Rapid7 (RPD) is a leading provider of security data and analytics solutions that enable organizations to implement an active, analytics-driven approach to cyber security. It is based in Boston, MA.
Seven other companies are scheduled for the week of July 13. The full IPO calendar is available at IPO Premium.
SEC Documents
Manager, Joint-managers: Morgan Stanley, Barclays
Co-managers: Pacific Crest Securities, William Blair, Raymond James, Cowen and Company
End of lockup (180 days): Wednesday, January 13, 2016
End of 25-day quiet period: Tuesday, August 11, 2015
RPD scheduled a $90 million IPO with a market capitalization of $534 million at a price range midpoint of $14 for Friday, July 17, 2015 on Nasdaq.
Rapid7 IPO Summary
RPD is a leading provider of security data and analytics solutions that enable organizations to implement an active, analytics-driven approach to cyber security.
RPD’s security data and analytics platform was purpose built for today’s increasingly complex and chaotic IT environment.
Rapid7 IPO Valuation
Glossary
| Accumulated deficit (mm) | . | . |
-$279 |
|||
| Per share dilution | . | . |
-$13.19 |
|||
| Valuation Ratios |
Mrkt Cap (mm) |
Price /Sls |
Price /Erngs |
Price /BkVlue |
Price /TanBV |
% offered in IPO |
| Rapid7 (RPD) |
$533 |
5.7 |
-17.3 |
12.4 |
17.3 |
17% |
RPD Conclusion
Buy
Major market growth, see report
Q1 rev +41%
Products (58% of rev) +29% in Q1
72% gross profit margin, that’s good
-33% net loss on rev
-17 P/E indicating moderate cash burn relative to market cap
-$279mm in accumulated deficit
-$13.19 per share dilution, vs mid-range of $14
Customer base includes 30% of Fortune 1000
Rapid7’s Business
RPD is a leading provider of security data and analytics solutions that enable organizations to implement an active, analytics-driven approach to cyber security.
RPD’s security data and analytics platform was purpose built for today’s increasingly complex and chaotic IT environment.
Rapid7 Market
According to Gartner, Inc., advanced targeted attacks make prevention-centric strategies obsolete. Securing enterprises in 2020 will require a shift to information- and people-centric security strategies, combined with pervasive internal monitoring and sharing of security intelligence.
Accordingly, RPD believes that the market opportunity is large and growing and will be positively impacted by the ongoing shift in security spending from a traditional passive, “block and protect” approach to an active, analytics-driven approach to cyber security.
Gartner, Inc. estimates that by 2020, 60% of enterprise information security budgets will be allocated for rapid detection and response approaches – up from less than 10% in 2014.
RPD’s estimate, based on International Data Corporation data, is that the overall market for security data and analytics is a $12.6 billion opportunity in 2015. Included in the estimates are all or a portion of the markets for Security and Vulnerability Management, Network Intrusion Detection and Prevention, Endpoint Security Suites and Security Services.
RPD believes that the market opportunity will grow as organizations continue to move away from prevention-based solutions and toward analytics-driven security environments.
Rapid7’s Customers
As of March 31, 2015, RPD had more than 3,900 customers, including over 30% of the organizations in the Fortune 1000.
Number of reported security incidents
Within enterprises increasing 48% in 2014 over the prior year, according to a report by PricewaterhouseCoopers LLP
Deferred revenue
85% of the revenue recognized in the first quarter of 2015 was recorded on the balance sheet as deferred revenue as of December 31, 2014. As of March 31, 2015 deferred revenue was $60 million.
Security data & analytics
RPD combines its extensive experience in security data and analytics and deep insight into attacker behaviors and techniques to make sense of the wealth of data available to organizations about their IT environments and users.
There has been an explosion of increasingly sophisticated cyber attacks as the proliferation of mobile devices, cloud-based applications and solutions relying on user credentials has eliminated the boundaries that previously defined an organization’s network perimeter and expanded the threat surface that organizations must now defend.
RPD’s powerful and proprietary analytics enable organizations to contextualize and prioritize the threats facing their physical, virtual and cloud assets, including those posed by the behaviors of their users.
Leveraging RPD’s security data and analytics platform, its solutions enable organizations to strategically and dynamically manage their cyber security exposure.
RPD’s solutions empower organizations to prevent attacks by providing visibility into vulnerabilities and to rapidly detect compromises, respond to breaches and correct the underlying causes of attacks.
This balanced and analytics-focused approach ultimately better secures organizations’ environments and reduces the likelihood of, and risks associated with, cyber attacks.
Technology & solutions
RPD believes its technology and solutions revolutionize the practice of cyber security and are central and critical to implementing a modern security program.
With its security data and analytics platform at its core, RPD is pioneering active, analytics-driven solutions to cyber security that enable organizations to find and eliminate critical weaknesses and detect attacks in their IT environments.
RPD’s threat exposure management offerings include its industry-leading vulnerability management products, which RPD enhances with deep security analytics capabilities to quickly deliver contextual risk prioritization, critical threat awareness and impactful remediation guidance.
Similarly, RPD added analytics and automation to traditional manual penetration testing to be able to deliver robust ongoing attack simulation solutions that provide organizations with visibility into real world threats.
By providing and combining analytics and actionable insights related to both an organization’s attack surface and the dynamic threat landscape, RPD’s security data and analytics platform enables organizations to manage their threat exposure above and beyond traditional vulnerability management products on the market.
Incident detection product
Further leveraging its technology platform and analytics capabilities, RPD recently introduced its incident detection product to provide organizations with the ability to rapidly detect and respond to cyber security incidents and breaches.
Proprietary behavioral and pattern-recognition analytics are central to this capability, which functions in part by automatically mapping an organization’s assets and users relative to the threat landscape, such that aberrant and risky user-specific and asset-specific behaviors are rapidly identified, escalated for investigation and prioritized by threat level.
To complement its incident detection product, RPD also recently introduced its incident response services, which provide its customers with critical access to its security experts and experience, enabling them to accelerate incident response and containment.
RPD also offers security advisory services that help organizations develop a holistic approach to their cyber security programs and advance their cyber security program maturity.
Intellectual property
As of March 31, 2015, RPD had four issued patents and 15 patent applications pending in the United States relating to its products.
RPD cannot assure you that any patents will issue from any patent applications, that patents that issue from such applications will give RPD the protection that it seeks or that any such patents will not be challenged, invalidated, or circumvented.
Any patents that may issue in the future from RPD’s pending or future patent applications may not provide sufficiently broad protection and may not be enforceable in actions against alleged infringers.
RPD has registered the “Rapid7,” “Nexpose” and “Metasploit” names and logos in the United States and certain other countries.
RPD has registrations and/or pending applications for additional marks in the United States and other countries; however, RPD cannot assure you that any future trademark registrations will be issued for pending or future applications or that any registered trademarks will be enforceable or provide adequate protection of its proprietary rights.
Competition
RPD’s competitors include: vulnerability management and assessment vendors, including Qualys and Tenable Network Security; diversified security software and services vendors, including McAfee (a subsidiary of Intel), IBM and HP; security services specialists, including Mandiant (a subsidiary of FireEye); and providers of point solutions that compete with some of the features present in its solutions.
5% shareholders pre-IPO
Entities affiliated with Technology Crossover Ventures 29.6%
Entities affiliated with Bain Capital Venture Partners, LLC 29.1%
John Devine 10.5%
Alan Matthews 10.2%
Michael Tuchen 5.6%
Timothy McAdam 29.6%
J. Benjamin Nye 29.1%
Dividends
No dividends are planned.
Use of proceeds
RPD expects to receive $81 million from its IPO and use it for the following:
for working capital and other general corporate purposes, including investments in sales and marketing in the United States and internationally and in research and development. RPD also intends to use $18.6 million of the net proceeds to pay all remaining outstanding principal and interest, together with a termination fee, under its term loan with Silicon Valley Bank, which carries a current interest rate of 12% and expires in December 2017.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions.
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