Q2 2026 Rapid7 Inc Earnings Call Transcript
Key Points
- Exceeded expectations across all metrics in Q2 2026, with non-GAAP operating income of $28.9 million and free cash flow of $31.9 million.
- Detection and Response business, which is approximately 55% of total ARR, grew approximately 5% year-over-year.
- Strong balance sheet with $702.6 million in cash and investments, positioning the company to repay its $600 million convertible notes due in March 2027.
- Announced restructuring to achieve 20% non-GAAP operating margins in Q4 2026, up from 13.7% in Q2, demonstrating commitment to operational efficiency.
- Leadership team strengthened with new Chief Financial Officer, Chief Commercial Officer, and Chief Product and Technology Officer, bringing experience in scaling and turnarounds.
- Healthy adoption of Exposure Command solution, driven by new customers and upgrades from older vulnerability management products.
- Raised full-year 2026 non-GAAP operating income guidance to $129 million to $133 million, reflecting improved profitability outlook.
- Total ARR declined sequentially to $824 million, with non-core products driving the decline and overall ARR growth not yet at desired levels.
- Exposure Management business is not yet where it needs to be, offsetting growth in Detection and Response within core platform solutions.
- Total revenue declined approximately 1.5% year-over-year in Q2 2026, reflecting weakness in non-core product ARR.
- Non-GAAP gross margins decreased approximately 215 basis points year-over-year due to increased staffing and cloud usage costs.
- Restructuring impacts approximately 12% of the workforce, leading to severance costs that will offset cash benefits in the near term.
- Third-quarter 2026 revenue guidance implies a year-over-year decline of approximately 4%, indicating continued pressure on top-line growth.
- Core platform solutions grew only approximately 1% year-over-year, highlighting slow progress in the company's key strategic areas.
Good day, everyone. My name is [Kahelani], and I will be your conference operator today. At this time, I would like to welcome you to the Q2 2026 Rapid7 earnings call. (Operator Instructions)
At this time, I'd like to turn the call over to Matt Wells, Vice President of Investor Relations.
Thank you, operator, and good afternoon, everyone. Today, we will be discussing Rapid7's second-quarter fiscal 2026 financial results. We've distributed our earnings press release over the wire, and it can be accessed on our Investor Relations website. With me on the call are Corey Thomas, Executive Chairman; Wael Mohamed, CEO; and Rafe Brown, CFO. As a reminder, all participants are in a listen-only mode, and a question-and-answer session will follow our opening remarks.
Before I hand the call over to Corey, I want to remind everyone that certain statements made during this conference call may be considered forward-looking statements under federal securities laws. These statements are made
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