096
Total interest expense	$	1,645	$	987	$	2,632	$	301	$	1,635	$	977	$	2,913

	Six Months Ended June 30,
	2022								2021
	2025 Notes		2027 Notes		Total		2023 Notes		2025 Notes		2027 Notes		Total
Contractual interest expense	$	2,588	$	750	$	3,338	$	706	$	2,588	$	425	$	3,719
Amortization of debt issuance costs	681		1,214		1,895		374		660		682		1,716
Induced conversion expense	—		—		—		2,740		—		—		2,740
Total interest expense	$	3,269	$	1,964	$	5,233	$	3,820	$	3,248	$	1,107	$	8,175

Schedule of Other Key Terms and Premiums Paid for the Capped Calls Related to Each Series of Notes

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 2023 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
Initial strike price, subject to certain adjustments	$	41.59	$	61.02	$	103.38
Cap price, subject to certain adjustments	$	63.98	$	93.88	$	159.04
Total premium paid (in thousands)	$	26,910	$	27,255	$	76,020

XML

Leases (Tables)

6 Months Ended

Jun. 30, 2022

Leases [Abstract]

Summary of Components of Lease Expense and Supplemental Cash Flow Information Related to Leases

The components of lease expense were as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Operating lease cost	$	5,230	$	3,779	$	10,243	$	7,545
Short-term lease costs	463		154		854		319
Variable lease costs	2,147		1,317		4,532		2,780
Total lease costs	$	7,840	$	5,250	$	15,629	$	10,644

Supplemental cash flow information related to leases was as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Cash paid for amounts included in the measurement of lease liabilities	$	4,908	$	4,177	$	8,036	$	8,324
ROU assets obtained in exchange for new lease obligations	$	—	$	909	$	8,864	$	1,061

Summary of Supplemental Balance Sheet Information Related to Operating Leases

Supplemental balance sheet information related to the operating leases was as follows:

	As of June 30, 2022		As of December 31, 2021
Weighted average remaining lease term (in years) - operating leases	6.9		7.2
Weighted average discount rate - operating leases	6.1	%	6.2	%

Summary of Maturities of Operating Lease Liabilities and Future Minimum Payments under Non-cancellable Leases

Maturities of operating lease liabilities as of June 30, 2022 were as follows (in thousands):

2022 (for the remaining six months)	$	8,442
2023	16,405
2024	18,532
2025	17,711
2026	16,321
2027 and thereafter	48,258
Total lease payments	$	125,669
Less: imputed interest	(24,387)
Total	$	101,282

XML

Stock-Based Compensation Expense (Tables)

6 Months Ended

Jun. 30, 2022

Share-Based Payment Arrangement [Abstract]

Schedule of Stock-Based Compensation Expense

Stock-based compensation expense for RSUs, performance-based PSUs, stock options and issuances of common stock pursuant to our employee stock purchase plan was classified in the accompanying consolidated statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
Stock-based compensation expense:
Cost of revenue	$	2,775	$	1,812	$	4,865	$	3,366
Research and development	13,925		9,420		26,949		17,235
Sales and marketing	8,430		6,038		15,204		11,784
General and administrative	7,281		6,544		14,315		12,291
Total stock-based compensation expense	$	32,411	$	23,814	$	61,333	$	44,676

Summary of Restricted Stock and Restricted Stock Unit Activity

RSUs and PSUs activity during the six months ended June 30, 2022 was as follows:

	Shares	Weighted-Average Grant Date Fair Value
Unvested balance as of December 31, 2021	2,778,877	$	74.40
Granted	1,960,840	94.72
Vested	(765,625)	61.16
Forfeited	(288,670)	80.63
Unvested balance as of June 30, 2022	3,685,422	$	87.47

Summary of Stock Option Activity

Stock option activity during the six months ended June 30, 2022 was as follows:

	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2021	1,411,387	$	10.74	3.4	$	150,951
Granted	—	—
Exercised	(119,720)	10.07			$	10,062
Forfeited/cancelled	—	—
Outstanding as of June 30, 2022	1,291,667	$	10.80	2.9	$	72,334
Vested and exercisable as of June 30, 2022	1,291,667	$	10.80	2.9	$	72,334

XML

Net Loss per Share (Tables)

6 Months Ended

Jun. 30, 2022

Earnings Per Share [Abstract]

Summary of Basic and Diluted Net Loss Per Share of Common Stock

The following table summarizes the computation of basic and diluted net loss per share of our common stock for the three and six months ended June 30, 2022 and 2021:

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands, except share and per share data)
Numerator:
Net loss	$	(39,606)	$	(34,164)	$	(84,605)	$	(64,009)
Denominator:
Weighted-average common shares outstanding, basic and diluted	58,239,958		55,392,383		57,983,790		54,169,464
Net loss per share, basic and diluted	$	(0.68)	$	(0.62)	$	(1.46)	$	(1.18)

Summary of Anti-Dilutive Securities Excluded from Computation Diluted Weighted Average Shares Outstanding

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 and Six Months Ended June 30,
	2022	2021
Options to purchase common stock	1,291,667	1,653,897
Unvested restricted stock units	3,685,422	3,488,275
Common stock to be issued to DivvyCloud founders	33,433	133,730
Common stock issued to IntSights founders	206,608	—
Shares to be issued under ESPP	57,281	50,382
Convertible senior notes	9,572,955	10,663,519
Total	14,847,366	15,989,803

XML

Segment Information and Information about Geographic Areas (Tables)

6 Months Ended

Jun. 30, 2022

Segment Reporting [Abstract]

Summary of Net Revenues of Customer by Geographic Area

Net revenues by geographic area presented based upon the location of the customer were as follows: 

	Three Months Ended June 30,				Six Months Ended June 30,
	2022		2021		2022		2021
	(in thousands)
United States	$	126,001	$	99,256	$	245,124	$	191,765
Other	41,454		27,165		79,715		52,107
Total	$	167,455	$	126,421	$	324,839	$	243,872

Summary of Property and Equipment, Net by Geographic Area

Property and equipment, net by geographic area was as follows:

	As of June 30, 2022		As of December 31, 2021
	(in thousands)
United States	$	35,660	$	37,682
Other	14,873		12,543
Total	$	50,533	$	50,225

XML

Revenue from Contracts with Customers - Summary of Revenue from Contracts with Customers and Revenue by Region (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Disaggregation of Revenue [Line Items]
Total revenue	$ 167,455	$ 126,421	$ 324,839	$ 243,872
Subscriptions
Disaggregation of Revenue [Line Items]
Total revenue	157,771	117,014	305,238	224,181
Perpetual software licenses
Disaggregation of Revenue [Line Items]
Total revenue	1,106	2,036	2,467	4,150
Professional services
Disaggregation of Revenue [Line Items]
Total revenue	8,333	7,274	16,692	15,440
Other
Disaggregation of Revenue [Line Items]
Total revenue	$ 245	$ 97	$ 442	$ 101

XML

Revenue from Contracts with Customers - Additional Information (Details) - USD ($)	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Disaggregation of Revenue [Line Items]
Revenue recognized	$ 143,700,000	$ 108,200,000	$ 250,400,000	$ 181,300,000
Unbilled receivables	1,000,000		1,000,000		$ 1,200,000
Contracts assets	$ 0		$ 0		$ 0
Perpetual software licenses
Disaggregation of Revenue [Line Items]
Economic life			5 years
Professional services
Disaggregation of Revenue [Line Items]
Contractual period			1 year

XML

Revenue from Contracts with Customers - Summary of Estimated Revenue Expected to be Recognized in Future Related to Performance Obligations (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 452,348
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	151,096
Subscriptions | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 432,603
Expected timing of satisfaction, period	12 months
Subscriptions | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 147,895
Expected timing of satisfaction, period
Perpetual software licenses | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 1,548
Expected timing of satisfaction, period	12 months
Perpetual software licenses | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 273
Expected timing of satisfaction, period
Professional services | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2022-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 18,197
Expected timing of satisfaction, period	12 months
Professional services | Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction, Start Date [Axis]: 2023-07-01
Revenue, Remaining Performance Obligation, Expected Timing of Satisfaction [Line Items]
Remaining performance obligation	$ 2,928
Expected timing of satisfaction, period

XML

Business Combinations - Additional Information (Details) $ in Thousands				3 Months Ended	6 Months Ended
	Jul. 16, 2021 USD ($)	Apr. 12, 2021 USD ($)	Jan. 28, 2021 USD ($) reportingUnit	Jun. 30, 2022 USD ($)	Jun. 30, 2022 USD ($) reportingUnit	Dec. 31, 2021 USD ($)
Business Acquisition [Line Items]
Goodwill				$ 515,631	$ 515,631	$ 515,258
Number of reporting units | reportingUnit					1
IntSights
Business Acquisition [Line Items]
Purchase price	$ 322,300
Payments to acquire businesses, gross	319,200
Deferred cash payments	3,400
Business combination, purchase price adjustment receivable	$ 300
Indemnification period	18 months
Net assets acquired	$ 61,100
Goodwill	260,900
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill	$ 65,200
Revenue of acquiree				8,100	$ 15,000
Net loss of acquire				$ 10,400	$ 21,300
Velocidex
Business Acquisition [Line Items]
Payments to acquire businesses, gross		$ 2,700
Deferred cash payments		$ 300
Velocidex | Developed technology
Business Acquisition [Line Items]
Useful life (in years)		6 years
Alcide.IO Ltd.
Business Acquisition [Line Items]
Purchase price			$ 50,500
Net assets acquired			(700)
Goodwill			40,800
Business Combination, Recognized Identifiable Assets Acquired and Liabilities Assumed, Intangible Assets, Other than Goodwill			$ 10,400
Number of reporting units | reportingUnit			1

XML

Business Combinations - Schedule of Unaudited Pro Forma Information (Details) - IntSights - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2021	Jun. 30, 2021
Business Acquisition [Line Items]
Revenue	$ 132,963	$ 256,393
Net loss	$ (47,222)	$ (84,232)

XML

Investments (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Debt and Equity Securities, FV-NI [Line Items]
Amortized Cost	$ 91,516	$ 92,982
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(942)	(64)
Fair Value	$ 90,574	$ 92,918
Minimum
Debt and Equity Securities, FV-NI [Line Items]
Remaining maturity	1 month	2 months
Maximum
Debt and Equity Securities, FV-NI [Line Items]
Remaining maturity	17 months	23 months
U.S. government agencies
Debt and Equity Securities, FV-NI [Line Items]
Amortized Cost	$ 65,670	$ 22,396
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(608)	(31)
Fair Value	65,062	22,365
Commercial paper
Debt and Equity Securities, FV-NI [Line Items]
Amortized Cost	8,164	37,778
Gross Unrealized Gains	0	0
Gross Unrealized Losses	0	0
Fair Value	8,164	37,778
Corporate bonds
Debt and Equity Securities, FV-NI [Line Items]
Amortized Cost	16,932	32,059
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(310)	(32)
Fair Value	16,622	32,027
Agency bonds
Debt and Equity Securities, FV-NI [Line Items]
Amortized Cost	750	749
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(24)	(1)
Fair Value	$ 726	$ 748

XML

Fair Value Measurements - Summary of Financial Assets Measured and Recorded at Fair Value on Recurring Basis (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Assets:
Available-for-sale securities	$ 90,574	$ 92,918
The Notes, Due 2025 | Convertible Debt
Liabilities:
Debt instrument, interest rate	2.25%
Convertible debt, fair value	$ 292,900
The Notes, Due 2027 | Convertible Debt
Liabilities:
Debt instrument, interest rate	0.25%
Convertible debt, fair value	$ 540,600
Fair Value, Recurring
Assets:
Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets)		73
Total	152,581	179,826
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	3,598	823
Total	3,598	823
Level 1 | Fair Value, Recurring
Assets:
Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets)		0
Total	127,069	109,200
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	0	0
Total	0	0
Level 2 | Fair Value, Recurring
Assets:
Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets)		73
Total	25,512	70,626
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	3,598	823
Total	3,598	823
Level 3 | Fair Value, Recurring
Assets:
Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets)		0
Total	0	0
Liabilities:
Foreign currency forward contracts designated as cash flow hedges (other current liabilities and other liabilities)	0	0
Total	0	0
U.S. Government agencies
Assets:
Available-for-sale securities	65,062	22,365
U.S. Government agencies | Fair Value, Recurring
Assets:
Available-for-sale securities	65,062	22,365
U.S. Government agencies | Level 1 | Fair Value, Recurring
Assets:
Available-for-sale securities	65,062	22,365
U.S. Government agencies | Level 2 | Fair Value, Recurring
Assets:
Available-for-sale securities	0	0
U.S. Government agencies | Level 3 | Fair Value, Recurring
Assets:
Available-for-sale securities	0	0
Corporate bonds
Assets:
Available-for-sale securities	16,622	32,027
Corporate bonds | Fair Value, Recurring
Assets:
Available-for-sale securities	16,622	32,027
Corporate bonds | Level 1 | Fair Value, Recurring
Assets:
Available-for-sale securities	0	0
Corporate bonds | Level 2 | Fair Value, Recurring
Assets:
Available-for-sale securities	16,622	32,027
Corporate bonds | Level 3 | Fair Value, Recurring
Assets:
Available-for-sale securities	0	0
Commercial paper
Assets:
Available-for-sale securities	8,164	37,778
Commercial paper | Fair Value, Recurring
Assets:
Available-for-sale securities	8,164	37,778
Commercial paper | Level 1 | Fair Value, Recurring
Assets:
Available-for-sale securities	0	0
Commercial paper | Level 2 | Fair Value, Recurring
Assets:
Available-for-sale securities	8,164	37,778
Commercial paper | Level 3 | Fair Value, Recurring
Assets:
Available-for-sale securities	0	0
Agency bonds
Assets:
Available-for-sale securities	726	748
Agency bonds | Fair Value, Recurring
Assets:
Available-for-sale securities	726	748
Agency bonds | Level 1 | Fair Value, Recurring
Assets:
Available-for-sale securities	0	0
Agency bonds | Level 2 | Fair Value, Recurring
Assets:
Available-for-sale securities	726	748
Agency bonds | Level 3 | Fair Value, Recurring
Assets:
Available-for-sale securities	0	0
Money market funds | Fair Value, Recurring
Assets:
Money market funds	62,007	86,835
Money market funds | Level 1 | Fair Value, Recurring
Assets:
Money market funds	62,007	86,835
Money market funds | Level 2 | Fair Value, Recurring
Assets:
Money market funds	0	0
Money market funds | Level 3 | Fair Value, Recurring
Assets:
Money market funds	$ 0	$ 0

XML

Property and Equipment - Summary of Property and Equipment (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 88,954	$ 82,222
Less accumulated depreciation	(38,421)	(31,997)
Property and equipment, net	50,533	50,225
Computer equipment and software
Property, Plant and Equipment [Line Items]
Property and equipment, gross	23,038	19,879
Furniture and fixtures
Property, Plant and Equipment [Line Items]
Property and equipment, gross	10,667	10,360
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property and equipment, gross	$ 55,249	$ 51,983

XML

Property and Equipment - Additional Information (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Property, Plant and Equipment [Abstract]
Depreciation expense	$ 3.2	$ 3.1	$ 6.5	$ 6.0

XML

Goodwill and Intangible Assets - Additional Information (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 515,631		$ 515,631		$ 515,258
Amortization expense	7,000	$ 4,000	13,900	$ 7,700
Capitalized computer software, gross	$ 16,400		$ 16,400

XML

Goodwill and Intangible Assets - Goodwill Activity (Details) $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($)
Goodwill [Roll Forward]
Goodwill, beginning balance	$ 515,258
Goodwill, ending balance	515,631
IntSights acquisition adjustments
Goodwill [Roll Forward]
Goodwill, acquired during period	$ 373

XML

Goodwill and Intangible Assets - Schedule of Identifiable Intangible Assets (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Finite-Lived Intangible Assets [Line Items]
Total acquired intangible assets, gross carrying amount	$ 137,174	$ 137,174
Total intangible assets, Gross Carrying Amount	171,089	163,031
Accumulated Amortization	(65,304)	(51,440)
Total acquired intangible assets, accumulated amortization	(55,129)	(43,682)
Net Book Value	89,417
Total acquired intangible assets, net book value	82,045	93,492
Intangible assets, net book value	$ 105,785	111,591
Developed technology
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Life (years)	5 years 2 months 12 days
Gross Carrying Amount	$ 122,555	122,555
Accumulated Amortization	(49,840)	(40,152)
Net Book Value	$ 72,715	82,403
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Life (years)	4 years 6 months
Gross Carrying Amount	$ 12,000	12,000
Accumulated Amortization	(3,805)	(2,436)
Net Book Value	$ 8,195	9,564
Trade names
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Life (years)	3 years 1 month 6 days
Gross Carrying Amount	$ 2,619	2,619
Accumulated Amortization	(1,484)	(1,094)
Net Book Value	$ 1,135	1,525
Internal-use software
Finite-Lived Intangible Assets [Line Items]
Weighted- Average Life (years)	3 years
Gross Carrying Amount	$ 33,915	25,857
Accumulated Amortization	(10,175)	(7,758)
Net Book Value	$ 23,740	$ 18,099

XML

Goodwill and Intangible Assets - Schedule of Estimated Amortization Expense (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2022	$ 12,738
2023	23,566
2024	19,176
2025	16,253
2026	12,478
2027	5,206
Net Book Value	$ 89,417

XML

Deferred Contract Acquisition and Fulfillment Costs (Details) - Contract Acquisition and Fulfillment Costs - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021
Capitalized Contract Costs [Roll Forward]
Beginning balance	$ 87,165	$ 64,639
Capitalization of contract acquisition and fulfillment costs	22,036	17,587
Amortization of deferred contract acquisition and fulfillment costs	(16,955)	(12,134)
Ending balance	$ 92,246	$ 70,092

XML

Derivatives and Hedging Activities - Balance Sheet Location (Details) - Designated as Hedging Instrument - Foreign Currency Forward Contracts Designated as Cash Flow Hedges - USD ($) $ in Millions	6 Months Ended	12 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Derivative [Line Items]
Term of contract	18 months	18 months
Notional amount	$ 47.7	$ 34.7

XML

Debt - Additional Information (Details)	1 Months Ended		3 Months Ended		6 Months Ended
	Mar. 31, 2021 USD ($)	May 31, 2020 USD ($) day	Dec. 31, 2021 USD ($) shares	Mar. 31, 2021 USD ($) shares	Jun. 30, 2022 USD ($)	Jun. 30, 2021 USD ($)	Sep. 30, 2021 USD ($)	Apr. 30, 2020 USD ($)
Debt Instrument [Line Items]
Proceeds from convertible debt					$ 0	$ 585,440,000
Convertible Debt | Debt Covenant One
Debt Instrument [Line Items]
Threshold trading days | day		20
Threshold consecutive trading days | day		30
Threshold percentage of stock price trigger		130.00%
Convertible Debt | Debt Covenant Two
Debt Instrument [Line Items]
Threshold trading days | day		5
Threshold consecutive trading days | day		10
Threshold percentage of stock price trigger		98.00%
Convertible Debt | Debt Covenant Three
Debt Instrument [Line Items]
Threshold percentage of stock price trigger		130.00%
Redemption price, percentage		100.00%
2023 Notes | Convertible Debt
Debt Instrument [Line Items]
Face amount			$ 45,400,000
Shares issued upon conversion (in shares) | shares			697,262	23,123
Repurchased face amount	$ 182,600,000		$ 2,000,000	$ 182,600,000
Converted amount			43,400,000	2,000,000
2023 Notes | Convertible Debt | Debt Covenant Three
Debt Instrument [Line Items]
Threshold trading days | day		20
Threshold consecutive trading days | day		30
Redemption price, percentage		100.00%
2025 Notes | Convertible Debt
Debt Instrument [Line Items]
Face amount		$ 230,000,000
Proceeds from convertible debt		222,800,000
2027 Notes | Convertible Debt
Debt Instrument [Line Items]
Face amount	600,000,000			$ 600,000,000
Proceeds from convertible debt	$ 585,000,000
Shares issued upon conversion (in shares) | shares				2,200,000
Credit Agreement
Debt Instrument [Line Items]
Credit sublimit			15,000,000
Credit Agreement | Secured Overnight Financing Rate (SOFR) Overnight Index Swap Rate
Debt Instrument [Line Items]
Sofr spread rate					0.10%
Credit Agreement | London Interbank Offered Rate (LIBOR)
Debt Instrument [Line Items]
Basis spread on variable rate					2.50%
Credit Agreement | Base Rate
Debt Instrument [Line Items]
Basis spread on variable rate					0.00%
Credit Agreement | Revolving Credit Facility
Debt Instrument [Line Items]
Current borrowing capacity		$ 50,000,000	100,000,000					$ 30,000,000
Credit sublimit								15,000,000
Maximum borrowing capacity			100,000,000				$ 50,000,000
Fee amount			400,000
Commitment fee percentage					0.20%
Credit Agreement | Letter of Credit
Debt Instrument [Line Items]
Maximum borrowing capacity			$ 150,000,000					$ 70,000,000
Long-term line of credit					$ 9,800,000

XML

Debt - Details of Notes (Details) - Convertible Debt shares in Millions	6 Months Ended
	Jun. 30, 2022 shares $ / shares
2025 Notes
Debt Instrument [Line Items]
Interest Rate	2.25%
Effective Interest Rate	2.88%
Initial Conversion Rate per $1,000 Principal	0.0163875
Initial Conversion Price (in dollars per share) | $ / shares	$ 61.02
Number of shares (in shares) | shares	3.8
2027 Notes
Debt Instrument [Line Items]
Interest Rate	0.25%
Effective Interest Rate	0.67%
Initial Conversion Rate per $1,000 Principal	0.0096734
Initial Conversion Price (in dollars per share) | $ / shares	$ 103.38
Number of shares (in shares) | shares	5.8

XML

Debt - Carrying Amount of Liability Component (Details) - Convertible Debt - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021	Dec. 31, 2021
Debt Instrument [Line Items]
Amortization of debt issuance costs	$ 963	$ 1,096	$ 1,895	$ 1,716
2025 Notes
Debt Instrument [Line Items]
Principal	229,992		229,992		$ 230,000
Unamortized debt issuance costs	(4,224)		(4,224)		(4,905)
Total	225,768		225,768		225,095
Amortization of debt issuance costs	351	341	681	660
Conversion of Notes			(8)
2027 Notes
Debt Instrument [Line Items]
Principal	600,000		600,000		600,000
Unamortized debt issuance costs	(11,818)		(11,818)		(13,032)
Total	588,182		588,182		$ 586,968
Amortization of debt issuance costs	$ 612	$ 602	$ 1,214	$ 682

XML

Debt - Schedule of Interest Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Debt Instrument [Line Items]
Induced conversion expense			$ 0	$ 2,740
2023 Notes
Debt Instrument [Line Items]
Total interest expense		$ 301
Convertible Debt
Debt Instrument [Line Items]
Contractual interest expense	$ 1,669	1,817	3,338	3,719
Amortization of debt issuance costs	963	1,096	1,895	1,716
Induced conversion expense			0	2,740
Total interest expense	2,632	2,913	5,233	8,175
Convertible Debt | 2023 Notes
Debt Instrument [Line Items]
Contractual interest expense		148		706
Amortization of debt issuance costs		153		374
Induced conversion expense				2,740
Total interest expense				3,820
Convertible Debt | 2025 Notes
Debt Instrument [Line Items]
Contractual interest expense	1,294	1,294	2,588	2,588
Amortization of debt issuance costs	351	341	681	660
Induced conversion expense			0	0
Total interest expense	1,645	1,635	3,269	3,248
Convertible Debt | 2027 Notes
Debt Instrument [Line Items]
Contractual interest expense	375	375	750	425
Amortization of debt issuance costs	612	602	1,214	682
Induced conversion expense			0	0
Total interest expense	$ 987	$ 977	$ 1,964	$ 1,107

XML

Debt - Other Key Terms and Premiums Paid for the Capped Calls (Details) - Call Option $ / shares in Units, $ in Thousands	6 Months Ended
	Jun. 30, 2022 USD ($) $ / shares
Capped Calls Entered into in Connection with the Issuance of the 2023 Notes
Debt Instrument [Line Items]
Initial strike price, subject to certain adjustments (in dollars per share)	$ 41.59
Cap price, subject to certain adjustments (in dollars per share)	$ 63.98
Total premium paid (in thousands) | $	$ 26,910,000
Capped Calls Entered into in Connection with the Issuance of the 2025 Notes
Debt Instrument [Line Items]
Initial strike price, subject to certain adjustments (in dollars per share)	$ 61.02
Cap price, subject to certain adjustments (in dollars per share)	$ 93.88
Total premium paid (in thousands) | $	$ 27,255,000
Capped Calls Entered into in Connection with the Issuance of the 2027 Notes
Debt Instrument [Line Items]
Initial strike price, subject to certain adjustments (in dollars per share)	$ 103.38
Cap price, subject to certain adjustments (in dollars per share)	$ 159.04
Total premium paid (in thousands) | $	$ 76,020,000

XML

Leases - Additional Information (Details)	6 Months Ended
	Jun. 30, 2022	Dec. 31, 2021
Lessee, Lease, Description [Line Items]
Lease term	6 years 10 months 24 days	7 years 2 months 12 days
Renewal term	7 years
Termination period	5 years 2 months 12 days
Office Building
Lessee, Lease, Description [Line Items]
Lease term	9 years 9 months 18 days

XML

Leases - Summary of Components of Lease Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Operating lease cost	$ 5,230	$ 3,779	$ 10,243	$ 7,545
Short-term lease costs	463	154	854	319
Variable lease costs	2,147	1,317	4,532	2,780
Total lease costs	$ 7,840	$ 5,250	$ 15,629	$ 10,644

XML

Leases - Summary of Supplemental Balance Sheet Information Related to Operating Leases (Details)	Jun. 30, 2022	Dec. 31, 2021
Leases [Abstract]
Weighted average remaining lease term (in years) - operating leases	6 years 10 months 24 days	7 years 2 months 12 days
Weighted average discount rate - operating leases	6.10%	6.20%

XML

Leases - Summary of Supplemental Cash Flow Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	$ 4,908	$ 4,177	$ 8,036	$ 8,324
ROU assets obtained in exchange for new lease obligations	$ 0	$ 909	$ 8,864	$ 1,061

XML

Leases - Summary of Maturities of Operating Lease Liabilities (Details) $ in Thousands	Jun. 30, 2022 USD ($)
Leases [Abstract]
2022	$ 8,442
2023	16,405
2024	18,532
2025	17,711
2026	16,321
2027	48,258
Total lease payments	125,669
Less: imputed interest	(24,387)
Total	$ 101,282

XML

Stock-Based Compensation Expense - Schedule of Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 32,411	$ 23,814	$ 61,333	$ 44,676
Cost of revenue
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	2,775	1,812	4,865	3,366
Research and development
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	13,925	9,420	26,949	17,235
Sales and marketing
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	8,430	6,038	15,204	11,784
General and administrative
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Total stock-based compensation expense	$ 7,281	$ 6,544	$ 14,315	$ 12,291

XML

Stock-Based Compensation Expense - Additional Information (Details) - USD ($) $ / shares in Units, $ in Thousands		3 Months Ended		6 Months Ended
	Mar. 15, 2022	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period				4 years
Share-based payment arrangement, expense		$ 32,411	$ 23,814	$ 61,333	$ 44,676
Purchase price of common stock by employees				85.00%
Issuance of common stock under employee stock purchase plan				$ 5,710	4,467
2020 Bonus Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share-based payment arrangement, expense		500	$ 1,000	$ 1,500	$ 2,300
Employee Stock Purchase Plan
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Common stock issued to employees (in shares)	80,747
Issuance of common stock under employee stock purchase plan	$ 5,700
Employee Stock Purchase Plan | Maximum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Employee withholding percentage				15.00%
Share issued, price per share (in dollars per share)	$ 81.37
Employee Stock Purchase Plan | Minimum
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Share issued, price per share (in dollars per share)	$ 67.59
RSUs and PSUs
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation expense		$ 298,800		$ 298,800
Unrecognized compensation expense, recognition period				2 years 10 months 24 days
Options to Purchase Common Stock
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options vested, fair value				$ 100

XML

Stock-Based Compensation Expense - Summary of Restricted Stock and Restricted Stock Unit Activity (Details) - Restricted Stock Units (RSUs)	6 Months Ended
	Jun. 30, 2022 $ / shares shares
Shares
Unvested balance, Beginning balance (in shares) | shares	2,778,877
Granted (in shares) | shares	1,960,840
Vested (in shares) | shares	(765,625)
Forfeited (in shares) | shares	(288,670)
Unvested balance, Ending balance (in shares) | shares	3,685,422
Weighted-Average Grant Date Fair Value
Unvested balance, Beginning balance (in dollars per share) | $ / shares	$ 74.40
Granted (in dollars per share) | $ / shares	94.72
Vested (in dollars per share) | $ / shares	61.16
Forfeited (in dollars per share) | $ / shares	80.63
Unvested balance, Ending Balance (in dollars per share) | $ / shares	$ 87.47

XML

Stock-Based Compensation Expense - Summary of Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended	6 Months Ended
	Mar. 31, 2022	Jun. 30, 2022	Dec. 31, 2021
Shares
Outstanding, Beginning balance (in shares)	1,411,387	1,411,387
Granted (in shares)		0
Exercised (in shares)		(119,720)
Forfeited/canceled (in shares)		0
Outstanding, Ending balance (in shares)		1,291,667
Vested and exercisable (in shares)		1,291,667
Weighted Average Exercise Price
Outstanding, Beginning balance (in dollars per share)	$ 10.74	$ 10.74
Granted (in dollars per share)		0
Exercised (in dollars per share)		10.07
Forfeited/canceled (in dollars per share)		0
Outstanding, Ending balance (in dollars per share)		10.80
Vested and exercisable (in dollars per share)		$ 10.80
Weighted Average Remaining Contractual Life (in years)
Outstanding	3 years 4 months 24 days	2 years 10 months 24 days
Vested and exercisable		2 years 10 months 24 days
Aggregate Intrinsic Value
Exercised		$ 10,062
Outstanding		72,334	$ 150,951
Vested and exercisable		$ 72,334

XML

Net Loss per Share - Summary of Basic and Diluted Net Loss Per Share of Common Stock (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Numerator:
Net loss	$ (39,606)	$ (34,164)	$ (84,605)	$ (64,009)
Denominator:
Weighted-average common shares outstanding, basic (in Shares)	58,239,958	55,392,383	57,983,790	54,169,464
Weighted-average common shares outstanding, diluted (in Shares)	58,239,958	55,392,383	57,983,790	54,169,464
Net loss per share, basic (in dollars per share)	$ (0.68)	$ (0.62)	$ (1.46)	$ (1.18)
Net loss per share, diluted (in dollars per share)	$ (0.68)	$ (0.62)	$ (1.46)	$ (1.18)

XML

Net Loss per Share - Summary of Antidilutive Securities Excluded From Computation Diluted Weighted Average Shares Outstanding (Details) - shares	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount (in shares)	14,847,366	15,989,803	14,847,366	15,989,803
Options to purchase common stock
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount (in shares)	1,291,667	1,653,897	1,291,667	1,653,897
Unvested restricted stock units
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount (in shares)	3,685,422	3,488,275	3,685,422	3,488,275
Common stock to be issued to DivvyCloud founders
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount (in shares)	33,433	133,730	33,433	133,730
Common stock issued to IntSights founders
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount (in shares)	206,608	0	206,608	0
Shares to be issued under ESPP
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount (in shares)	57,281	50,382	57,281	50,382
Convertible senior notes
Schedule Of Calculation Of Numerator And Denominator In Earnings Per Share [Line Items]
Antidilutive securities excluded from computation of earnings per share amount (in shares)	9,572,955	10,663,519	9,572,955	10,663,519

XML

Commitments and Contingencies - Additional Information (Details)	1 Months Ended
	Oct. 31, 2018 patent
Commitments and Contingencies Disclosure [Abstract]
Number of patents allegedly infringed	7

XML

Segment Information and Information about Geographic Areas - Additional Information (Details)	6 Months Ended
	Jun. 30, 2022 segment
Segment Reporting [Abstract]
Number of operating segments	1

XML

Segment Information and Information about Geographic Areas - Net Revenues of Customer by Geographic Area (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2022	Jun. 30, 2021	Jun. 30, 2022	Jun. 30, 2021
Entity Wide Portfolio Carrying Amount, Major Customer [Line Items]
Total	$ 167,455	$ 126,421	$ 324,839	$ 243,872
United States
Entity Wide Portfolio Carrying Amount, Major Customer [Line Items]
Total	126,001	99,256	245,124	191,765
Other
Entity Wide Portfolio Carrying Amount, Major Customer [Line Items]
Total	$ 41,454	$ 27,165	$ 79,715	$ 52,107

XML

Segment Information and Information about Geographic Areas - Property and Equipment, Net By Geographic Area (Details) - USD ($) $ in Thousands	Jun. 30, 2022	Dec. 31, 2021
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	$ 50,533	$ 50,225
United States
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	35,660	37,682
Other
Revenues from External Customers and Long-Lived Assets [Line Items]
Total	$ 14,873	$ 12,543

XML

Label	Element	Value
Accounting Standards Update [Extensible Enumeration]	us-gaap_AccountingStandardsUpdateExtensibleList	Accounting Standards Update 2020-06 [Member]