Q2 2024 Rapid7 Inc Earnings Call

Operator: Thank you for standing by. I'd like to welcome everyone to the Rapid7 2nd Quarter 2024 Earnings Call. All lines have been placed on mute to prevent any background noise.

Operator: Thank you for standing by.

Thank you for standing by.

Operator: I'd like to welcome everyone to the Rapid7, 2nd quarter of 2024 fernings call. All lines have been placed on mute to prevent any background noise.

Corey Thomas: So I would just say it was within expectation. Look, Q2 was a quarter that we expected to normalize. We saw normalization, but I would not say it was a home-run quarter.

Speaker Change: I'd like to welcome everyone to the rapid southern second quarter 2024 earnings call.

Speaker Change: All lines have been placed on mute to prevent any background noise. After.

Operator: After the speaker's remarks... There will be a question and answer session. If you'd like to ask a question during this time, simply press star and the number one on your telephone keypad. If you'd like to withdraw your request, press star 1 again. Thank you. I would now like to turn the call over to Elizabeth Chwalk, Director of Investor Relations at Rapid7. Please go ahead.

Operator: After this speaker's remarks, there will be a question-and-answer session. If you'd like to ask a question during this time, simply press star and the number one on your telephone keypad. If you'd like to withdraw your question, press star one again. Thank you.

Speaker Change: The Speakers' remarks there.

Speaker Change: There will be a question and answer session if you'd like to ask a question. During this time simply correct star and the number one on your telephone keypad.

Speaker Change: If you'd like to withdraw your question.

Speaker Change: Press Star one again, thank you all.

Elizabeth Schwach: I would now like to turn the call over to Elizabeth Schwach, Director of Investor Relations at Rapid7. Please go ahead.

Corey Thomas: I would just say that Q1 was a bad quarter. Q2, we expected to actually get back to business and normalize it. It normalized. We saw very healthy traction and normalized traction on the platform side. We gave a number of mid-single digits. It was getting back to positive net overall customer growth. And that's kind of where we expect it to be in a healthy, normalized environment and the setup.

Elizabeth Schwark: I'd now like to turn the call over to Elizabeth Schwark Director of Investor Relations at rapid seven. Please go ahead.

Elizabeth Schwach: Thank you, operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's 2nd quarter, 2024 financial and operating results, in addition to our financial outlook for the 3rd quarter and full fiscal year 2024. With me on the call today are Corey Thomas, our CEO, and Tim Adams, our CFO.

Elizabeth Chwalk: Thank you, operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's second quarter 2024 financial and operating results, in addition to our financial outlook for the third quarter and full fiscal year 2024. With me on the call today are Corey Thomas, our CEO, and Tim Adams, our CFO. We have distributed our earnings press release over the wire, and it is now posted on our website at investors.rapid7.com, along with the updated company presentation and financial metrics file.

Corey Thomas: So we actually – it was what we expected and what we needed to do to actually set up for us to be where we want to be as we exit the year. The primary thing that I'm focused on right now is, of course, introducing the product to our customers, the new product to our customers, and building a pipeline not just for the back half of the year but as we go forward. Thank you very much, and I'll be open to any other questions.

Elizabeth Schwark: Thank you operator, and good afternoon, everyone. We appreciate you joining us today to discuss rapid seven second quarter 2024 financial and operating results. In addition to our financial outlook for the third quarter and full fiscal year 2024.

Speaker Change: With me on the call today are Corey Thomas our CEO and Tim Adams, our CFO, we have distributed our earnings press release over the wire and it is now posted on our website at investors <unk> rapid seven dot com, along with the updated company presentation and financial metrics file.

Elizabeth Schwach: We have distributed our earnings press release over the wire, and it is now posted on our website at investors.rapid7.com, along with the updated company presentation and financial metrics file. This call is being broadcast live via webcast, and following the call, an audio replay will be available at investors.rapid7.com. During this call, we may make statements related to our business that are considered forward-looking under federal securities law. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements related to the company's positioning strategy, business plans, and financial guidance for the 3rd quarter and full year 2024 and the assumptions underlying such goals and guidance.

Elizabeth Chwalk: This call is being broadcast live via webcast, and following the call, an audio replay will be available at investors.rapid7.com. During this call, we may make statements related to our business that are considered forward-looking under federal securities law. These statements are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 and include statements related to the company's positioning, strategy, business plans, and financial guidance for the third quarter and full year of 2024 and the assumptions underlying such goals and guidance.

Speaker Change: This call is being broadcast live via webcast and following the call an audio replay will be available at investors <unk> rapid seven dot com.

Speaker Change: This call we may make statements related to our business that are considered forward looking under federal Securities Law. These statements are made pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995 and include statements related to the company's positioning strategy business plans and financial guidance for the third quarter.

Speaker Change: And full year 2024, and the assumptions underlying such calls and guidance.

Elizabeth Schwach: These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on Form 10-Q filed on May 8, 2024. Our most recent annual report on Form 10-K on February 26, 2024, and in the subsequent reports that we file with the SEC. The information provided on this conference call should be considered in light of such risks. Actual results on the timing of certain events may differ materially from the results are timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance.

Elizabeth Chwalk: These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on Form 10-Q filed on May 8, 2024, our most recent annual report on Form 10-K filed on February 26, 2024, and in the subsequent reports that we file with the SEC.

These forward looking statements are based on our current expectations and beliefs and on information currently available to us.

Speaker Change: Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on Form 10-Q filed on May eight 2020 for our most recent annual report on Form 10-K on February 26, 2024 and.

Speaker Change: And the subsequent reports that we file with the SEC.

Elizabeth Chwalk: The information provided on this conference call should be considered in light of such. Actual results on the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. Rapid7 does not assume any obligation to update the information presented on this conference call, except to the extent required by applicable law. Our commentary today will primarily be in non-GAAP terms, and reconciliations between our historical GAAP and non-GAAP results can be found in today's earnings press release and on our website at investors.rapid7.com.

Speaker Change: The information provided on this conference call should be considered in light of such risks.

Speaker Change: Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward looking statements and reported results should not be considered as an indication of future performance.

Elizabeth Schwach: Rapid7 does not assume any obligation to update the information presented on this conference call, except to the extent required by applicable law.

Speaker Change: <unk> does not assume any obligation to update the information presented on this conference call except to the extent required by applicable law or.

Elizabeth Schwach: Our commentary today will primarily be in non-GAAP terms, and reconciliation between our historical GAAP and non-GAAP results can be found in today's earnings press release and on our website at investors.rapid7.com. At times in our prepared comments or in responses to your questions, we may offer incremental metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that this additional detail may be one time in nature, and we may or may not update these metrics in the future.

Speaker Change: Our commentary today will primarily be in non-GAAP terms and reconciliations between our historical GAAP and non-GAAP results can be found in today's earnings press release and on our website at investors that rapid seven dot com.

Speaker Change: At times in our prepared comments or in responses to your questions.

Speaker Change: We may offer incremental metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that this additional detail maybe onetime in nature, and we may or may not update these metrics in the future.

Corey Thomas: With that, I'd like to turn the call over to our CEO, Corey Thomas. Corey?

Elizabeth Chwalk: At times, in our prepared comments or in responses to your questions, we may offer incremental metrics to provide greater insight into the dynamics of our business or our quarterly results. Please be advised that this additional detail may be one-time in nature, and we may or may not update these metrics in the future. With that, I'd like to turn the call over to our CEO, Corey Thomas.

Operator: There are no more questions.

Speaker Change: With that I'd like to turn the call over to our CEO Corey Thomas Corey.

Corey Thomas: Hello, and welcome to everyone joining us on our second quarter 2024 earnings call. It's previewed a few weeks ago, Rapid7 ended the second quarter with $816 million of ARR, which is in line with our expectations and represents 9% growth over the prior year. Growth was led by our threat detection and response business, as customers continue to prioritize their ability to efficiently monitor security data across their full environment while standing their teams with our deep security expertise. The strongest demand was for our consolidated threat-complete offerings, which drove over 40% of new ARR in the quarter. As we progress through the second quarter, the underlying market dynamics we've highlighted as tailwinds for our business continue to support our broad strategic plans.

Corey Thomas: Hello, and welcome to everyone joining us on our second quarter 2024 earnings call. As predicted a few weeks ago, Rapid7 ended the second quarter with $816 million in ARR, which is in line with our expectations and represents 9% growth over the prior year.

Corey Thomas: All right, with that, I want to thank everyone. I know that there's lots of stuff going on, but I really appreciate the questions and the support. I think we're in an exciting time.

Corey Thomas: Hello, and welcome to everyone joining us on our second quarter 2024 earnings call.

Operator: We've been executing our product strategy. We're taking that out to our customers. And we've been intentionally focused on investments that are going to set us up for the next several years, not the past three years. So I appreciate everyone's time and attention. Thank you all.

Speaker Change: As previewed a few weeks ago rapid seven into the second quarter with $816 million of.

Speaker Change: <unk>, which is in line with our expectations and represents 9% growth over the prior year.

Corey Thomas: Growth was led by our threat detection and response business as customers continue to prioritize their ability to efficiently monitor security data across their full environment while extending their teams with our deep security expertise. The strongest demand was for our Consolidated Threat Complete Offerings, which drove over 40% of new ARR in the quarter. As we progress through the second quarter, the underlying market dynamics we've highlighted as tailwinds to our business continue to support our broad strategic plan. For example, security practitioners are increasingly struggling to manage visibility into their complete IT environment. Current market offerings don't tackle these challenges effectively or economically, with the latter factor being particularly difficult for mainstream enterprises.

Operator: Ladies and gentlemen, that concludes today's conference call. Thank you all for joining us. You may now disconnect.

Speaker Change: Growth was led by our threat detection with practices as customers continue to prioritize their ability to efficiently monitor security data across their full environment, while extending their teams with our deep security expertise.

Operator: Please wait; the conference will begin shortly.

Speaker Change: The strong demand with four consolidated direct complete offerings, which drove over 40% of new <unk> in the quarter.

Speaker Change: As we progressed through the second quarter, the underlying market dynamics, we've highlighted as tailwind to our business continues to support our broad strategic plans.

Corey Thomas: Security practitioners are increasingly struggling to manage visibility into their complete IT environments. Current market offerings don't tackle these challenges effectively or economically, which is the latter factor being particularly difficult for mainstream enterprises. As we continue to advance key investments around innovation this year, these are the core customer challenges we remain focused on solving. Rapid7 is investing to build the strongest security operating system for mainstream interprocess, supported by a leading data platform for contextualizing risk across fragmented, complex environments. Over the past year, we've been strategically reorienting our company towards an integrated data platform, focusing on the highest value workloads in cloud and texture response and building out a more efficient go-to-market motion.

Speaker Change: Judy practices are increasingly struggling demand as visibility into their complete it environments.

Speaker Change: Our market offerings don't tackle these challenges effectively or economically what's the latter factor via particularly difficult for mainstream enterprises.

Corey Thomas: As we continue to advance key investments around innovation this year, these are the core customer challenges we remain focused on solving. Rapid7 is investing to build the strongest security operations ecosystem for mainstream enterprises. Supported by a leading data platform for contextualizing risk across fragmented, complex, Over the past year, we've been strategically reorienting our company towards an integrated data platform, focusing on the highest value workloads in cloud and detection response and building out a more efficient go-to-market process.

Speaker Change: As we continue to advance key investments around innovation this year.

Speaker Change: These are the core customer challenges, we remain focused on solving.

Stephan: Rapid Stephan is investing to build the strongest security operations ecosystem for mainstream care process.

Speaker Change: By leading data platform for contextualize, our risks across fragmented complex environments.

Speaker Change: Over the past year, we can strategically reorienting, our company with an integrated data platform.

Speaker Change: Focusing on the highest value workloads and cloud and its extra swaps and building out a more efficient go to market motion.

Corey Thomas: We firmly believe that provided visibility across a customer's risk environment by integrating traditional bundling management with a broad set of cloud security solutions, and parent that with a world-class DNR stock efficacy, in one place gives customers a more effective solution and overall better security outcomes as the price value they're seeking. Our strategic plan is to capture this opportunity while optimizing our business for better long-term growth. In order to meet these strategic objectives, we started this year by sharing our intentional and targeted efforts around three key areas: the texture response innovation, our partner ecosystem, and mainstream cloud security adoption.

Corey Thomas: We firmly believe that providing visibility across a customer's risk environment by integrating traditional vulnerability management with a broad set of cloud security solutions and pairing that with a world-class DNR stock ethic in one place gives customers a more effective solution and overall better security outcomes at the price value they're seeking. Our strategic plan is to capture this opportunity while optimizing our business for better long-term growth. In order to meet these strategic objectives, we started this year by sharing our intentional and targeted efforts around three key areas.

Speaker Change: We firmly believe that provided visibility across the customer's risk environment by integrating traditional vulnerability management with a broad set of cloud security solutions.

Speaker Change: Parent debt with a world class a stock efficacy in one place give customers a more effective solution and overall opex maturity outflows at the price they are seeking.

Speaker Change: Our strategic plan is to capture this opportunity, while optimizing our business for better long term growth.

Corey Thomas: Detection and Response Innovation, our partner ecosystem, and Mainstream Cloud Security Adoption. We've spoken to these critical areas on the last few earnings calls, and today I'm pleased to update you on the progress we made in each and every last one of them. Our first area of focus is innovation to deliver world-class detection and response experiences for our customers. Rapid7 has taken a deliberate approach to this market over the last few years, and we continue to invest in extending our capabilities with a committed focus on delivering the integrations, features, and usability that resonates most with mainstream enterprise customers. This overarching approach supports the steady growth we're seeing today in the following ways.

Speaker Change: In order to meet the strategic objectives. We started this year by sharing our intentional and targeted efforts around three key areas.

Speaker Change: <unk> had a spot innovation.

Speaker Change: Part of the ecosystem and mainstream cloud security adoption.

Corey Thomas: We've spoken to these critical areas on the last few earning calls, and today I am pleased to update you on the progress we made in each and every last one of them. Our first area of focus is innovation to deliver world-class texture response experience for our customers. Rapid7 has taken a deliberate approach in this market over the last few years, and we continue to invest in extending our capabilities with the committed focus on delivering the integration features and usability that resonates most with mainstream enterprise customers. This overarching approach supports the steady growth we're seeing today in the following ways.

Speaker Change: We spoke to these critical areas on our last few earnings calls and today I am pleased to update you on the progress we made in each and every last one of them.

Speaker Change: Our first area of focus and innovation to deliver world class detection response experience to our customers.

Speaker Change: <unk> separate its taken a deliberate approach in this market over the last two years and we continue to invest in extending our capabilities with a committed focus on delivering the integration features and usability that resonates most with mainstream enterprise customers.

Speaker Change: This overarching approach supports the steady growth we're seeing today in the following ways.

Corey Thomas: The escalating frequency of ransomware tax is driving security teams to favor solutions that monitor their full IT environments. We continue to focus investments towards expanding the breadth of alert coverage on our platform, which improves our ability to monitor and manage more third-party security data on our platform and sets Rapid7 apart from our peers in sales and the FDR. Rapid7 also stands out against point vendors that lack broad expertise and capabilities across security operations. Our ability to offer an integrated platform to solve adjacent security concerns, like full visibility, is the hybrid attack service that delivers better security outcomes and more compelling economic value.

Corey Thomas: The escalating frequency of ransomware attacks is driving security teams to favor solutions that monitor their full IT environment. We continue to focus investments towards expanding the breadth of alert coverage on our platform, which improves our ability to monitor and manage more third-party security data on our platform and sets Rapid7 apart from our peers in the SIEM and the XDR space. Rapid7 also stands out against point vendors that lack broad expertise and capabilities across security operations. Our ability to offer integrated platform to solve adjacent security concerns like full visibility is a hybrid attack surface delivers better security outcomes and more compelling economic value. And lastly,

Speaker Change: The escalating frequency of ransomware attack is driving security teams to favorite solutions the market therefore it environments.

Speaker Change: We continue to focus investments worth expanded the breadth of coverage on our platform, which improves our ability to monitor and manage more third party security data on our platform SaaS rapid separate apart from our peers and Phil and the Xdr space.

Speaker Change: Rapid seven also stands out against <unk>.

Speaker Change: That lacked broad expertise and capabilities across security operations.

Speaker Change: Our ability to offer integrated platform to solve adjacent security concerns like full visibility, it's a hybrid attack surface delivers better security outcomes, if more compelling economic value.

Corey Thomas: And lastly, we are one of the few detect service box platforms that gives customers a seamless extension of their own security teams by using our managed services and the extensive expertise that comes along with it. We continue to invest in the efficiency and scale of our stock, including leveraging AI and analytics to make these teams more effective. Our second year of focus this year is our partner ecosystem, which continues to increase its importance as we scale and prioritize efficient demand generation. Investing in our lowest services and partner ecosystem to increase our capacity for service delivery, as well as provide a strong source of efficient demand generation, will help us deliver more sustainable and profitable growth.

Speaker Change: And lastly.

Corey Thomas: We are one of the few detection and response platforms that gives customers a seamless extension of their own security teams. By using our managed services and the extensive expertise that comes along with them, we continue to invest in the efficiency and scale of our SOC, including leveraging AI and analytics to make these teams more effective. Our second key area of focus this year is our partner ecosystem, which continues to increase in importance as we scale and prioritize efficient demand generation.

Speaker Change: We are one of the few detects our fast platforms. It gives customers a seamless extension of their own security teams by using our managed services and the extensive expertise that comes along with it we continue to invest in the efficiency and scale of our sock, including leveraging AI and analytics to make these teams more effective.

Speaker Change: Our second key area of focus this year is our partner ecosystem.

Speaker Change: Which continues to increase in importance as we scale fr cost efficient demand generation.

Corey Thomas: Investing in our growing services and partner ecosystem to increase our capacity for service delivery as well as provide a strong source of efficient demand generation will help us deliver more sustainable and profitable growth. Sales pipeline generated across our strategic partners increased 15% year over year in the second quarter, which was an acceleration from Q1. Our team is seeing traction broadly as we continue to emphasize our MSSP, partnerships, key channel relationships, and increasingly engage with customers in marketplaces like AWS. Our Comcast business partnership is progressing nicely and will serve as a steady driver of scale for our detection and response business.

Speaker Change: Investing in our lowest surfaces and partner ecosystem to increase our capacity for service delivery as well as provide a strong source of efficient demand generation will help us deliver more sustainable and profitable growth.

Corey Thomas: Sales pipeline generated across our strategic partners will 15% year over year in the second quarter, which was an acceleration of few months. Our team is being trapped ship wrongly as we continue to emphasize our MSST partnerships, deep channel relationships, and increasingly engaged with customers in marketplaces like AWS. Our top-class business partnership is progressing nicely and will serve as a steady driver of scale for our detection response business. Customer buyer behavior continues to shift towards the hyper-scale and marketplaces, and our ability to support this has doubled the volume of deals that we have closed year to date on AWS Marketplace.

Speaker Change: Sales pipeline generated across our strategic partners grew 15% year over year in the second quarter, which was an acceleration from Q1.

Speaker Change: Our team is seeing traction broadly as we continue to emphasize our MSP partners.

Speaker Change: Channel relationships and increasingly engaged with customers in marketplaces like AWS.

Speaker Change: Our Comcast this partnership is progressing nicely and will serve as a steady drop our upscale private tech sales processes.

Corey Thomas: Customer buying behavior continues to shift towards the hyperscaler marketplaces, and our ability to support this has doubled the volume of deals that we have closed year-to-date in the AWS market. Furthermore, we're gaining mindshare and momentum with our top channel partners, which is helping to support stronger pipeline growth and remains a growth opportunity for Rapid7. Our last key area, and the one that I'm most excited about today, is our focus on leading mainstream cloud security adoption.

Speaker Change: We are a buyer behavior continues to shift towards the hyperscale and marketplaces and our ability to support this is double the volume of deals that we've closed year to date on AWS marketplace.

Corey Thomas: Furthermore, we're gaining minds here in momentum with our top channel partners, which is helping to support stronger pipeline growth and remains a growth opportunity for our asset.

Speaker Change: Furthermore, we're gaining mindshare and momentum with our top channel partners, which is helping to support strong pipeline growth remains a growth opportunity for <unk>.

Corey Thomas: Our last year in the one that I'm most excited about today is our focus on leading mainstream cloud security adoption. To give some context to the unique challenges and opportunities in this space, it's helpful to remember that many security teams don't exactly know what their IT environment looks like. While this knowledge was foundational to protecting those environments, mastery of the customer tax service is limited by data collection, which tends to be expensive and challenging, especially as it relates to securing cloud security environments. Because there are multiple sources of data to integrate, we are lowering the barrier to visibility by allowing customers to secure their attack surface by integrating diverse sets of security data, including network, identity, and cloud imagery together on the Rapid7 command platform.

Speaker Change: Our last year and the one that I'm. Most excited about today is our focus on leading mainstream cloud security adoption.

Corey Thomas: To give some context to the unique challenges and opportunities in this space, it's helpful to remember that many security teams don't exactly know what their IT environments look like. While this knowledge is foundational to protecting those environments, mastery of the customer attack surface is limited by data collection, which tends to be expensive and challenging, especially as it relates to securing cloud security environments. Because there are multiple sources of data to integrate, we are lowering the barrier to visibility by allowing customers to secure their attack surface by integrating diverse sets of security data, including network, identity, and cloud telemetry, together on the Rapid7 command platform. We introduced our new command platform at BlackHat.

Speaker Change: To give some context to the unique challenges and opportunities in this space. It is helpful to remember that many security teams.

Speaker Change: Exactly know what their it departments look like.

Speaker Change: This knowledge is foundational to protecting those inbox mastery of the customer attack surface is limited by data collection, which tends to be expensive and challenging, especially as it relates to securing cloud security environments.

Speaker Change: Because there are multiple sources of data to integrate.

Speaker Change: So and the barrier to visibility by our customers to secure their attack surface by integrating diverse set of security data, including network identity cloud leveraging.

Speaker Change: Yet there are the rapid seven demand platform.

Corey Thomas: This leads me to the announcement you may have heard and seen yesterday. We introduced our new command platform and Black Hat. This fully integrated platform extends our traditional insight capabilities by allowing customers to integrate more of their critical security data in one place, whether that data comes from Africa 7 or other providers. Give us security operations teams greater visibility that they can trust. Our flagship exposure command offering aims to provide integrated risk visibility across the full attack surface. Nicholas, and Optimal Cost Effectiveness. This single unified view, it helps customers understand what does my complete environment look like, and what are my biggest exposures, is the core of our new Exposure Command offer.

Speaker Change: This leads me to the announcements you may have heard and seen yesterday.

Speaker Change: We introduced our new command platform at Black hat.

Corey Thomas: This fully integrated platform extends our traditional insight capabilities by allowing customers to integrate more of their critical security data in one place, whether that data comes from Rapid7 or other providers, giving security operations teams greater visibility that they can trust. Our flagship exposure command offering aims to provide integrated risk visibility across the full attack surface at optimal cost effectiveness. This single unified view can help customers understand what my complete environment looks like and what my biggest exposures are. It is the core of our new exposure command office.

Speaker Change: This fully integrated platform extends our traditional insight capabilities, allowing customers to integrate more of their critical security data in one place.

Speaker Change: What does that data come from rapid seven or other providers gives us security operations teams greater visibility that they can trust.

Speaker Change: Our flagship exposure command offering aims to provide integrated risk visibility across the full attack surface at optimal cost effectiveness.

Speaker Change: This single unified view to help customers understand what does my complete environment looked like and what are our biggest exposures.

Speaker Change: Is the core of our newest closure from an office.

Corey Thomas: The hybrid attack surface clarity offered by exposure command across both additional and final environments is now built into our vulnerability management and improved suite of robust steam app capabilities for an integrated threat-based approach to risk production. Exposure command is boistered by a recent acquisition of NOEDIC, which provides an integrated high confidence view of assets across the attack surface. We believe that the NOEDIC technology and the top-notch team will be crucial pieces of Rapid7's broader offering, and we're thrilled to have them aboard. Starting officially this week, the Rapid17 will be executed on the following opportunities for our company and our customers related to exposure command.

Corey Thomas: The hybrid attack surface clarity offered by Exposure Command across both traditional and cloud environments is now built into our vulnerability management and improved suite of robust CNAP capabilities for an integrated, threat-based approach to risk reduction. Social Command is exemplified by our recent acquisition of Noetic, which provides an integrated, high-confidence view of assets across the tax system.

Speaker Change: The hybrid attack surface clarity offered by exposure demand across both traditional and cloud environments.

Speaker Change: Built into our vulnerability management and improved suite of robust.

Speaker Change: Capabilities for an integrated threat based approach to risk reduction.

Speaker Change: Exposure to voice by our recent acquisition of Noetic, which provides an integrated high profits you have assets across the attack surface.

Corey Thomas: We believe that Noetic Technology and their top-notch team will be crucial pieces of Rapid7's broader offering, and we're thrilled to have them on board. Starting officially this week, the Rapid7 team will be working on the following opportunities for our company and our customers related to Exposure Command. First, the opportunity to drive meaningful expansion from our existing Insight VM base to Exposure Command, and frictionless upsell offers for customers looking to unlock better attack surface visibility and expand into the cloud.

Speaker Change: We believe that the way to technology and the top box team will be crucial pieces of rapid tests for our offering we're thrilled to have them onboard.

Speaker Change: Starting to officially this week the rapid 17 will be executed on the fall opportunities for our company and our customers related to a question from me.

Corey Thomas: First, the opportunity to drive meaningful expansion from our existing inside VM base to exposure command. With frictionless upsell offers for customers looking to unlock better attack surface visibility and expand into the cloud. Second, we expect this new platform offering can enhance retention, not only through exposure command, but by offering additional attack surface management functionality as part of the existing VM offering and a minimal uplift. Third, exposure command adds a second flagship land offering with disruptive market pricing to position strongly in competitive deals and to help us expand the market to new mainstream customers. We believe there are many underserved mainstream customers that lack visibility into their broader environments, in part due to the complexity and cost structure for existing CNAB offers.

Speaker Change: First the opportunity to drive meaningful expansion from our existing installed base to a coach brand.

Speaker Change: With frictionless up to offer for customers looking to add a lot better attack surface with ability and expand into the cloud.

Corey Thomas: Second, we expect this new platform offering can enhance retention, not only through Exposure Command but by offering additional attack surface management functionality as part of the existing VM offering and at a minimal uplift. Third, Exposure Command adds a second flat shipland offering with disruptive market pricing to position us strongly in competitive deals and to help us expand the market to new mainstream customers. We believe there are many mainstream customers that lack visibility into their broader environments, in part due to the complexity and cost structure of existing CNAP offers.

Speaker Change: We expect this new platform offering can enhance retention not only through exposure command, but by offering additional attack surface management functionality as part of the existing offering at a minimal uplift.

Speaker Change: Third exposure commands adds a second flagship land offerings with disruptive market pricing to position us strongly in competitive deals and to help us expand the market to new mainstream customers. We believe there are many underserved mainstream customers get lack visibility into their broader and pockets in part due to the complexity and cost structure.

Speaker Change: For existing CF offerings.

Corey Thomas: And finally, we believe accelerating cloud security adoption via exposure command will further support DNR growth. As customers know well, you can't effectively monitor and respond to threats without visibility into your attack surface, and having visibility into your full environment is a driver for greater urgency around monitoring and responding. As we look ahead, we believe that the long-term investments we are prioritizing this year are the three critical areas I just described. Supporting the NR momentum, building on our partner ecosystem, and accelerating mainstream cloud adoption will ultimately deliver the best security outcomes and the strongest economic value for our customers.

Corey Thomas: And finally, we believe accelerating cloud security adoption, via exposure command, will further support DNR growth. As customers know well, you can't effectively monitor and respond to directs without visibility into your attack surface, and having visibility into your full environment is a driver for greater urgency around monitoring and responding to directs. As we look ahead, we believe that the long-term investments we are prioritizing this year, in its re-critical areas, I just described, to put in the environment within our apartment ecosystem and accelerating mainstream cloud adoption, will ultimately deliver the best security outcomes and the strongest economic value for our customers.

Speaker Change: And finally, we believe accelerating cloud security adoption via social demand will further support DNR Kohl's as customers no well you can't effectively monitor and responses rest without visibility into our Texas office.

Speaker Change: Visibility is your full environment is the driver for greater urgency around molecule and responding to threats.

Speaker Change: As we look ahead, we believe that the long term investments we are prioritizing this year.

Speaker Change: Three critical areas I, just described supported the anomaly but.

Speaker Change: Within our partner ecosystem and accelerating mainstream cloud adoption will ultimately deliver the best security outcomes and strong economic value for our customers.

Corey Thomas: We remain steadfast in our commitment to enhance value for our shareholders, and we are working to capture upside and opportunity through our focus strategic plan. We are currently in the market with our two flagship offerings, an exposure command, and the texture response, to address the highest priority areas of spending with security operations. We continue to innovate on our underlying product capabilities and improve our land and expand motions to meet customers' needs in the existing market. We are confident there are recently streamlined leadership organizations focused on profitability and efficient growth and a clear strategy to provide leading security operations platform to mainstream enterprise customers with support long-term growth for rapidly.

Corey Thomas: We remain steadfast in our commitment to enhancing value for our shareholders, and we are working to capture upside and opportunity through our FOCUS strategic plan. We're currently in the market with our two flagship offers. Social Command, and the Text-in-Response to address the highest priority areas of spending within security operations. We continue to innovate on our underlying product capabilities and improve our land and expand operations to meet customers' needs in the existing market.

Speaker Change: We remain steadfast in our commitment to enhancing value for our shareholders and we are working to capture upside and opportunity through our focus strategic plan.

Speaker Change: We're currently in the market with our two flagship offerings exposure command and the text of response to address the highest priority areas of spending with their security operations.

Speaker Change: We continue to innovate on our underlying product capabilities and improve our land and expand motions to meet customers' needs.

Speaker Change: The market.

Corey Thomas: We're confident that our recently streamlined leadership organization focused on profitability and efficient growth and a clear strategy to provide a leading security operations platform to mainstream enterprise customers will support long-term growth for Rapid7. Thank you for joining us on the call today. I will now turn the call over to our CFO, Tim Adams, to share additional detail on our financial results and outlook.

Speaker Change: We're confident that our recently streamlined leadership organization focused on profitability and efficient growth and a clear strategy to provide leading security operations platform that mainstream enterprise customers will support long term growth for rapid sepsis.

Corey Thomas: Thank you for joining us on the call today.

Speaker Change: Thank you for joining us on the call today I will now turn the call over to our CFO to Adams to share additional detail on our financial results and outlook Tim.

Tim Adams: I would now turn the call over to our CFO, Tim Adams, to share additional detail on our financial results. Tim?

Tim Adams: Thank you, Corey, and good afternoon to everyone on today's call. Thank you for taking the time to join us today.

Tim Adams: Thank you, Corey, and good afternoon to everyone on today's call. Thank you for taking the time to join us today.

Tim Adams: Thank you Corey and good afternoon to everyone on today's call. Thank you for taking the time to join us today.

Tim Adams: Before I turn to our results, a quick reminder that, except for revenue, all financial results we will discuss today are non-GAAP financial measures unless otherwise stated. Additionally, reconciliations between our GAAP and non-GAAP results can be found in our earnings press release. Rapid7 ended the second quarter of 2024 with $816 million in ARR, consistent with our expectations and growing 9% over the prior year. Our Q2 ending ARR result reflects continued strength in our detection and response business, particularly for our threat complete offering.

Tim Adams: Before I turn to our results, a quick reminder that, except for revenue, all financial results we will discuss today are non-GAAP financial measures, unless otherwise stated. Additionally, reconciliation between our GAAP and non-GAAP results can be found in our earnings press release. Rapid7 and the second quarter of 2024, with $816 million in ARR, consistent with our expectations and growing 9% over the prior year. Our Q2 ending ARR result reflects continued strength in our detection and response business, particularly for our threat-complete offerings. As Corey shared, this consolidated offering drove over 40% of new ARR in the quarter and underscores the customer demand we are seeing for broad, effective, well-integrated solutions at compelling price points.

Tim Adams: Before I turn to our results a quick reminder, that except for revenue all.

Tim Adams: Financial results, we will discuss today are non-GAAP financial measures unless otherwise stated.

Tim Adams: Additionally, reconciliations between our GAAP and non-GAAP results can be found in our earnings press release.

Tim Adams: Rapid <unk> ended the second quarter of 2024 with $816 million in <unk>.

Speaker Change: <unk> <unk>.

Speaker Change: Consistent with our expectations and growing 9% over the prior year.

Speaker Change: Our Q2, ending RMR result reflects continued strength in our detection and response business, particularly.

Speaker Change: Particularly for our threat complete offerings.

Tim Adams: As Corey shared, this consolidated offering drove over 40% of new ARR in the quarter and underscores the customer demand we are seeing for broad, effective, well-integrated solutions at compelling price points. Trends in the rest of the business during the second quarter were in line with our expectations as we work towards the launch of Exposure Command, our new integrated risk management offering. ARR growth in the second quarter was weighted towards our sales expansion, as ARR per customer grew 7% over the prior year to $71,000. Meanwhile, our total customer base grew 2% year over year to end the quarter with nearly 11,500 customers.

Corey Thomas: As Corey shared this consolidated offering drove over 40% of new <unk> in the quarter and.

Corey Thomas: And underscores the customer demand, we are seeing for broad effective well integrated solutions at compelling price points.

Tim Adams: Trends in the rest of the business during the second quarter were in line with our expectations as we work towards the launch of our Exposure Command, our new integrated risk management offering. ARR growth in the second quarter was weighted towards our sales expansion, as ARR per customer grew 7% over the prior year to $71,000. While our total customer base grew 2% year over year to end the quarter with nearly 11,500 customers. We continue to see growth in our higher value platform customers that is partially offset by a decline in lower value non-platform customers. Second quarter revenue of $208 million grew 9% over the prior year and exceeded our guided range.

Speaker Change: Trends in the rest of the business during the second quarter were in line with our expectations as we work towards the launch of our exposure command, our new integrated risk management offering.

Speaker Change: Our growth in the second quarter was weighted towards our sales expansion.

Speaker Change: As <unk> per customer grew 7% over the prior year to $71000.

Speaker Change: While our total customer base grew 2% year over year to end the quarter with nearly 11500 customers.

Tim Adams: We continue to see growth in our higher-value platform customers that is partially offset by a decline in lower-value non-platform customers. Second quarter revenue of $208 million grew 9% over the prior year and exceeded our guided range. Recurring product subscription revenue grew 10% over the prior year to $200 million, which was better than expected on favorable linearity in the quarter. Professional services revenue declined sequentially as we continue to actively deemphasize certain lower-value services.

Speaker Change: We continue to see growth in our higher value platform customers that is partially offset by a decline in lower value non platform customers.

Tim Adams: Recurring products subscription revenue grew 10% over the prior year to $200 million, which was better than expected on favorable linearity in the quarter.

Tim Adams: Professional services revenue declined sequentially as we continue to actively de-emphasize certain lower-value services. Our revenue mix continues to shift towards international, which grew 19% year over year and now represents 23% of total revenue.

Tim Adams: Our revenue mix continues to shift towards international, which grew 19% year over year and now represents 23% of total revenue. I'll turn now to our operating and profitability measures for the second quarter. Gross profit margin was 76% in the quarter, and total gross margin was 74%, both of which are in line sequentially and with the prior year. Sales and marketing and R&D expenses were 33% and 15% of revenue, respectively, compared to 39% and 21% in the prior year. G&A expense was in line with the prior year at 7% of revenue.

Tim Adams: I'll turn now to our operating and profitability measures for the second quarter. Profit gross margin was 76% in the quarter, and total gross margin was 74%. Both of which are in line sequentially and with the prior year. Sales and marketing and R&D expenses were 33% and 15% of revenue, respectively, compared to 39% and 21% in the prior year. GNA expense was in line with the prior year at 7% of revenue. Operating income of $39 million was above our guided range and represented a roughly 19% operating margin, approximately 12% higher than the second quarter of the last year.

Speaker Change: Percent of revenue.

Tim Adams: Operating income of $39 million was above our guided range and represented a roughly 19% operating margin, approximately 12% higher than the second quarter of last year. Adjusted EBITDA was $45 million in the quarter, and net income per diluted share was $0.58. Moving to our balance sheet and cash flow, we ended the second quarter with cash, cash equivalents, and investments of $494 million, compared to $464 million at the end of the first quarter. We generated $29 million of free cash flow in the quarter, up from the $28 million we reported last quarter.

Speaker Change: Operating income of $39 million was above our guided range and represented a roughly 19% operating margin.

Speaker Change: Approximately 12% higher than the second quarter of last year.

Tim Adams: Adjusted EBITDA was $45 million in the quarter, and net income per diluted share was 58 cents.

Speaker Change: Adjusted EBITDA was $45 million in the quarter and net income per diluted share was <unk> 58.

Tim Adams: Williams. Moving to our balance sheet and cash flow, we ended the second quarter with cash, cash equivalents, and investments of $494 million, compared to $464 million at the end of the first quarter. We generated $29 million of free cash flow in the quarter, up from the $28 million we reported last quarter.

Speaker Change: Moving to our balance sheet and cash flow. We ended the second quarter with cash cash equivalents and investments of $494 million compared to $464 million at the end of the first quarter.

Speaker Change: We generated $29 million of free cash flow in the quarter up from the 28 million, we reported last quarter.

Tim Adams: This brings us to our guidance for the remainder of the year. We continue to expect full year ending ARR to be in the range of $850 million to $860 million, which represents growth of 6% to 7% over the prior year. Our second quarter was broadly in line with our expectations, and as we look out at the rest of the year, our assumptions for the second half have not meaningfully changed since we updated guidance in May. While the demand environment continues to be choppy, we expect relative stability and customer spending trends to continue. And while we expect improving pipeline momentum, exiting the year, only a modest contribution from exposure command is assumed in the fourth quarter.

Tim Adams: This brings us to our guidance for the remainder of the year. We continue to expect full year ending ARR to be in the range of $850 million to $860 million, which represents growth of 6% to 7% over the prior year. Our second quarter was broadly in line with our expectations, and as we look out at the rest of the year, our assumptions for the second half have not meaningfully changed since we updated guidance in May.

Speaker Change: This brings us to our guidance for the remainder of the year.

Speaker Change: We continue to expect full year, ending <unk> to be in the range of $850 million to $860 million, which represents growth of 6% to 7% over the prior year.

Speaker Change: Our second quarter was broadly in line with our expectations and as we look out at the rest of the year our assumptions for the second half have not meaningfully changed since we updated guidance in may.

Speaker Change: While the demand environment continues to be choppy, we expect relative stability in customer spending trends to continue.

Tim Adams: While the demand environment continues to be choppy, we expect relative stability and customer spending trends to continue. And while we expect improving pipeline momentum exiting the year, only a modest contribution from exposure command is assumed in the fourth quarter. And lastly, we continue to expect that our detection and response business will remain healthy.

Speaker Change: And while we expect an improving pipeline momentum exiting the year only a modest contribution from exposure command is assumed in the fourth quarter.

Tim Adams: And lastly, we continue to expect that our detection and response business will remain healthy.

Tim Adams: Similar to the comments we made last quarter, given the ramp of ARR in the second half of the year and the timing of our recent exposure command launch, I would like to share some directional commentary on our ARR expectations for the third quarter. We expect a high single-digit sequential increase in millions of net new ARR dollars, similar to the increase in the second quarter. We are raising and narrowing our full year revenue range to $833 to $837 million, representing growth of 7 to 8%, up from the $830 to $836 million. On profitability, we are maintaining the midpoint and narrowing our full year operating income range to $152 to $156 million.

Tim Adams: Similar to the comments we made last quarter, given the ramp of ARR in the second half of the year and the timing of our recent exposure command launch, I would like to share some directional commentary on our ARR expectations for the third quarter. We expect a high single-digit sequential increase in millions of net new ARR dollars, similar to the increase in the second quarter. We are raising and narrowing our full-year revenue range to $833-837 million, representing growth of 7-8%, up from $830-836 million.

Tim Adams: On profitability, we are maintaining the midpoint and narrowing our full-year operating income range to $152 to $156 million. Our updated operating income range is the result of better expense control in the second quarter that is offset by new incremental costs in the second half of the year related to the NOETC acquisition, as well as higher advisory and legal fees. We expect full-year net income per share in the range of $215 to $220 based on an estimated $74.7 million diluted weighted average shares outstanding.

Tim Adams: Our updated operating income range is the result of better expense control in the second quarter that is offset by new incremental costs in the second half of the year related to the Noetic acquisition, as well as higher advisory and legal fees. We expect full year net income per share in the range of $215 to $220 based on an estimated 74.7 million diluted weighted average shares outstanding. Our full year expectation for free cash flow is now $150 to $160 million. While we remain strongly committed to expanding profitability and continue to see a reasonable path to our original target of $160 million, our updated range reflects the new incremental costs in the second half of the year related to Noetic and higher advisory and legal fees.

Tim Adams: Our full year expectation for free cash flow is now $150 to $160 million. While we remain strongly committed to expanding profitability and continue to see a reasonable path to our original target of $160 million, our updated range reflects the new incremental costs in the second half of the year related to Noetics and higher advisory and legal fees. Moving to quarterly guidance, for the third quarter of 2024, we expect total revenue in the range of $209 million to $211 million, representing growth of 5% to 6% over the prior year.

Speaker Change: Our updated range reflects the new incremental costs in the second half of the year related to noetic and higher advisory and legal fees.

Tim Adams: Moving to quarterly guidance. For the third quarter of 2024, we expect total revenue in the range of $209 million to $211 million. Scholars, representing growth of 5-6% over the prior year. We expect non-GAAP operating income in the second quarter in the range of $36-38 million, and non-GAAP net income per share of $0.50 to $0.53, which is based on 74.9 million diluted weighted average shares outstanding.

Speaker Change: Moving to quarterly guidance for the third quarter of 2024, we expect total revenue in the range of $209 million to $211 million.

Speaker Change: Representing growth of 5% to 6% over the prior year we.

Tim Adams: We expect non-GAAP operating income in the second quarter in the range of $36 to $38 million and non-GAAP net income per share of $0.50 to $0.53, which is based on 74.9 million diluted weighted average shares outstanding. Thank you for taking the time to join us on the call today, and with that, we will open the call for questions. Operator?

Speaker Change: We expect non-GAAP operating income in the second quarter in the range of $36 million to $38 million and non-GAAP net income per share of 50 253.

Speaker Change: Which is based on $74 9 million diluted weighted average shares outstanding.

Operator: Thank you for taking the time to join us on the call today, and with that, we will open the call for questions, Operator. Thank you.

Speaker Change: Thank you for taking the time to join us on the call today and with that we will open the call for questions operator.

Speaker Change: Thank you.

Operator: As a reminder, if you'd like to ask a question, please press star one on your telephone keypad.

Operator: As a reminder, if you'd like to ask a question, please press star 1 on your telephone keypad. Your first question comes from the line of Matt Hedberg from RBC. The line is open.

Speaker Change: As a reminder.

Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad.

Matt Hedberg: Your first question comes from the line of Matt Hedberg from RBC. Line up.

Speaker Change: Your first question comes from the line of Matt Hedberg from RBC.

Speaker Change: Your line is open.

Matt Hedberg: Great. Thanks for taking my questions, guys. Corey, nice to see the stability in the results. I guess, you know, I wanted to drill down a little bit on some of the go-to-market changes that you talked about a month or so ago. Maybe just a little bit more of the rationale there and, you know, how do you think about that, you know, potentially impacting second-half performance?

Matt Hedberg: Great. Thanks for taking my questions guys.

Speaker Change: Corey.

Matt Hedberg: Nice to see the stability in the results.

Corey Thomas: Nice to see the stability in the results I guess I wanted to drill down a little bit on some of the go to market changes that you talked about a month or so ago.

Corey Thomas: I guess I wanted to drill down a little bit on some of the go-to-market changes that you talked about a month or so ago. Maybe just a little bit more of the rationale there, and I don't think about that potentially impacting second half performance. Yeah, now that's a great question, Matt. The primary drivers, we're gearing up for the evolution of our go-to-market motion, as we really focus on both the command and future command launches. A big part of that is upgrading our VM customers to our new command platform, which we think is going to be more relevant to the future than traditional vulnerability management, and we had a higher distance here around that.

Corey Thomas: Yeah, no, that's a great question, Matt. So, the primary drivers, we're gearing up for the evolution of our go-to-market motion as we really focus on both the command and exposure command launches. You know, a big part of that was upgrading our VM customers to our new command platform, which we think is going to be more relevant to the future than traditional vulnerability management, and we had a high urgency around that. We had three established leaders who had a strong track record, strong tenure with the company, that were ready to actually take over sort of integrated roles across each of the regions.

Corey Thomas: We had three established leaders who have a strong track record, a strong tenure with the company that we're ready to actually take over, sort of like integrated roles across each of the regions. The second part of it is I've been spending the last several years really focused on our FROC and R&D, and I really wanted to actually sort of like spend more direct time with our self-leaders as we were actually making this transition, and as we were looking to accelerate the business more forward.

Corey Thomas: The second part of it is, I've been spending the last several years really focused on our product and R&D, and I really wanted to actually spend more direct time with our sales leaders as we were actually making this, as we were making this transition, and as we were looking to accelerate the business more forward.

Corey Thomas: God, that makes a lot of sense. And I guess someone related the second question. In your opinion, I think you called out MSP and AWS and maybe a couple others. How does that think about the evolving go-to-market motion? How important are partners going to be, especially with me, product rollouts and just broader distribution from that sense? Look, I think it's critical. If you just take a step back, remember we have two big things that we're really focusing on. It's one, making sure and making the transition to make sure that our products and our services are relevant for the next five years, not the past five years.

Corey Thomas: I got it. That makes a lot of sense. And I guess, somewhat related to the second question, in your prepared remarks, you called out that the sales pipeline from partners grew nicely. Yeah, I think you called out, you know, sort of MSP and AWS and maybe a couple others. How does that, you know, you think about the evolving go-to-market motion, you know, how important partners are going to be, especially with new product rollouts and just broader distribution from Look, I think it's critical, you know, if you just take a step back, remember, we have like two big things that we

Corey Thomas: Look, I think it's critical, you know, if you just take a step back, remember, we have two big things that we're really focusing on. One is making sure and making the transition to make sure that our products and our services are relevant for the next five years, not the past five years. We've had a lot of focus on the product strategy around detection response, managed detection response, and now something sort of like integrated exposure command with our new attack surface management offering.

Speaker Change: In next five years not the past five years.

Corey Thomas: We've had a lot of focus on the product strategy around detection response, man's detection response, and now sort of like integrated exposure command with our new attack service management offering. And so we've been highly focused there overall, but the second part is how do we actually set ourselves up for efficient growth as we actually go forward. And as you know, we have to make some sort of like hard but important decisions to actually look at, say, how do we become the growth oriented security operations company over the next five years, and we saw partners as critical to that.

Speaker Change: A lot of focus on the product strategy around detection response managed detection and response and now sort of like integrated exposure demand with our new attack surface management offering and so we've been highly focused there overall, but the second part is how do we actually set ourselves up for efficient growth as we actually go forward and as you know we have to make some sort of like.

Corey Thomas: And so we've been highly focused there overall. But the second part is, how do we actually set ourselves up for efficient growth as we go forward? And as you know, we have to make some sort of hard but important decisions to actually look at, say, like, how do we become a growth-oriented security operations company over the next five years, and we saw partners are critical to that. We think we're making good traction there.

Speaker Change: Heart, but important decisions to actually look at say like how do we become fee growth oriented security operations company over the next five years and we saw partners is critical to that we think we're making good traction there we're still in the middle of the transition there.

Corey Thomas: We're still in the middle of the transition process there. But we're seeing things pointed in the right way. Partners like our offering, we're increasing our investment, we're increasing our service around it, we think it's good for partners, and it's good for our customers. But we think that these two big things that we've been doing, ensuring our product strategy is right for the next five years, which is really a long-term orientation, and ensuring that our go-to-market strategy has the most leverage for both our customers and the company are two big things we're doing, and partners are key to that.

Corey Thomas: We think we're making good traction there. We're still in the middle of the transition there, but we're seeing the things pointed in the right way. Partners like our offerings; we're increasing our investment, we're increasing our service around it. We think it's good for partners, it's good for our customers. But we think that these two big things that we've been actually doing ensure our product strategies right for the next five years, which is really a long-term orientation, and ensuring that our go-to-market strategy has the most leverage for both our customers and the company; our two big things we're doing in partner security.

Speaker Change: We're seeing that they've pointed in the right way partners like our offering we're increasing our investment work using our service around it we think it's good for our partners is good for our customers, but we think that these two big things that we've been actually doing ensuring our product strategy is right for the next five years, which is really a long term orientation and ensuring that our go to market strategy has the most leverage for both our.

Speaker Change: <unk> and the company are two big things, we're doing in partners' acute.

Matt Hedberg: Thanks a lot, Corey. Best of luck. Thanks Matt, appreciate.

Speaker Change: Thanks, a lot quite a best of luck.

Matt: Thanks, Matt appreciate it.

Speaker Change: Okay.

Operator: Thank you. You're next question.

Operator: Thank you. Operator, your next question, sorry, I apologize. Your next question comes from the line of Fatima Boolani from Citi.

Speaker Change: Thank you operator. Your next question sorry, I apologize. Our next question comes from the line of Fatima <unk> from Citi.

Operator: Sorry, I apologize.

Fatima Boolani: Your next question comes from the line of Fatima Boolani from City.

Joel: Line is open. Hi, afternoon. This is Joel on for Fatima. Thanks for taking our questions. So, maybe just the first one to follow up on the GTM conversation. So, in relation to some of the GTM and sales or changes from earlier this year, could you just talk about how sales productivity and excretion levels has tended relative to your internal expectations, and then also from that perspective, what's embedded in your guidance for the year? Yeah, so on the, I think you're talking about the sales, people themselves. We've seen very healthy; we're just sales force. It's in line with our expectations overall, and then where we expect from the sales force maturity.

Speaker Change: Your line is open.

Joel: Hi, good afternoon. This is Joel speaking on behalf of Fatima. Thanks for taking our questions. So maybe just the first one to follow up on the GTM conversation. So, in relation to some of the GTM and sales org changes from earlier this year, could you just talk about how sales productivity and attrition levels have trended relative to your internal expectations? And then also, from that perspective, what's embedded in your guidance?

Corey Thomas: Yeah, so on the, I assume you're talking about the sales people themselves. We've seen very healthy retention of the sales force. It's in line with our expectations overall and what we expect from the sales force maturity. I can tell you that our sales team is extraordinarily excited by the new command launch and the new products that we actually have coming into the market. I haven't seen this much momentum in a long time.

Corey Thomas: I can tell you that our sales team is extraordinarily excited by the new command launch and the new products that we actually have come into the market. I haven't seen this much momentum in a long time. We think that that's voicering some of the retention in an overall, I would just say, challenging high level macro environment. We're seeing lots of excitement and momentum as we enter the second half of the year from ourselves.

Corey Thomas: We think that's hampering some of the retention in an overall, I would just say, challenging high-level macro environment. We're seeing lots of excitement and momentum as we enter the second half of the year.

Corey Thomas: And then maybe just to follow up for you, Corey, on the CRC V2, any shareable anecdotes from customers and maybe how early the momentum is tracking relative to your expectations. Yeah, so the biggest difference between so we launch our new command platform and you can think about the, you know, the inside platform was a Rapid7 platform that actually offered a common set of products on a common platform. The command platform is an all security data platforms that includes both Rapid Seven data, but critically customers want to actually see all of their security data about their attack surface.

Corey Thomas: Right. And then maybe just to follow up for you, Corey, on the CRC v2, any shareable anecdotes from customers, and maybe how early momentum is tracking relative to your expectations?

Corey Thomas: Yeah, so the biggest difference between, we launched our new command platform, and you can think about the Insight platform was a Rapid7 platform that actually offered a common set of products on a common platform. The command platform is an all-security data platform that includes Rapid7 data, but critically, customers want to actually see all of their security data about their attack surface, and they don't want to have to be the system integrator on that.

Corey Thomas: And they don't want to be the system integrated on that. The problem that we actually saw with the command platform with exposure command is we provide the lowest cost efficacy view of the overall attack surface. While actually integrating all the security telemetry across the ecosystem overall. And so that's the primary drive and purpose of the command platform overall. And with that set up, I would just say that we're actually seeing a lot of early interest. That's too early to tell, but I'll tell you, we saw, you know, pre-launch the pipeline build, which is for ourselves.

Corey Thomas: So the problem that we actually solve with the command platform and with the exposure command is we provide the lowest cost, highest efficacy view of the overall attack surface while actually integrating all the security telemetry across the ecosystem overall. And so that's the primary drive and purpose of the command platform overall.

Corey Thomas: And with that setup, I would just say that we're actually seeing a lot of early interest. Now, it's too early to tell, but I'll tell you, the number of pre-launched the pipeline build after we introduced our sales tax has been the highest of any launch that I've seen in Rapid7's history. We've already got the first set of deals in when, you know, that was sort of like because it was addressing a real customer need.

Speaker Change: Build.

Corey Thomas: It's been the highest of any launch that I've seen and rapid seven history. We've already got the first set of deals in when, you know, that was sort of like, because it was addressing a real customer need. That said, is that we're pretty pragmatic about the expectations for this year. Our primary goal this year is to go high so that we're set up for sort of right to be acceleration next year. But if still cycles come in, that's great, but it's not something we're faculty into our role plans. Got it. Thank you.

Speaker Change: Our sales force has been the highest of any launch did us and rapid dentistry.

Speaker Change: Already got the first set of deals and when.

Speaker Change: That was sort of like because it was addressing a real customer need.

Corey Thomas: That said, we're pretty pragmatic about the expectations for this year. Our primary goal this year is to build pipeline so that we're set up for sort of a re-acceleration next year. But if sales cycles come in, that's great, but it's not something we're factoring into our overall plan. Got it. Thank you.

Speaker Change: It is that we're pretty pragmatic about the expectations for this year. Our primary goal. This year is to build pipe. So that we're set up for sort of like Reacceleration next year, but itself cycles come in that's great, but it's not something we're factoring into our overall plans.

Speaker Change: Okay got it thank you.

Corey Thomas: Got it. Thank you. Thank you. Thank you. The next question comes from the line of Jonathan Ho from William Blair. The line is open. Hi there.

Speaker Change: Thank you.

Speaker Change: Okay.

Speaker Change: Thank you.

Jonathan Ho: The next question comes from the line of Jonathan Ho from William Blair. The line is okay there. Can you hear me okay?

Jonathan Ho: The next question comes from the line of Jonathan Ho from William Blair. The line is open. Hi there. Can you hear me okay?

Speaker Change: The next question comes from the line of Jonathan Ho from William Blair.

Speaker Change: The line is okay there.

Jonathan Ho: Can you hear me okay.

Jonathan Ho: Good afternoon. I just wanted to get a sense for how you're thinking about this command platform upsell and perhaps you know how you're seeing the market change, you know, whether there's any shifts in terms of, you know, customer spending behaviors that are maybe maybe moving more towards this item or a tax surface management value proposition. Yeah, no, it's a great question. Look, we've been worried about this for a while. We started investing, as you know, several years ago. We've been accelerating the investment. That was a big part of the restructuring that we did last year because what we really want to position ourselves up was to position ourselves for future customer needs and not customer needs that invests.

Jonathan Ho: Yes, Hey, good afternoon, just wanted to get a sense for how you're thinking about this command platform upsell and perhaps how youre seeing the market change whether there's any shifts in terms of customer spending behaviors that are maybe maybe moving more towards this few time or attack surface management value proposition.

Corey Thomas: Yeah, no, it's a great question. Look, we've been worried about this for a while. We started investing. As you know, several years ago, we've been accelerating the investment. That was a big part of the restructuring that we did last year because what we really wanted to position ourselves for future customer needs, and not customer needs that are in the past. Right now, customers' biggest challenge is that, if you ask almost any customer, they do not have a clear understanding of their overall tax service.

Speaker Change: Yes.

Speaker Change: Great question look we've been worried about this for a while will start investing as you know.

Speaker Change: Several years ago, we've been accelerating the investment that was a big part of the restriction that we did last year because.

Speaker Change: Because what we really want to position ourselves to.

Corey Thomas: Right now, customers' biggest challenge is that you ask almost any customer; they do not have a clear understanding of their overall tax service. And vulnerability management has done a decent job, but it's still sort of providing a silo of data about parts of the attack surface, but it provides it with a lack of context. What we heard from lots of customers is they wanted to actually have a high confidence view of their overall attack surface. They wanted to actually integrate the data from all the security to limited, not just from one vendor. That's the, that's the flaw of many asset inventory systems. And they actually want the lower the cost of actually the ability to get an understanding of the overall attack surface, which is one of the challenges that you have on the cloud side.

Corey Thomas: And vulnerability management has done a decent job, but it's still sort of providing a silo of data about parts of the attack surface, but it provides it with a lack of context. What we've heard from lots of customers is that they want to actually have a high confidence view of their overall attack surface. They wanted to actually integrate the data from all their security telemetry, not just from one vendor. That's the flaw in many asset inventory systems.

Corey Thomas: And so we are seeing a shift to CTM, or I think Gardner calls the explosion management space. It's, it's not just sort of packaging vulnerability management together in clouds together. It's the ability to make sure you have into in the ability across the environment, but just important, where we put lots of investment, where we actually combine our innovations with the way it's innovation is the ability to integrate all that data in to actually have the highest confidence view of the state of the overall attack surface at any moment in time, and then to be able to integrate all that different data in and be able to drive in, investigate, respond for our ties across all the data across all of the attack surface.

Corey Thomas: And they actually want to lower the cost of actually the ability to get an understanding of the overall attack surface, which is one of the challenges that you have on the cloud side. And so we are seeing a shift at CTAM or I think Gartner calls it the exposure management space. It's not just sort of packaging vulnerability management together and cloud together. It's the ability to make sure you have end-to-end visibility across the environment, but just important where we put lots of investment, where we actually combine our innovations with the edX innovation, is the ability to integrate all that data in, to actually have the highest confidence view of the state of the overall attack surface at any moment in time, and then to be able to integrate all that different data in and be able to drive in, investigate, respond, prioritize across all the data, across all of the attack surface.

Corey Thomas: So far in early discussions, that's providing real value to customers in ways that traditional vulnerability management didn't, which was just another data source that customers didn't have to spend a lot of time in people to actually go, could you out like, how do I relate that data to the other data in the environment?

Corey Thomas: So far, in early discussions, that's providing real value to customers in ways that traditional vulnerability management didn't, which was just another data source that customers did have to spend a lot of time and people to actually figure out like, all right, how do I relate that data to other data in the environment?

Corey Thomas: Fantastic. Thank you. Thanks. Thank you.

Corey Thomas: Fantastic. Thank you. Thanks, John. Thank you. The next question comes from...

Joel Fishbane: The next question comes from the line of Joel Fishbane from Tourist, Truest Security. Your line is open. Thank you. Thanks for taking the question, and congrats on the command platform launch.

Jonathan Ho: The next question comes from the line of Joel Fishbein from Truist Security. Your line is open. Thank you. Thanks for taking the questions.

Corey Thomas: Corey, for you, I just would love a little bit of color on, and I know it's early days pricing, packaging, and go to market for the command platform, and what will it actually include and not include? That would be really helpful. Thank you. Yeah. So the, while it's early days, what I would just say is that look, similar to what we did in DNR, our goal is to actually make the ability to have 100% visibility with confidence into customers' environments affordable and achievable. So it will be an uplift, but it's a relatively reasonable uplift for existing vulnerability management customers.

Joel Fishbein: Yeah, so while it's early days, what I would just say is that, similar to what we did in DNR, our goal is to actually make the ability to have 100% visibility with confidence into customers' environments affordable and achievable. So it will be an uplift, but it's a relatively, I think, reasonable uplift for existing vulnerability management customers. We think that if we actually do that, it will not just improve, sort of like, in our expansion growth, but it will also lock customers in for longer and make them stickier because we're solving a bigger, better problem.

Corey Thomas: We think that if we actually do that, it will not just improve sort of like in our expansion growth. It also lots customers in for longer and make them stickier because there's always a bigger, better problem. The second thing that actually gives us by taking that approach is when customers better understand what their tax service is, it turns out that there's more demand, and we can actually monetize it with our detection response offers. So you can expect it to be a small uplift from the incremental vulnerability management perspective, but we really are fighting this to actually have customers complete visibility into their overall tax service.

Joel Fishbein: The second thing that it gives us by taking that approach is when customers better understand what their attack surface is, it turns out that there's more to monitor, and we can actually monetize it with our detection and response offerings. So you can expect it to be a small uplift from the incremental vulnerability management perspective, but we really are pricing this to actually give customers complete visibility into their overall attack surface.

Speaker Change: When customers better understand what the attack surface is it turns out that there is more to monitor and we can actually monetize it with our detection and response offerings.

Speaker Change: Or you could expect it to be a small uplift from the incremental vulnerability management perspective, but we really are pricing this to actually have customers complete visibility into their overall attack surface.

Joel Fishbein: And then from there, we actually have several different offerings on top of that that we can actually monetize, but it all starts on the basis that every customer has 100% confidence and understanding of their attack surface.

Corey Thomas: And then from there, we actually have several different offerings on top of that that we can actually monetize, but it all starts on the basis of every customer has a hundred percent confidence and understanding their tax service. Thank you.

Speaker Change: And then from there we actually have several different offerings on top of that that we can actually monetize but it all starts on the basis of every customer has 100% confident that understanding of their attack surface.

Speaker Change: Thank you.

Speaker Change: Thank you.

Joe: Thank you Joe.

Alex Henderson: Your next question comes from the line of Alex Henderson from Needham. Before I throw a question at you, I just wanted to clarify something. Did you say your pipeline was up 15% for the company as a whole, or was that just the bar channel? Yeah, that was our long partner ecosystem was up 15%. The commentary on the company is just that we have seen pipeline stabilized and improving, but we want to see that improvement continue to build up for the next year.

Alex Henderson: Your next question comes from the line of Alex Henderson from Needham.

Joe: Our next question comes from the line of Alex Henderson from Needham.

Alex Henderson: That is open. Before I throw a question at you, I just wanted to clarify something. Did you say your pipeline was up 15% for the company as a whole, or was that just the bar channel?

Alex Henderson: Yeah that is hopefully before I throw a question I just wanted to clarify something did you say your.

Speaker Change: Pipeline was up 15%.

Alex Henderson: For the company as a whole or was that just the bar channel.

Corey Thomas: And then I've got...

Alex Henderson: And then I've got a question.

Corey Thomas: Yeah, so that was our long partner ecosystem was up 15%. The commentary on the company is just that we have seen pipelines stabilize and improve, but we want to see that improvement continue as we build up momentum for next year.

Alex Henderson: Yeah.

Speaker Change: Those are all partner ecosystem.

Alex Henderson: 15% of the commentary on the <unk>.

Alex Henderson: The commentary on the company's assistant we have seen pipeline stabilize and improve.

Alex Henderson: But we want to see that improvement continue to build up momentum for next year. Okay.

Alex Henderson: Okay, so if I were to look at the two major products that you've got now, what you're calling your two foundational platforms, if I was a new customer, say in the June quarter of next year, and I acquired these two product lines simultaneously for a reasonable sized company, what would be the relative sizing of the company? If the two acquired properties would one be larger than the other, is the exposure or command product larger or smaller than the detection and response platform? Yeah, did you just talk about raw pipeline? Is that correct? That's what I'm trying to say.

Alex Henderson: So, if I were to look at the two major products that you've got now, what you're calling your two foundational platforms, if I were a new customer, say, in the June quarter of next year, and I acquired these two product lines simultaneously for, you know, a reasonable sized company, what would be the relative size of the two acquired properties? Would one be larger than the other? Is the exposure command product larger or smaller than the detection and response platform?

Alex Henderson: So if I were to look at the two major products.

Speaker Change: Products that you've got now.

Alex Henderson: Yeah, you're just talking about raw pricing, is that correct? That's what I'm trying to understand. Yeah, it just...

Corey Thomas: Yeah, I just roughly, if a new customer say a thousand employees, yeah, so which is the word? Yeah, absolutely. So the way to think about it is that surface command is designed to sort of be a very local thing if you complete coverage of the environment and so people can actually integrate the data across the environment. Exposure command combines the integration capabilities of surface command with all the raw sort of capability. So think about it; it will be disruptive against traditional power pricing, but it's meant to actually really drop adoption. So it's meant to be affordable and drop overall coverage in the environment.

Corey Thomas: That's just roughly, you know, for a new customer, say a thousand employees. Yeah.

Corey Thomas: Which is larger? Yeah, absolutely. So the way I think about it is that Surface Command is designed to sort of be very low cost and give you complete coverage of the environment, so people can actually integrate the data across the environment. Exposure Command combines the integration capabilities of Surface Command with all the raw, sort of like, capabilities.

Corey Thomas: So think about it, it will be disruptive against traditional cloud pricing, but it's meant to actually really drive adoption. So it's meant to be affordable and drive overall coverage in the environment. And then there are lots of ways to think about it.

Corey Thomas: Detection response is going to be at a premium price point, and frankly, it's going to be more customizable to customers' needs. And we really get our modernization into the detection response space because that's critical. And we have a wide range of price points, from technology only, demand service with partners, demand service with us, and customer learning. But we have a wider range of price points with detection response, and that's also a super strategic benefit for customers.

Corey Thomas: And then there's lots of the way to think about it; the texture response is going to be at a premium price point, and frankly, it's going to be more customizable to customers' needs. And we really get our modernization into the texture response space because that's critical. And we have a wide range of price points from technology, only demand services partners, demand service with us to customer learning. But we have a wider range of price points with the texture response. And that's also a super strategic for customers. And part of why we take the disruptive approach on the surface command and exposure command is because the more people understand their tax surface, the easier it is for us to monitor and to chair the attack surface with the customer.

Corey Thomas: And part of why we take the disruptive approach on the Surface Command and Exposure Command is because the more people understand their attack surface, the easier it is for us to monitor and secure that attack surface with our customers.

Alex Henderson: So, should we be thinking about..., somewhat of a lost leader. The entry product, then allows you to upsell the This is a much smaller contribution to revenues but does drive the overall business proposition over time? Is that the right way to think about it? The way that I would think about it is that it will actually be a contributor to growth. We expect it to be a contributor to growth, but I would say it's probably a smaller contributor to growth than detection response.

Corey Thomas: So should we be thinking about this as somewhat of a loss leader, you know, entry product that then allows you to upsell the detection and response platform. And therefore is a much smaller contribution to revenues, but does drive the overall business proposition over time? Is that the right way to think about what we're launching here? Yeah, the way that I would think about it is it will actually be a contributor. We expected to be a contributor to growth, but I would say it's part of smaller contributing growth and the texture response. But it's still a net positive contributor to growth, just to be clear.

Alex Henderson: But it's still a net positive contributor to growth, just to be clear. And I think that this disruptive sort of like packaging and pricing doesn't interrupt that. It does set up for higher expansion and growth in the detection response business, that's true. But we're not pricing it where it's a negative to growth. It is accretive to growth; we expect it to be accretive to growth, but we expect detection response to be a larger growth driver. That's true. Thanks.

Corey Thomas: And I think that the disruptive sort of like action price and doesn't interrupt that, it does set up for higher expansion and growth in the detection responses. That's true, but we're not pricing it where it's a negative to growth. It is a creative to grow. We expect it to be a creative to growth, but we expect the texture response to be a larger growth driver. That's true.

Alex Henderson: Thank you so much.

Operator: Thank you.

Joshua Tilton: Next question comes from the line of Joshua Tilton, from Wolf Research.

Joshua Tilton: The next question comes from the line of Joshua Tilton, from WOLF Research.

Joshua Tilton: Hey guys, thanks for taking my question. Can you hear me? Yeah, I just have one for me, and I heard the prepared remarks, especially around the guidance. But just maybe help us get a little confidence around your confidence interval on the applied second half in that new ARR. I understand you guys talk to like strength and consolidated offerings, which is 40% of net new ARR, you know, this quarter, but we're talking about pretty small numbers for net new ARR in the first half first what's applied in the second half, and it kind of feels like the rest of the business needs to pick up, kind of hit the numbers you're talking to.

Joshua Tilton: Hey guys, thanks for taking my question. Can you hear me? Yes, Andy, it's fine. Um, yeah, look, I just have one for me.

Corey Thomas: And I guess, you know, I heard the prepared remarks, especially around the guidance, but maybe just maybe help us get a little confidence around, you know, your confidence interval on the applied second half net new ARR. I understand you guys talked about strength and consolidated offerings, which was 40% of net new ARR this quarter, but we're talking about pretty small numbers for that new ARR in the first half versus what's implied in the second half, and it kind of feels like the rest of the business needs to pick up to kind of hit the numbers you're talking about. So, just maybe help us gain a little bit more confidence around, you know, your guys' decision to leave for the full year, to reiterate the full year ARR output.

Tim Adams: So just maybe help us gain a little support confidence around, you know, what your guys' decision to leave the fully or to reiterate the full year ARR looks today. That's great. Do you really look at it? While you're right on the first year, half a guidance, it's really Q1 was just like, sort of like, really poor in terms of it. Our big question that we actually had was really stabilizing Q2 and having a stable outlook from Q3. We feel very good about that. In addition, Q4, we have this is more longer term deals in there.

Corey Thomas: That's great. So if you really look at it, while you're right in the first year, I have got it. It's really Q1 was just sort of like really poor in terms of that. Our big question that we actually had was really stabilizing Q2 and having a stable outlook for Q3. We feel very good about that. In addition, in Q4, we have this more longer-term deal in there. So we have a little bit more in the bank going into Q4. But really, what you're talking about is getting back up to a little bit above a flat year-over-year net ARR from last year.

Speaker Change: With a stable outlook for Q3, we feel very good about that.

Speaker Change: In Q4, we haven't this is more longer term deal in there. So we have a little bit more in the bank going into Q4, but really what you're talking about is getting back up to a little bit above a flat year over year or from last year, and we feel good about that trend line.

Tim Adams: So we have a little bit more in the bank going into Q4, but really what you're talking about is getting back up to, you know, a little bit above a flat year-over-year net ARR from last year, and we feel good about that trend line. I mean, frankly, from the Q1 spot to the Q2, just even though it was a small number, getting that momentum back and having that outlook be stable for Q3 was the trend that we're actually looking to actually get on. And that puts us, I think, in the guidance range, and actually we feel comfortable about landing in the guidance range right now.

Corey Thomas: And we feel good about that trend line. I mean, frankly, from the Q1 spot to the Q2, just even though it's a small number, getting that momentum back and having that outlook be stable for Q3 was the trend that we're actually looking to get on. And that puts us, I think, in the guidance range. And actually, we feel comfortable about landing in the guidance range right now.

Alex Henderson: Frankly from the Q1 spot to the Q2, just even though it's a small number getting that momentum back and having that outlet to be stable for Q3, what the trend that we're actually looking to actually get on.

Speaker Change: That puts us I think in the guidance range and actually we feel comfortable.

Speaker Change: About landing in the guidance range right now Yep Korean in your prepared comments you talked about the strength in the partner pipeline build up 15% year over year, which was up from Q1. So we are seeing the momentum on that side and we know that Q4 has historically always been a strong quarter for us and we anticipate that again this year, but anyway.

Corey Thomas: Corey, in your prepared comments, you talked about the strength in the partner pipeline building up 15 percent year over year, which was up from Q1. So we are seeing the momentum on that side. And we know that Q4 has historically been a strong quarter for us, and we anticipate that again this year. But even that, we expected it to be relatively stable from last year, and we're seeing enough momentum for that.

Tim Adams: Yeah. Cory, in your prepared comments, you talked about the strength in the partner pipeline, build up 15%, which, you know, year over year, which was up from Q1. So we are seeing the momentum on that side. And we know that Q4 has historically always been a strong quarter for us, and we anticipate that against the share. But even that, we expect it to be relatively like stable from last year, and we're seeing enough momentum and feel good for that.

Speaker Change: We expect it to be relatively stable from last year, and we've seen enough momentum.

For that.

Tim Adams: Super helpful.

Corey Thomas: Super helpful. Maybe just a very quick follow-up on my end. Uh, can you guys, um... Maybe just broadly speaking... Actually, not broadly speaking, just in general, I don't know if you give an update. I don't remember exactly when you give it to us, but can you just help us understand like the strength you're seeing or or like what the run rate is or just an update on the IDR business? Has that kind of been a shining light for you guys over the last two quarters?

Speaker Change: Super helpful. Maybe just a very quick follow up.

Tim Adams: Maybe just a very quick follow-up on Mayan. Can you guys, maybe just broadly speaking, actually not broadly speaking. Just in general, I don't know if you've given up date. I don't remember exactly when you get to, but can you just help us understand like the strength you're seeing or like what the run rate is or just an update on the IDR business? Is that kind of a shining light for you guys over the last two quarters? Yeah. IDR is much higher in the preference stack, and it's been the biggest contributor overall growth this year. And we see the demand there.

Speaker Change: On margin.

Speaker Change: Sure.

Speaker Change: Can you guys.

Speaker Change: Maybe just broadly speaking.

Corey Thomas: Yeah, IDR is much higher on the preference stack, and it's been the biggest contributor to overall growth this year. And we see the demand there, and in fact, we are working to expand our IDR services because we see customers looking for us to actually do more from a detection and response perspective. So we see that as something that's high in the value stack. Customers are looking for help both on the technology side and on the managed service side from us and our partners. And so we see that as a big opportunity, frankly, not just now, but over the next several years. Yeah, Corey. We didn't break it down.

Speaker Change: Absolutely not broadly speaking just in general I don't know if you give an update I don't remember exactly when you give it to you but can you just help us understand like the strength youre seeing or or like what the run rate is there is an update on the <unk> business as that has kind of been a shining light for you guys over the last few quarters.

Speaker Change: Yes, <unk> is much higher than their preference stack and that's been the biggest contributor.

Speaker Change: Overall growth this year and.

Speaker Change: And we see the demand there and in fact, we are working to expand our <unk> services.

Tim Adams: And in fact, you know, we're working to expand our IDR services because we see customers looking for us to actually do more from a detection response perspective. So we see that it's something that's high in the value stack. Customers are looking to help both on the technology side and on the main service side from us and our partners. And so we see that as a big opportunity, frankly, not just now but over the next several years. Yeah, Corey, we didn't break it out this quarter, and maybe we have in the past, but we both said in our prepared comments, it's really been an anchor for us, a very strong positive anchor, and it grew very nicely in the quarter.

Tim Adams: Yeah, Corey, we didn't break it out this quarter, and maybe we have in the past, but we both said in our prepared comments that it's really been an anchor for us, a very strong, positive anchor, and it grew very nicely in the quarter. Thank you.

Operator: Thank you.

Operator: Thank you, guys. Let's appreciate it. Thanks, Josh.

Joshua Tilton: Thank you guys, much appreciated. Thanks Jeff. Thank you. Your next question comes from the line of Brian Essex from J.P. Morgan. The line is open.

Rob Owens: Thank you.

Charlotte Beatick: Your next question comes from the line of Brian Essex from JP Morgan.

Brian Essex: Your next question comes from the line of Brian Essex from J.P. Morgan.

Charlotte Beatick: The line is open. Hi, this is Charlotte Beatick on for Brian Essex. Thank you for taking the question.

Tim Adams: I know you've used some color in the prepared remarks, but do you expand a little bit about the platform customer count versus your total customer count and how that's trending? And if they're, if you're seeing better traction and enterprise, that can be different aspects like that, that would be really helpful. Thank you. Yeah, I think in the past, we've broken out platform versus traditional, but we continue to see fall off of our small dollar transactional customers. Our platform customers grew faster than that. And so you can think about like mid single digits in terms of that, which was, I would just say in line with extrications and healthy. We always want to grow customers, but we're happy that the growth is coming on the platform side.

Corey Thomas: Yeah, I think in the past, we've broken out platform versus traditional, but we continue to see fall off from our small dollar transactional customers; our platform customers grew faster than that. And so you can think about like mid single digits, in terms of that, which was, I would just say, in line with expectations and healthy. We always want to grow customers, but we're happy that the growth is coming on the platform side. We think that sets up for better long-term growth. Yeah, Corey, and it was up sequentially and year over year on the platform side, and it's a line share.

Tim Adams: We think that sets up for better long term growth. Yeah, Corey, and it was up sequentially and year over year on the platform side, and it's a line share the customer base and it's performing well. Thank you. Great. Thank you.

Tim Adams: Yeah, Corey, and it was up sequentially and year over year on the platform side. And it's an aligned share of the customer base, and it's performing well.

Brian Essex: Perfect. Thank you. Great. Thank you. Thank you. You're next.

Tim Adams: Thanks.

Operator: Thank you.

Rob Owens: Your next question comes from the line of Rob Owens from Piper Sandler. The line is open. Great. Thanks for taking my question. This is Ethan.

Corey Thomas: Your next question comes from the line of Rob Owens of Piper Sandler. The line is open. Great. Thanks for taking my question. This is Ethan on for Rob. Corey, I just wanted to ask on the DM space as a whole. Do you see some of the headwind and growth in growth that you're seeing here? You and other. Your peers are saying as kind of cyclical or more secular of longer term. Thanks.

Corey Thomas: Yeah, so look, I think the biggest thing is we've been worried and focused and building our platform for a little while because we've seen the pressure that in the strategic value of vulnerability manager was going to have. And so we really have taken an intentional approach to actually shift our value stack up first with the text response. And now with our CTM or overall exposure command offering to make to solve a more strategic problem for customers, but at the end of the day it's about the customer. And vulnerability management solves a problem, but that problem is becoming less and less strategic for customers.

Corey Thomas: Yeah, so look, I think the biggest thing is that we've been worried and focused and building our platform for a little while because we saw the pressure that the strategic value that vulnerability management was going to have. And so we really have taken an intentional approach to actually shift our value stack up, first with the textual response, and now with our CTEM, or overall exposure command offering, to solve a more strategic problem for customers because, at the end of the day, it's about the customer. And vulnerability management solves a problem, but that problem is becoming less and less strategic for customers. I think that's the pressure that you're seeing in the market.

Corey Thomas: I think that's the pressure that you're seeing in the market. It's one that we've been sort of like worried about and focused on for a little while. So, while I think that's true, I think vulnerability management itself is still critical. And that's why we see as an important capability of our solution, but it's a capability of the solution. It's not a standalone solution. As we see it and we think standalone solutions will continue to depressure. But we do think that if you're solving the broader visibility risk, understanding of the attack surface problem, then we actually think that's something that customers got to find valuable.

Corey Thomas: It's one that we've been sort of worried about and focused on for a little while. So while I think that's true, I think vulnerability management itself is still critical. And that's why we see it as an important capability of our solution, but it's a capability of the solution. It's not a standalone solution, as we see it. And we think standalone solutions will continue to see pressure. But we do think that if you're solving the broader visibility, risk, and understanding of the attack surface problem, then we actually think that's something that customers have to find valuable. We're seeing good early momentum, but it's too early to tell the pace of that. But we are seeing a very good early track.

Corey Thomas: We're seeing good early momentum, but it's still all the detail, the pace of that, but we are seeing very good early traction there.

Corey Thomas: Great, appreciate the color. Thank you.

Oscar Savedra: The next question comes from the line of an anonymous caller from Morgan Stanley. Line is open. Hi, this is Oscar Savedra on Fodderwala from Morgan Stanley. Thank you for taking my question. I want to dig in a little on your commentary on pipeline generation by partners. Nice to see that it was up 15%. Last quarter, I know you mentioned that the contribution from the new focus was not yet making up the contribution laws from where you deem for size. I was just wondering if you can comment on how that trend of this quarter to what extent that gap was closed compared to last quarter.

Oscar Saavedra: The next question comes from the line of an anonymous caller from Morgan Stanley.

Oscar Saavedra: Hi, this is Oscar Saavedra on behalf of Hamza Fodderwala from Morgan Stanley. Thank you for taking my question.

Corey Thomas: I want to dig in a little on your commentary on pipeline generation by partners. It was nice to see that it was up 15%. Last quarter, I know you mentioned you indicated that the contribution from the new focus was not yet making up the contribution laws from what you de-emphasized. I was just wondering if you could comment on how that trended this quarter, to what extent that gap was closed compared to last quarter. And as we look ahead, how should we think about maybe the timeline for that to sort of break even? Yeah, it's part of some of the changes that we actually made on panel.

Oscar Savedra: And as we look ahead, how should we think about maybe the timeline for that to sort of break even. Thank you.

Corey Thomas: Yeah, as part of some of the changes that we actually made, this is something I'm paying a lot of attention to. What I would say is that we saw it stabilize and grow better than it has in a while during the quarter, but we are looking to actually manage it to grow faster. Now, the partner stuff takes time, and I would just say that that's a core, sort of like part of the transition period, but we feel that we're on the right trajectory, enough so that we're actually increasing our investment allocation to the partner ecosystem because we're seeing the yield and the results there.

Corey Thomas: Yeah, it's part of the some of the changes that we actually made. Something I'm paying a lot of attention to. What I say is that we saw it stabilized and grow better than it has in a while in the quarter. But we do are looking to actually manage it to grow faster. Now the partner stuff takes time. And I would just say that that's a core sort of like part of the transition period. But we feel that we're on the right trajectory enough so that we're actually increasing our investment allocation to the partner ecosystem. Because we're seeing the yield and the results there.

Corey Thomas: And really, what we're focusing on is how do we, of course, make sure that we actually are executing against this year's targets, but also how do we actually build that momentum as we actually go into next year? And so I would just say it's trending the right way. Of course, like everybody else, we want to see more sooner, and we're managing our investments to offload on that path, but we're seeing the right direction. We're just looking to actually get more out of it faster.

Corey Thomas: And really what we're focusing on is, you know, how do we, of course, make sure that we actually are executing against this year's targets. But also, how do we actually build that momentum as we actually go into next year. And I would just say it's trending the right way. Of course, like everybody else, we want to see more sooner. And we're managing our investments off on that path, but we're seeing the right direction. We're just looking to actually get more out of it faster. Got it. Thank you. Thank you very much.

Operator: Thank you.

Mark Cash: Thank you. The next question comes from the line of Mark Cash of Raymond James.

Mark Cash: The next question comes from the line of Mark Cash of Raymond James. The line is open. Thank you. This is the mark on for Adam. So I can start with you, you know, since I'm setting change on the product front half name. And while there's just moved to regional go-to-market structure, I'm not replacing COO overall.

Corey Thomas: Yeah, thank you. This is Mark speaking on behalf of Adam. So Corey, if I could start with you, there are some exciting, exciting changes on the product front. You know, while there's this move to a regional go-to-market structure and not replacing the COO role. So are those changes related? Or is the move to a regional sales structure something that's already being worked on? And why move to that structure?

Corey Thomas: So are those changes related, or is the moved to regional sales structure standards already being worked on? And why move to that structure? Yeah, the changes to actually the regional sales structure are actually being worked on. We have been looking at how to within the region align the, you know, the land, expand, you know, retain their businesses drive. Not just efficiency, but especially if you have more partner-centric business to make sure that we actually have more alignment there. So that work was already underway in our previous Chief Commercial Officer actually did lots of the homework working with the regional sales leaders.

Corey Thomas: Yeah, the changes to the Regional Sales Structure RAs have been worked on. We've been looking at how to, within the region, align the, you know, the land, expand, you know, retain businesses, drive, not just efficiency, but especially since we have a more partner-centric business, to make sure that we actually have more alignment there. So, that work was already underway, and our previous Chief Commercial Officer actually did lots of the homework, working with the regional sales leaders to actually help bring that plan forward and make it a reality there.

Speaker Change: <unk> retained businesses drive not just efficiency, but especially as we have a more partner centric business to make sure that we actually had more alignment. There. So that work was already underway in our previous chief commercial officer actually the lots of the homework working with the regional sales leaders to actually tap.

Corey Thomas: So, the reason for it was not just an efficiency thing; it was also an execution thing about how do we actually make sure that we're upgrading our installed base to the new command platform in a timely fashion while working with and expanding our partner ecosystem.

Corey Thomas: To actually, to actually help bring that plan forward and to make it a reality there.

Speaker Change: He helped bring that plan forward and to make it a reality there so but the reason for it was not just an efficiency.

Tim Adams: So, but the reason for it was not just an efficiency, being also an execution about how do we actually make sure that we're actually upgrading our install base to the new command platform in a timely fashion while working with an expanded our partner ecosystem? Okay, thank you for that.

Speaker Change: Also execution about how do we actually make sure that we're actually upgrading our installed base to the new command platform in a timely fashion, while working with and expanding our partner ecosystem.

Speaker Change: Okay. Thank you for that.

Tim Adams: Okay, thank you for that. And Corey, if I could ask, I'm sorry, actually for Tim, if you don't mind.

Tim Adams: In court, if I could ask, I'm sorry, maybe actually for 10, if you don't mind. I guess, you know, generate 150 to 163 cash, so this year substantial margin improvement year-rear. So how are you now thinking about rank ordering the use of cash? Do you have this more durable maintenance of cash coming to the business? Yeah, in terms of more of a capital structure, use of cash. So, first priority is to make sure we always have enough cash to run the business, which has never been a problem. You know, I would call that a couple hundred million that you would leave on the balance sheet.

Tam: If I could ask I'm, sorry, maybe actually for Tam if you don't mind.

Tam: I guess generate $150 million to $160 million free cash flow this year substantial margin improvement year over year.

Speaker Change: How are you now thinking about rank ordering the use of cash that you have this more durable came into cash coming to the business.

Tim Adams: In terms of more of a capital structure, the use of cash, our first priority is to make sure we always have enough cash to run the business, which has never been a problem. You know, I would call that, you know, a couple hundred million that you would leave on the balance sheet. Corey and I have talked very publicly about, you know, one acquisition per year to at least have the room to do that. Similar to the acquisition, you know, we welcome the Noetic team to Rapid7, and that is a tech and team, a smaller deal.

Tim Adams: I guess, you know, generate $150 to $160 million of free cash flow this year, and substantial margin improvement year over year. So how are you now thinking about ranking the uses of cash that you have this more durable phase into cash coming to the business? In terms of more of a capital structure.

Speaker Change: In terms of more of a capital structure and use of cash. So first priority is to make sure. We always have enough cash to run the business, which has never been a problem I wouldn't call that a couple of hundred million dollars that you would leave on the balance sheet.

Tim Adams: Corey and I have talked very publicly of, you know, one acquisition per year to at least have the room to do that similar to the acquisition. You know, we welcome the Noetic team to Rapid7, and that is a tech and team a smaller size deal. So, I would call all of that priority number one, and then priority number two is we're very mindful of the debt stack that we have, and we have plenty of time to manage that accordingly, but ultimately to repay the debt. So, I put it in that order priority. Thank you so much.

Speaker Change: Corey and I have talked very publicly.

Corey Thomas: One acquisition per year to at least have the room to do that similar to the acquisition, we welcomed noetic team to rapid seven.

Speaker Change: And that is a tech and team a smaller size deal.

Michael Romanelli: So I would call all of that priority number one. And then priority number two is we're very mindful of the debt stack that we have. And we have plenty of time to manage that accordingly, but ultimately, to repay the debt. So I'd put it in that order of priority. Thank you so much.

Speaker Change: I would call all of that priority number one and didn't priority number two is we're very mindful of the debt stack that we have.

Speaker Change: And we have plenty of time to manage that accordingly, but ultimately two to repay the debt. So I would put it in that order of priority.

Speaker Change: Okay. Thank you so much.

Tim Adams: Thank you very much.

Speaker Change: Thanks.

Michael Romanelli: Thank you. Our next question comes from the line of Michael Romanelli from Meza Hall. Line is open. Yeah, hey guys, this is Mike on for Greg. There may be two for me. I guess just, you know, firstly, from your perspective, have you seen any change in customer behavior since the CrowdStrike IT outage very recently? And then just on average discounting rates. So I guess, what do they look like it to you? You know, was there any changes sequentially? Thanks.

Speaker Change: Thank you.

Michael Romanelli: Our next question comes from the line of Michael Romanelli from Mesa Hall. The line is open. Yep. Yeah.

Speaker Change: Our next question comes from the line of Michael Romanelli from Mizuho.

Speaker Change: Your line is open.

Yeah, Hey, guys. This is Mike on for Greg.

Michael Romanelli: Maybe two for me I guess, just firstly from you know from your perspective have you seen any change in.

Speaker Change: Customer behavior thing.

Speaker Change: Crowd strike Ikea outage very recently and then just on.

Speaker Change: Average discounting rates, so I guess, what do they look like in <unk>.

Speaker Change: Were there any changes sequentially.

Speaker Change: Thanks.

Corey Thomas: Look, the CrowdStrike items is a big deal for our customers and for the security industry in general. It took a lot of time. Lots of people put a world of efforts in to get their businesses back online while they were staying secure. We have overlapping customers, and we were trying to make sure that we supported our customers. And so I think people are sort of like law systems are back online. I think that took a lot out of security teams. And so I think that was probably the bigger pressure point. I think it's really knowing anything else, but I just know security teams and IT teams put in a heart-to-leaning efforts.

Corey Thomas: Look, the CrowdStrike items were a big deal for our customers and for the security industry in general. It took a lot of time. Lots of people put heroic efforts in to get their businesses back online while they were staying secure. We have overlapping customers, and we were trying to make sure that we supported our customers. And so I think people are sort of like, while systems are back online, I think that took a lot out of security teams.

Speaker Change: Look the crosswalk items, there was a big deal for our customers and for the security industry in general It took a lot of time lots of people put her heroic efforts in to get their businesses back online while they were staying secure.

Speaker Change: We have overlapping customers and we were trying to make sure that we supported our customers.

Corey Thomas: And so I think that was probably the bigger pressure point. I think it's too early to know anything else. But I just know security teams and IT teams put in herculean efforts, and I think it really matters, and they should be appreciated.

Speaker Change: And so I think people are sort of like walk us through the back online I think that took a lot out of security teams.

Speaker Change: And so I think that was probably the bigger pressure point I think it's too early to know anything else I, just though security teams and ICT and putting a herculean efforts.

Corey Thomas: And I think it really matters, and they should be appreciated.

Speaker Change: It really matters and we appreciate it.

Corey Thomas: Your second question, remember what it was again? Just on relative discounting. I don't think we thought anything material on the relative is now in a real change. Yeah. Thank you very much. Thank you.

Corey Thomas: Second question, remind me what it was again? Just on relative discounting and... Oh, relative discounting. I don't think we saw anything material at the relative discounting level. No, no relative discounting.

Speaker Change: Your second question remind me what it was again just on the relative discounting and how relative to this I don't think we saw anything material.

Corey Thomas: RelativeDiscount.com Thank you very much. Thank you. Right here. Yep, that part.

Speaker Change: On the relative knowing that no real change.

Speaker Change: Yes.

Speaker Change: Okay. Thank you very much.

Speaker Change: Thank you operator any more questions.

Kingsley Crane: Apologies. Thank you. Our next question comes from the line of Kingsley Crane.

Speaker Change: Yep I apologize thank you yep.

Corey Thomas: Our next question comes from the line of Kingsley Crane. Lines open. I think you're taking the question. So, in light of some of your peers focusing on profitability, I wanted to double-click on product first margins. How much room do you feel you have to expand product first margins over time? Is 80% of reasonable goal, or you expect most future margin improvements to be from sales and marketing, for example. You know, it's a really good question. I would say the one look; I think customers get a vote here. And I will say that customers are also looking for more assistance and enablement.

Speaker Change: Our next question comes from the line of Kingsley Crane.

Speaker Change: Your line is open.

Corey Thomas: Hi, thanks for taking the question. So in light of some of your peers focusing on profitability, I wanted to double-click on product versus margins. How much room do you feel you have to expand product versus margins over time? Is 80% a reasonable goal? Or do you expect most future margin improvements to be from sales and marketing, for example?

Kingsley Crane: Hi, Thanks for taking the question so in light of some of your peers focusing on profitability I wanted to double click on product gross margins how much room do you feel you have to expand product gross margins over time as 80% a reasonable goal or do you expect most future margin improvements to be from sales and marketing for example.

Kingsley Crane: You know, it's a really good question. I would say the one, look, I think customers get a vote here. And I will say that customers are also looking for more assistance and enablement. So I think right now that we have confidence that we can grow margins overall; we have the flexibility to actually, you know, grow them at the gross margin line or from operating expenses. But customers are looking for more help and assistance.

Speaker Change: It's a really good question I would say the one.

Speaker Change: I think customers are going to vote here and I will say that customers are also looking for more assistance and enablement. So I think right. Now we are confident that we can grow margins overall, we have the flexibility to actually grow it at the gross margin line or from operating expenses.

Corey Thomas: So I think right now we have confidence that we grow margins overall. We have the flexibility to actually grow at the gross margin line from operating expenses. But customers are looking for more help and assistance now. I think part of the reason that we actually have room on the gross margin lies really to things is one, we are gearing up more partners and manage services partners, which actually help with that. And our team is investing in AI, which actually has the benefit of helping our customers get more coverage and support while also allowing us to expand our margin profile.

Speaker Change: But customers are looking for more help and assistance.

Speaker Change: I think part of the reason that we actually have room on the gross margin line related things is one we are geared up more partners and managed services partners, which actually help with that and our team is investing in AI, which actually has the benefit of helping our customers.

Kingsley Crane: Now, I think part of the reason that we actually have room on the gross margin line is really two things. One, we are gearing up more partners and managed services partners, which actually help with that. And our team is investing in AI, which actually has the benefit of helping our customers get more coverage and support while also allowing us to expand our margin profile. And so we haven't sort of like fixed the model; we don't want to sacrifice our ability to support customers and engage with customers.

Speaker Change: Get more coverage and support while also allowing us to expand our margin profile and so we have it sort of like fixed model, we don't want to sacrifice our ability to support customers engage with customers, but right now we have very high confidence that we can expand our overall margin of the confident as a company while accelerating growth.

Corey Thomas: And so we haven't sort of like fixed the model. We don't want to sacrifice our ability to support customers, engage with customers. But right now we have very high confidence that we can spend our overall margin as a confident as a company while accelerating growth. But it's going to actually are the overall demand level of customer service, which has been going up hugely. So what customers want to have Rapid7 in its partners helps them more their security programs, that's going to be offset by AI and the ability for us to continue to wrap up.

Speaker Change: But it's going to actually grow the overall demand level of customer service, which has been going up hugely where customers want to.

Kingsley Crane: But right now, we have very high confidence that we can expand our overall margin of confidence as a company while accelerating growth. But it's going to actually, sorry, the overall level of customer service, which has been going up hugely, where customers want to have Rapid7 and its partners help them with their security programs more, that's going to be offset.

Speaker Change: Have rapid seven and its partners helped them more their security programs, that's going to be offset by AI and the ability for us to continue to ramp arms.

Speaker Change: Okay.

Corey Thomas: Rick Weston, really helpful, and just one more. So, one I think through geodynamics, we've seen some challenges in the States for a lot of security companies. You've added almost as much in that new revenue last year in international, as you did in the States. So, I just want to talk more about what you're seeing in the US market in particular and what you're hearing from customers. So, there's two things. One, customers are still under loss of budget pressures. So, I just want to be clear that, like, that has not gone away. Customers are trying to figure out how to address security, and frankly, how to do it in a tighter budget envelope overall.

Corey Thomas: Great question, that's really helpful. And just one more.

Speaker Change: Okay. Great question, Thats really helpful and just one more so one of the things through geodynamics, we've seen some challenges in the states of for a lot of security companies you've added almost as much net new revenue last year and international as you did in the states. So just wanted to talk more about what you're seeing in the U S market in particular, and what you're hearing from customers.

Corey Thomas: So when I think through geodynamics, we've seen some challenges in the States, for a lot of security companies, you've added almost as much net new revenue last year in international as you did in the States. So just want to talk more about what you're seeing in the US market, in particular, and what you're hearing from customers.

Corey Thomas: So there are two things. There's one, customers are still under lots of budget. And so I just want to be clear that that has not gone away. Customers are trying to figure out how to address security and, frankly, how to do it in a tighter budget envelope overall. But we see most customers trying to really address security, and they're trying to address the budget envelope overall. That hasn't changed. What they're focusing on is the most critical security problems, and that's why we've had this urgency to really drive and make sure the problems that we solve are the most meaningful problems that we can possibly solve in the security stack.

Speaker Change: So yes.

Speaker Change: So there's two things is one <unk>.

Speaker Change: Customers are still under lots of budget pressures. So I just wanted to be clear that that has not gone away customers I'm trying to figure out how to address security and frankly, how to do it in a tighter budget envelope overall, but we see most customers trying to really direct security.

Corey Thomas: But we see most customers trying to really address security, and they're trying to address the budget envelope overall. That hasn't changed. What they're focusing on is the most critical security problems, and that's why we've had this urgency to really drive and make sure the problems that we solve are the most meaningful problems that we can possibly solve in the security stack. That's why you've seen us address so many questions. So, heavily in long-term product service and technology, because that's the moment to do it so that we're actually doing a more important job for customers overall.

Speaker Change: And they are trying to address the budget envelope abroad that hasnt change what theyre focusing on the most critical security problems and that's why we've had this urgency to really drive and make sure. The problems that we solve are the most meaningful problems that we can possibly solve in the security stack. That's why you've seen us request so heavily in long term product service and technology.

Corey Thomas: That's why you've seen us invest so heavily in long-term product, service, and technology because that's the moment to do it so that we're actually doing a more important job for customers overall. But most customers are struggling with this: how do I actually make sure that I'm addressing my business's budget needs while also making sure I'm securing our business? And that's not going away, and we see that in North America, too, just like most security issues.

Speaker Change: Allergy.

Speaker Change: Because that's the moment to do it so that we're actually doing a more important job for customers overall, but most customers are struggling with is how do I actually make sure that I'm adjusting my business budget needs. While also making sure obviously churn in our business and that's not going away and we see that in North America too just like multi year guidance.

Corey Thomas: But most customers are struggling with this. How do I actually make sure that I'm adjusting my business budget needs? While also making sure I'm securing our business, and that's not going away. We see that in North America too, just like most security companies. Very awful.

Speaker Change: Very helpful. Thank you.

Corey Thomas: Very helpful, thank you. Thank you.

Corey Thomas: Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you.

Brad Reback: Our next question comes from the line of Brad Reebat from Stifel. The line's open. Great. Thanks very much.

Brad Reback: Our next question comes from the line of Brad Reback from Stifle.

Speaker Change: Our next question comes from the line of Brad Reback from Stifel.

Speaker Change: Your line is open.

Brad Reback: Great. Thanks very much.

Corey Thomas: But, Corey, as we look out to next year, can you envision a scenario where total customer counts are actually down? Look, in this role, you can never say never. I would just say that our strategy right now is to focus on the quality of customers. And I think that if you look at our strategic platform customers, if you look at what we're doing with the command platform, I have high confidence that the command platform customers will be up. I have high confidence that the strategic customers will be up. I would just say we're less concerned about some of the historical transactional business.

Brad Reback: Cory as we look out to next year can you envision a scenario where total customer count is actually down.

Corey Thomas: Look, in this world, you can never say never. I would just say that our strategy right now is to focus on the quality of customers. And I think that if you look at our strategic platform customers, and if you look at what we're doing with the command platform, I have high confidence that the command platform customers will be up. I have high confidence that the strategic customers will be up. I would just say we're less concerned about some of the historical transactional business, and that creates noise.

Cory: In this world you can never say never I would just say that our strategy right now is to focus on quality of customers and I think that like if you look at our strategic platform customers. If you look at what we're doing with the command platform I have high confidence that the EMEA platform customers will be up.

Brad Reback: I have HOKA form that the strategic customers.

Brad Reback: It will be up I would just say, we're less concerned about some of the historical transactional business.

Corey Thomas: And that creates noise. And so on, the overall customer count, who knows. But I would just say on the things that actually matter, we have very high confidence that that will continue to improve. And we're expecting to see healthy transition and healthy adoption of our local math level. Yeah. And the platform customers, Corey, as we mentioned earlier, continue to grow sequentially. Yeah.

Brad Reback: And that creates noise.

Brad Reback: So yeah on the overall customer count.

Corey Thomas: And so on the overall customer count, who knows, but I'll just say on the things that actually matter, we have very high confidence that that'll continue to improve, and we're expecting to see healthy transitions and healthy adoptions.

Brad Reback: Who knows but I'll just say on the things that actually matter, we have very high confidence that that will continue to improve and we're expecting to see healthy transition and healthy adoption of our welcome back level and the platform customers for as we mentioned earlier continue to grow sequentially.

Tim Adams: Yeah, and the platform customers, Corey, as we mentioned earlier, continue to grow sequentially. It has absolutely.

Corey Thomas: But that's why I said on the total customer count, it's just that there are some things that we're managing and some things that we're not. I think one of the things that, you know, we and the team were talking about is just how to provide, over time, more consistent transparency to the things that matter. But I would just say on the things that matter, we feel very good about our ability to grow that customer base. That's great. Just one follow up on that. Any reason?

Speaker Change: Sure, Yes, but that's all I'll say on the total customer count is just that there is something that we're managing it's something that we're not one of them.

Corey Thomas: But that's what the total customer count is. There's something that we're managing, and something that we're not.

Corey Thomas: I mean, one of the things that, you know, of the thing we're talking about is just how to provide overtime, more consistent transparency to the things that matter. But I would just say, on the things that matter, we feel very good. Our ability to grow that customer cycle. That's great.

Brad Reback: You were talking about just sort of provide overtime more consistent transparency to the things that matter.

Brad Reback: But I would just say on the data that matter, we feel very good about our ability to grow that customer segment.

Speaker Change: That's great and just one follow up on that any reason you wouldn't start providing the absolute platform customer count going forward.

Corey Thomas: Just one follow up on that. Any reason you wouldn't start providing the absolute platform customer count going forward? Yeah. So right now, our team's looking, you know, every year we go through the cycle of looking at like what's the right things to provide. I know that amongst a bunch of other things are in consideration about what we actually share and provide going forward. Our goal is to provide the most meaningful insight to our investors. And I know that Elizabeth and the team are working through that right now. So I can't make any commitments now, but they work through that every year.

Corey Thomas: Yeah, so right now, our team's looking, you know, every year we go through the cycle of looking at like, what's the right thing to provide? I know that, amongst a bunch of other things are in consideration about what we actually share and provide going forward. Our goal is to provide the most meaningful insight to our investors.

Speaker Change: Yeah. So right now our teams looking at you know every year, we go through the cycle of looking at like what's the right thing to provide.

Speaker Change: I note that amongst a bunch of other things under consideration.

Brad Reback: What we actually share and provide going forward.

Brad Reback: Our goal is to brought the most meaningful insight to our investors.

Speaker Change: I know that Elizabeth and the team are working through that right now so I can't make any commitments now, but they worked with every year and I know, they're looking to do it again announced year to enter next year.

Brad Reback: And I know that Elizabeth and the team are working through that right now. So I can't make any commitments now, but they work through that every year. And I know they're looking to do it again now as we're in the next Perfect. Thanks very much. Thank you. Our next question comes from the line of Schneider-Rod from Baird. The line is open.

Corey Thomas: And I know they're looking through it again now as we're at the internet.

Operator: Thank you. Thanks very much.

Speaker Change: Perfect. Thanks very much.

Speaker Change: Thank you.

Speaker Change: Thank you.

Zach Schneider: Our next question comes from the line of Schneider Rod from Beard. The line is open. Hi, this is Zach Schneider on first, trying to get Beard. Thanks for taking the question.

Speaker Change: Our next question comes from the line of Schneider Rod from Baird.

Schneider-Rod: Our next question comes from the line of Schneider-Rod from Baird. Money's Open!

Speaker Change: Line is open.

Eric Schneider: Hi, This is Eric Schneider on for sure and I get Baird. Thanks for taking the question I just wanted to ask about upselling to existing customers and specifically, how you're kind of sustaining its momentum in the face of budget constraints and elongated sales cycles.

Zach Schneider: I just wanted to ask about upselling to existing customers and specifically how you plan on sustaining its momentum in the face of budget constraints and elongated sales cycles. If you could talk to any specific initiatives that are being implemented to enhance customer engagement and drive higher upsells, and additionally how you're addressing customer concerns regarding pricing and ROI. Thanks. Yeah, absolutely. Look, we have what I think is a very high ROI story. We solve a big problem for our to say relatively modest and regional incremental spending cost. And we think that formulation has the impact of making it easier for customers to say yes, making it easier to actually secure existing renewals because we're pioneering a lot of incremental value to customers for what's a relatively modest incremental price point.

Speaker Change: Could talk to any specific initiatives that are being implemented to enhance customer engagement and drive higher up sells.

Speaker Change: And additionally, how youre addressing customer concerns regarding pricing and ROI.

Corey Thomas: Yeah, so absolutely. Look, we have what I think of as a very high ROI story. We solve a big problem for our, to say, relatively modest and reasonable incremental spending costs. And we think that that formulation has the impact of making it easier for customers to say yes, making it easier to actually secure existing renewals, because we're providing a lot of incremental value to customers for what's a relatively modest incremental price point.

Speaker Change: Yes, so absolutely.

Speaker Change: Absolutely look we have what I think is a very high ROI story, we solve a big problem.

Speaker Change: For our to say relatively modest and reasonable incremental spending cost.

Speaker Change: And we think that that formulation as the impact of making it easier for customers to say, yes, making it easier to actually secure existing renewals because we're piloting a lots of innerwear incremental value to customers.

Speaker Change: For what's a relatively modest incremental price points and so we're taking that out to all of our customers.

Corey Thomas: And so we're taking that out to all of our customers. Again, the initial feedback has been good. But we're in the early stages of taking that strategy out to customers. We're doing it across all of our sales teams. And I think we're set up well for success there. But again, we want to make it really, really compelling. And that's why we did not pick, like others, a purely monetization strategy, which is about the company. We picked how do we solve the biggest possible customer problem at the most reasonable cost. And we think that's a strategy that's going to be attractive.

Corey Thomas: And so we're taking that out to all of our customers. The initial feedback has been good, but we're in the early stages of taking that strategy out to customers. We're doing it across all of our sales teams, and I think we're set up well for success there. But again, we want to make it really, really compelling. And that's why we did not pick, like others, a truly monetization strategy, which is about the company. We picked how do we solve the biggest possible customer problem at the most regional economics. And we think that's a strategy to come to track it.

Speaker Change: The initial feedback has been good but we're in the early stages of taking that strategy out to customers.

Speaker Change: We're doing it across all of our sales teams and.

Speaker Change: And I think we're set up well for success, there, but again, we want to make it really really compelling and that's why we did not pick like others, a purely monetization strategy, which is about the company. We play how do we solve the biggest hospital customer problem at the most recent economics, and we think that the strike retracted.

Corey Thomas: Great. Thank you.

Trevor Rambo: Great. Thank you. Thank you. Thank you. Our next question comes from the line of Trevor Rambo of BTIG. The line's open.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you.

Trevor Rambo: Our next question comes from the line of Trevor Rambo of BTIG. The line's open.

Trevor Rambo: Our next question comes from the line of Trevor Rambo of BTIG. Lines open. Hi, this is Trevor on for...

Speaker Change: Our next question comes from the line of Trevor Rambo.

Speaker Change: <unk> your.

Speaker Change: Your line is open.

Speaker Change: Hi, This is Trevor on for Greg. Thanks for taking my question and congrats on some nice results.

Trevor Rambo: Hi, this is Trevor Rambo of Greypal. Thanks for taking my question, and I can grab some of my results. So maybe dovetailing off a question before.

Speaker Change: So maybe dovetailing off of <unk> question, before but what needs to happen for our growth to improve back to double digits over the next year or so in terms of growth.

Corey Thomas: But what needs to happen for ARR growth to improve back to double digits over the next year or so in terms of growth? What levers do you guys have to do at your disposal to get there? Is that something more of an exposure command again interaction and then and once we think about that becoming a possibility at this point?

Speaker Change: What levers do you guys have at your disposal to get there or is that something more of a exposure command gaining traction and then and when should we think about that becoming a possibility at this point.

Corey Thomas: Yeah, so look, we're clearly, or folks, while it's too early to comment, just next year, I will comment on the levers because that's a very reasonable question there. So the levers we have, we have latent demand and detection response that we just have to actually our team do some work to expand the offerings and the coverage of customers asking us for stuff. And we just have to expand our offerings. It's not rocket science there, but our team is working through that, and we think that allows us to address more of the overall detection response market as we actually go forward.

Corey Thomas: Yeah, so look, we're clearly a focus. While it's too early to comment specifically on next year, I will comment on the levers, because that's a very reasonable question there.

Speaker Change: Yeah. So look we're clearly a focus while it's too early to comment specifically next year I will comment on the levers because that's a very reasonable question there, but the levers. We have is one we have latent demand in detection response that we just have to actually our teams with our work to expand the offerings in the conference where customers are asking us for staff and we'll just have to expand our offerings, it's not rocket science there but.

Corey Thomas: Look, the levers we have are one; we have latent demand and detection and response that we just have to actually, our team is doing some work to expand the offerings and the coverage. Our customers are asking us for stuff, and we just have to expand our offerings. It's not rocket science there, but our team is working through that, and we think that allows us to address more of the overall detection and response market as we go forward. The one that we've actually talked about is the command platform exposure command.

Speaker Change: Our team is working through that and we think that allows us to address more of the overall protection spot market as we actually go forward.

Corey Thomas: Then one that we've actually talked about is the Command Platform Exposure Command. We actually think that allows us to actually really participate in the higher value spec, similar to cloud, similar to the attack service management of what customers actually spend their money versus traditional vulnerability management, which just isn't as big a budget priority. So now we're actually playing in the area where customers actually have priority and they're looking at the spend money, and we're providing a good overall value proposition.

Corey Thomas: We actually think that allows us to actually participate in the higher value stack, similar to the cloud, similar to attack surface management, where customers are actually spending money versus traditional vulnerability management, which just isn't as big a budget priority. So now we're actually playing in an area where customers actually have a priority, and they're looking to spend money, and we're providing a good overall value proposition. And then, in addition to that, we actually have a couple of add-ons that we're introducing in the installation base.

Speaker Change: And one of them, we've actually talked about is the command platform exposure command, we actually think that allows us to execute really participate in the higher value stack similar to cloud.

Speaker Change: The attack surface management.

Speaker Change: More customers actually spending money versus traditional vulnerability management, which just isn't as big a budget priority. So now we're actually playing in the area where customers actually have.

Speaker Change: I already and they're looking to spend money and we're providing a good overall value proposition.

Corey Thomas: And then, in addition to that, we actually have a couple of add-ons that we're introducing in the install base. Now, all of that has to tee up with the continued investors that we're actually making in the partner ecosystem that actually drives scale and the rationalization that we're actually doing around the alignment across the business.

Speaker Change: And then in addition to that we actually have a couple of add ons that were introduced in the installed base now all of that has to tee up what the continued investments that we're actually making it in the partner ecosystem to actually drive scale and.

Corey Thomas: Now, all of that has to tee up with the continuing investments that we're actually making in the partner ecosystem. That actually drives scale and the rationalization that we're actually doing around alignment across the business. But if you look at the right product strategy around text and response, which we're expanding that business, you're going to hear more about that later. The exposure command, which allows us to be more strategic in the risk and visibility space

Speaker Change: And the rationalization that we're actually doing around the alignment across the business, but if you look at that right product strategy around text, our spots, which we're expanding that business you're going to hear more about that later the exposure command, which allows us to be more strategic in the risk of visibility space. We're executing that we have good momentum there partners continue to make investments and frankly, we got we accelerated those investments over time, all we're seeing good traction there.

Corey Thomas: But if you look at that right product strategy around textile response, which we're expanding that business, you're going to hear more about that later. The exposure command, which allows us to be more strategic in the risk of visibility space, we're executing that. We have that momentum there.

Corey Thomas: We're executing that. We have good momentum there. And frankly, we're going to be accelerating those investments over time. We're seeing good traction there. And then we're really focused on equipping and enabling our team. We have a good tenured team there. And I think that they're set up well. Those are the things that can actually drive traction as we go into next year. It's early, but we're actually seeing this set up well.

Corey Thomas: Partner, continuing to make investments. And frankly, we're going to be accelerating those investments over time. We're seeing good traction there.

Speaker Change: Sure.

Corey Thomas: And then we're really focused on equipping an able-art team. We have a good team; your team there. And I think that they're set up well.

Speaker Change: And then we're really focused on equipment enable our team we have a good team there and I think that they are set up well those are the things that can actually track traction as we actually go into next year. It's early but we're actually seeing that set up good.

Corey Thomas: Those are the things that can actually thrive traction as we actually go into next year. It's early, but we're actually seeing this set up good.

Corey Thomas: But we have to actually, first and foremost, start by continuing to actually leverage the healthy pipeline trend that we actually saw, where it stabilized and climbed in 2.2. And we have to actually really accelerate that and build that. But those are the things that actually drive the trend.

Rudy Kessinger: But we have to actually first and foremost, we have to start by continuing to actually leverage the healthy pipeline trends that we actually saw, where stabilize and uptick in Q2. And we have to actually really celebrate that and build that. But those are the things that actually try out as we go. Thank you.

Speaker Change: But we have to actually first and foremost we have to start by continuing to actually leverage the healthy pipeline spreads that we actually saw where it stabilize and uptick in Q2, and we have to actually really accelerate that and build that but those are the things that actually drive as we go forward.

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Speaker Change: Okay.

Rudy Kessinger: Thank you. Our last question comes from the line of Rudy Kessinger of D.A. Davidson.

Speaker Change: Thank you.

Rudy Kessinger: Our last question comes from the line of Rudy Kessinger of D.A. Davidson. The line is open. Hey, thanks for squeezing me in, guys. I want to come back to just this implies in a new AR in the second half. I mean, it's four times as much in a new AR basically in five in the second half versus the first half of the midpoint of the AR. I know you've given a few comments; marketplace pipeline up 15%. You know, they get 4x in a new AR. So just can you give some commentary on the overall pipeline for the second half relative to the first half?

Speaker Change: Our last question comes from the line of Rudy Kessinger.

Speaker Change: D a davidson.

Speaker Change: Your line is open.

Corey Thomas: Hey, thanks for squeezing me in, guys. I want to come back to just this implied net new ARR in the second half. I mean, it's four times as much net new ARR basically implied in the second half versus the first half of the midpoint of the ARR outlook. And I know you've given a few comments, the marketplace pipeline up 15%. You know, they get 4x the net new ARR. So just can you give some commentary on the overall pipeline for the second half relative to the first half? Is there any other assumption in the outlook, such as maybe improved gross retention that might be helping drive some of the sequential improvements here?

Rudy Kessinger: Hey, Thanks for squeezing me in guys I want to come back to just this implies net new <unk> in the second half minutes. It's four times as much net new where are basically in filing in the second half versus the first half of the mid point of view.

Speaker Change: Our outlook.

Speaker Change: I know you've given a few comments marketplace pipeline up 15%.

Speaker Change: If they get Forex the net new IRR. So just can you give some commentary on the overall pipeline for the second half relative to the first half is there any other assumptions in the outlooks such as maybe improved gross retention that might be helping drive some of the sequential improvements here or just any other color.

Tim Adams: Is there any other assumptions in the outlook, such as maybe improved gross retention that might be helping drive some of the sequential improvements here, or just any other color you could provide would be very helpful. Yeah, I took with this one. It's primarily a Q1 dynamic, not the linearity X and E22. I would just point out it's about 4x in the second half. It will 7x and 22. And so when you have a two one that we actually had, the numbers don't make any sense. You know, you could have actually said 7x and 22 was going to make it, or 8x and 22 was going to make any sense either.

Rudy Kessinger: Or just any other color you could provide would be very helpful.

Speaker Change: You could provide would be very helpful.

Corey Thomas: Yeah, two quick things. One, it's primarily a Q1 dynamic, not linearity X and E22. I would just point out that it's talking about 4X in the second half; it was 7X and 2 in Q2. And so when you have a Q1 like we actually had, the numbers don't make any sense. You know, you could actually say 7X and Q2 was going to make it, or 8X, and Q2 wasn't going to make any sense either.

Speaker Change: Yes, two quick things one it's a primarily a Q1 dynamic.

Speaker Change: Not the linearity exiting Q2, I would just point out that you're talking about Forex in the second half of it was set back in Q2.

Speaker Change: And so when you have a Q1 that we actually had the numbers don't make any fits you couldn't have executed seven extra Q2 was going to make any or eight extra GT was going to make any sense either.

Tim Adams: And so really it's the traction and the it's the rate of improvement. And we're back on the healthy rate improvement. So yes, Q1 was bad, but I think we actually normalize and stabilize things in Q2, and we're going to well. And then to get to your core of your question, which is actually really good, is that we didn't leave the guidance range the same, just to leave it the same. We actually took a very detailed look at our pipeline. And we believe that from the pipeline and the data and everything that we actually see today, that we're going to be in the guidance range that we actually indicated.

Speaker Change: And so really its the traction and the <unk>.

Speaker Change: Right.

Speaker Change: Improvement and we're back on a healthy rate of improvement. So, yes, Q1 was bad, but I think we actually normalize and stabilize things in Q2, and we said it well and then to get to your core of your question, which is actually really good is that we didn't leave the guidance range. The same just to leave it. The same we actually took a very detailed look at our pipeline and we believe that from the pipeline and the data than ever.

Corey Thomas: And so really, it's the traction and the rate of improvement. And we're back on a healthy rate of improvement. So yes, Q1 was bad.

Speaker Change: We actually see today that we're going to be in the guidance range that we actually indicated but those are the two considerations that are this year.

Tim Adams: But those are the two considerations that I'll just share. Thanks for the question. Yeah, okay.

Speaker Change: Thanks for the question, yes, okay.

Tim Adams: And then just a quick follow-up that I could just go up on the new logo side. Yeah, on the new logo side, I saw, you know, it's looked back to positive quarter of a quarter. I guess there's any comments on, you know, new logo, both using Q2 relative expectations. So I would just say it was with an expectation. Look, Q2 was a quarter that we expected to normalize. We saw normalization. I would not say it was a home run quarter. I would just say that Q1 was a bad quarter; Q2. We expected to actually get back to business and normalize it and normalize.

Speaker Change: And then just as a quick follow up if I could just.

Speaker Change: Just on the new logo side on.

Speaker Change: On the new logo side I saw it flip back the positive quarter over quarter, I guess, just any comments on.

Speaker Change: New logo bookings in Q2 relative to expectations.

Speaker Change: So I'll just say with an expert guy. So Q2 was a quarter that we expect it to normalize we saw normalization I would not say it was a home run quarter I would just say that Q1 was a bad quarter Q2, we expect it to actually get back to business to normalize at a normalized we saw.

Tim Adams: We saw very healthy traction and normalized traction on the platform side. We gave a number of mid single digits. We saw the; it was getting back to positive net overall customer growth. And that's kind of where we expected to be in a healthy, normalized environment and the setup. So we actually, it was what we expected. And what we needed to do is actually set up for us to be what we want to be as we actually enter the year.

Speaker Change: Very healthy traction in normalized traction on the platform side, we gave the number of up mid single digits, we saw the.

Speaker Change: Just getting back to positive net overall customer growth and Thats kind of where we expect it to be in a healthy normalized environment and the setup. So we actually it was what we expected.

Speaker Change: What we needed to do to actually set up for us to be where we want to be as we actually exit the year. The primary thing that I'm focused on right now is of course the introducing.

Operator: The primary thing that I'm focused on right now is, of course, the introducing the product to our customers, the new product to our customers, and building pipeline, not just for the back half of the year, but as we go forward. All right, thank you very much, and operate with any other questions.

Speaker Change: Introducing the product to our customers new products to our customers and building pipeline not just for the back half of the year, but as we go forward.

Corey Thomas: But I think we actually normalized and stabilized things in Q2, and we're doing well. And then to get to the core of your question, which is actually really good, is that we didn't leave the guidance range the same just to leave it the same. We actually took a very detailed look at our pipeline, and we believe that from the pipeline and the data and everything that we actually see today, we're going to be in the guidance range that we actually indicated. But those are the two considerations that I just shared.

Speaker Change: Alright, Thank you very much and operate with any other questions.

Corey Thomas: There are no more questions. All right, with that, I want to thank everyone. I know that there's lots of stuff going on, but I really appreciate the questions and the support. I think we're in an exciting time. We've been executing our product strategy. We're taking that out to our customers, and we've been intentionally focused on investors that are going to set up for the next several years, not the past three years. So I appreciate everyone's time and attention. Thank you all. Thank you.

Speaker Change: There are no more questions.

Speaker Change: Alright with that I want to thank everyone.

Speaker Change: I know that there's lots of stuff going on but I really appreciate the questions and the support.

Speaker Change: I think we're in an exciting time.

Speaker Change: And execute our product strategy, and we're taking that out to our customers and we've been intensely focused on investments, they're going to set us up for the next several years not the past three years. So I appreciate everyone's time and attention. Thank you all thank you.

Speaker Change: Okay.

Operator: Ladies and gentlemen, that concludes today's conference call. Thank you all for joining. You may now disconnect.

Speaker Change: Ladies and gentlemen that concludes today's conference call. Thank you all for joining you may now disconnect.

Rudy Kessinger: And then, just as a quick follow-up, if I could... Just on the new logo side, yeah, on the new logo side, I saw, you know, it flipped back to a positive quarter of a quarter. I guess, any comments on, you know, new logo buckings in Q2 relative to expectations?

Speaker Change: Please wait the conference will begin shortly.

Speaker Change: Yes.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

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