Tag Archives: cloud software

Rapid7 (NASDAQ: RPD)

Rapid7 (NASDAQ: RPD)

Rapid7 (NASDAQ: RPD)Rapid7 (NASDAQ: RPD), based in Boston, Massachusetts, is a recent addition to our Battle Road IPO Review Software sector coverage. The company was founded 15 years ago in New York City, where its founders took the city’s rapid transit train to work in mid-town Manhattan. RPD focuses on IT security software and services, with an emphasis on vulnerability and threat detection. The company recorded revenue of $77 million and a net loss of $33 million in 2014. For 2015 Consensus estimates call for revenue of $104 million and a Loss per Share of $1.53, followed by revenue of $131 million and a Loss per Share of $0.85.

Rapid7 priced its 6.45 million share IPO at $16 per share –above an expected range of $13-15—on the NASDAQ on June 16, 2015 for first trade the following day. All shares were offered by the company. Subsequently the underwriters exercised their over-allotment, enabling the company to raise about $110 million in its IPO. The deal was led by Morgan Stanley, Barclays Capital, KeyBanc Capital Markets/Pacific Crest, William Blair, Raymond James, and Cowen.

Rapid7 is led by Corey Johnson, President and CEO, who has risen through the ranks of the company in the last seven years, and served as Chief Operating officer, prior to his current position. His experience includes five years at Microsoft, where he was a Group Project Manager, with responsibility for the world-wide launch of SQL Server in 2005. Steve Gatloff, CFO, formerly CFO of iPass, held financial roles at United Online, Sterling Commerce, and VeriSign.

Rapid7 provides a portfolio of cloud-based software and managed services to detect and analyze cybersecurity threats for over 4,100 customers across a broad range of industries, including 34 percent of the Fortune 1000. In the last year, RPD added BJ’s Wholesale Club, Boyd Gaming, Dollar Tree, Fastenal, Iowa State University, Johnson Controls, Parker Hannifin, Samsung Electronics, and the Smithsonian to its growing list of business and government customers.

Roughly two-thirds of sales in each of the last three years comes from its Nexpose vulnerability and threat assessment software, which among other things, identifies weak points in a company’s data network, and helps to prevent cyber attacks across computer networks. About 88 percent of sales comes from the US, and the company utilizes a direct salesforce as well as channel partners that account for 41 percent of sales. RPD boasts an 87 percent renewal rate for existing products. The company recognizes about 80 percent of sales each quarter from backlog. At the end of the September 30, 2015 quarter, the company’s DSOs stood at 103, up from 95 in the previous quarter, a level that we consider to be high relative to other software companies that we research.

The market for security threat detection and assessment is a large and competitive one, with IBM, HP, and Intel, through its acquisition of McAfee, quite active in the market. In addition, RPD faces competition from several dedicated security software and services vendors, such as FireEye (NASDAQ: FEYE), Qualys (NASDAQ: QLYS), and others.


alarm.comAlarm.com (NASDAQ: ALRM), a cloud-based security systems provider is among the recent additions to our Battle Road IPO Review Software sector coverage. Founded in 2000 as part of a research and development unit within MicroStrategy (NASDAQ: MSTR), a provider of business intelligence software, Alarm.com was later spun off from MSTR. Alarm.com is headquartered in Vienna, Virginia, and its CEO and president is Steve Trundle. Consensus estimates call for EPS of $0.14 in 2015, flat with $0.14 in 2014, while revenues are projected to increase by 16 percent in 2015 to $194 million.

Alarm.com debuted on the NASDAQ on June 26, 2015 at $14.00 per share. All proceeds from the seven million share offering went to Alarm.com. Goldman Sachs, Credit Suisse and Merrill Lynch acted as book-running managers for the transaction, with Stifel, Raymond James, William Blair, and Imperial Capital acting as co-managers. At a recent share price of $14.00, the company’s market cap is roughly $635 million.

Alarm.com deploys wireless security systems that can be monitored using video, mobile apps, and web-based apps. In 2010, Alarm.com added to these systems by allowing users to control heating and cooling temperatures using these apps. With 2.3 million subscribers, 25 million connected sensors and devices, and 20 billion data points processed in the last year alone, Alarm.com claims to be the largest connected home platform. This platform has been built specifically for home and business security, with a network of more than 5,000 service providers, with expertise in design, sales, installation, and support for the platform.

The connected home platform designed by Alarm.com has four main segments: Interactive Security, Intelligent Automation, Video Monitoring, and Energy Management. Interactive Security is an always-on security system powered by cellular connection which can survive otherwise detrimental occurrences such as line cuts, power outages and network problems. Interactive Security includes app alerts and triggers and constant emergency response. Intelligent Automation allows users to connect and control security systems, garage doors, lights, locks, thermostats, electricity and other devices. Intelligent Automation learns patterns and recommends adjustments.

Video Monitoring allows for on-demand viewing of security footage which can be accessed at any time, including live streaming, video alerts, constant high definition recording and clip captures. Video Monitoring can be accessed through the web and mobile apps. Energy Management enables users to control energy usage and comfort and is connected to thermostats, power meters, lights, shades, solar panels and appliances. Energy Management controls devices and manages temperatures. Users can also obtain a real-time look into their energy usage and efficiency. The pricing for Alarm.com is a monthly fee starting at $13.99 for homes and $19.99 for businesses, with more features available for a higher cost. There is also an initial set-up fee.

The Alarm.com app, which can control the entire connected home platform, is available on the iPhone, iPad, Android, Windows Phone, Apple Watch, Pebble Watch, and Amazon Fire TV. This app is what brings the connected home platform together, allowing users access to their homes while out and about. Main competitors of Alarm.com include iControl, Frontpoint, Protect America, LiveWatch, Link Interactive, SimpliSafe, LifeShield, AlarmForce, ADT, and Vivint. Post-IPO, we note that Alarm.com has a solid balance sheet, with over $100 million in cash and net debt of just $7 million.