RPD

Rapid7, Inc. 10-Q Summary: Q2 2026

Business Context and Reporting Period

This filing covers the quarterly period ended June 30, 2026. Rapid7, Inc. is a global leader in AI-powered managed cybersecurity operations, providing the Rapid7 Command Platform to over 11,500 customers. The company operates as a single reportable segment, focusing on product subscriptions (cloud-based, managed services, licenses) and professional services. Significant corporate developments during the period include the appointment of Wael Mohamed as CEO effective June 1, 2026, and the acquisition of Kenzo Security, Inc. in March 2026 to enhance AI-driven security operations.

Key Financial Metrics

Material Changes vs. Prior Period

• Revenue Decline: Total revenue decreased 1.5% year-over-year (YoY) in Q2 and 0.9% for the six months ended June 30, 2026. This was primarily driven by a decrease in non-core standalone products and lower penetration-testing revenue, partially offset by growth in Managed Detection and Response (MDR) revenue.
• Profitability Pressure: Net income declined 27% YoY in Q2 and 31% for the six-month period. Operating income decreased due to higher personnel costs in Cost of Revenue and restructuring charges.
• Restructuring Charges: The company incurred $1.7 million in restructuring expenses in Q2 2026 related to workforce reductions in sales, marketing, and G&A. There were no such charges in the prior year periods.
• Stock-Based Compensation (SBC): Total SBC expense decreased significantly to $19.8 million in Q2 2026 from $27.6 million in Q2 2025, driven by fewer awards granted and lower grant prices.
• Acquisition Activity: Rapid7 acquired Kenzo Security for approximately $25.5 million in cash and deferred consideration. The acquisition contributed immaterial revenue and net income for the period.

Guidance, Outlook, and Risks

• Restructuring Plan: On August 7, 2026 (subsequent to the period end), the Board approved a plan to reduce the workforce by approximately 12%. The company estimates charges of $10 million to $11 million, primarily for severance and transition costs, to be incurred in Q3 and Q4 2026.
• Liquidity and Debt: The company maintains $425.6 million in cash and equivalents. It has a $200 million revolving credit facility with no outstanding borrowings as of June 30, 2026. The company is preparing for the maturity of $600 million in 2027 Convertible Senior Notes due March 2027 and has restricted new investments to maturities of 12 months or less.
• Key Risks:
  • Tax Contingency: An assessment of approximately $108 million (324 million Israeli New Shekels) was received from the Israel Tax Authority regarding fiscal year 2021. Rapid7 intends to defend its position and has not recorded a liability, but an unfavorable outcome could materially impact financial results.
  • Market Conditions: Risks include prolonged economic uncertainty, increased competition, and the ability to successfully integrate acquired technologies.
  • Debt Maturity: The need to repay or refinance the $600 million 2027 Notes in March 2027.

Investor Verification Checklist

• Revenue Mix: Verify the sustainability of the decline in non-core standalone products versus the growth in MDR services.
• Restructuring Impact: Monitor the execution of the 12% workforce reduction and the timing of the estimated $10M-$11M charges in Q3/Q4 2026.
• Debt Refinancing: Assess the company's strategy and liquidity position regarding the $600 million 2027 Note maturity.
• Tax Litigation: Track developments regarding the $108 million Israeli tax assessment and potential reserve requirements.
• Non-GAAP Metrics: Review the reconciliation of Non-GAAP Operating Income ($28.9M in Q2) to GAAP Operating Income ($3.0M) to understand the impact of SBC and amortization on reported profitability.