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Rapid7 Buys DivvyCloud for $145M

May 1, 2020

Rapid7 has entered into a definitive agreement to acquire Divvy Cloud, a provider in Cloud Security Posture Management (CSPM). Under the terms of agreement, Rapid7 will acquire DivvyCloud for a total purchase price of approximately $145 million, subject to adjustments, to be paid in cash and stock. The acquisition is expected to close during the second quarter of 2020, subject to the satisfaction of customary closing conditions.

As organizations accelerate their migration and adoption of cloud services, they need help bringing Security and DevOps teams together to understand and effectively manage the governance, risk and security of their cloud and container environments. Through DivvyCloud’s platform, Rapid7 customers will have the ability to innovate more securely, move out of data centers and into the cloud, and make infrastructure accessible and manageable.

DivvyCloud enables deep visibility, combined with automated prevention and real-time remediation of risk to deliver continuous security and compliance for cloud environments, including support for Amazon Web Services, Microsoft Azure, Google Cloud Platform, Alibaba Cloud and Kubernetes. Using DivvyCloud, customers can protect cloud and container environments from misconfiguration, policy violations, external and internal threats, and identity and access management challenges.

“We are thrilled to welcome DivvyCloud, its customers, and the entire DivvyCloud team to the Rapid7 family,” said Corey Thomas, chairman and CEO, Rapid7. “With the acceleration of cloud adoption introducing new enterprise risk areas, we're excited to bring Security and DevOps teams together with DivvyCloud's best-of-breed compliance, risk management and governance for multi-cloud and container environments, while also integrating it with our Insight Cloud platform to create enduring customer value.”

“Joining forces with Rapid7 is a natural next step,” said Brian Johnson, CEO and co-founder, DivvyCloud. “Their commitment to customers, employees, and company culture is well-aligned with the values that have made DivvyCloud so successful. With the combined expertise of both Rapid7 and DivvyCloud, we are even better positioned to help enterprises accelerate innovation using cloud and containers without the loss of control.”

“Security teams are constantly challenged with understanding and effectively managing the risk and security for cloud environments at DevOps speeds,” said Lee Weiner, chief innovation officer, Rapid7. “DivvyCloud’s technology, team, and market leadership in the cloud security space will enable Rapid7 to better serve its customers’ needs by helping them innovate more securely, and provide a robust set of compliance and remediation paths for those with modern cloud infrastructure.”
Rapid7 provides one of the most comprehensive security operations platforms in the market today, with a broad set of best-of-breed capabilities across SIEM-based incident detection and response, vulnerability management, application security and security automation and orchestration. Through this acquisition, Rapid7 will address the growing need for organizations to secure multi-cloud environments by extending the cloud security capabilities of its Insight platform.

RTP Ventures, MissionOG, and Providence Strategic Growth, an affiliate of Providence Equity Partners, were the lead investors in DivvyCloud. DC Advisory served as DivvyCloud’s financial advisor and Miles & Stockbridge served as legal advisor.

Preliminary First Quarter Financial Results
Rapid7 also provided preliminary estimated financial results for the first quarter ended March 31, 2020. Preliminary estimates of revenue and non-GAAP loss from operations for the first quarter 2020 exceeded Rapid7’s previous guidance provided on February 10, 2020. Rapid7 anticipates revenue for the first quarter 2020 to be in the range of $93.8 million to $94.0 million. For the first quarter 2020, the Company anticipates GAAP loss from operations to be in the range of $(20.3) to $(20.1) million, and non-GAAP loss from operations to be in the range of $(4.4) to $(4.2) million.

Preliminary First Quarter 2020 Key Metrics

  As of March 31,
  2020
 
  2019
 
  % Change
Annualized recurring revenue (in millions) $ 350.6 to $ 350.8   $ 268.2
 
  31%
Number of customers 9,024
 
  7,934
 
  14%
ARR per customer (in thousands) $ 38.9
 
  $ 33.8
 
  15%
Renewal rate* 106%   117%    

*Rapid7’s renewal rate as of March 31, 2019 was adjusted from 120%, as previously disclosed, to 117% based on a reclassification of certain upsells and cross-sells.

The above preliminary estimated financial data and key metrics as of and for the three months ended March 31, 2020 are based upon Rapid7’s estimates and are subject to completion of the Company’s financial closing procedures. Moreover, these data have been prepared solely on the basis of currently available information by, and are the responsibility of, Rapid7. Rapid7’s independent registered public accounting firm has not audited or reviewed, or expressed an opinion with respect to, these data. This information is not a comprehensive statement of Rapid7’s financial results for this period, and its actual results may differ materially from these estimates due to the completion of its financial closing procedures, final adjustments, completion of the review of the Company’s financial statements and other developments that may arise between now and the time the review of Rapid7’s financial statements is completed. There can be no assurance that these estimates will be realized, and estimates are subject to risks and uncertainties, many of which are not within our control. Complete quarterly results as of and for the three months ended March 31, 2020 are expected to be announced in connection with the Company’s first quarter financial results earnings conference call, to be held on May 7, 2020, and included in the Company’s Quarterly Report on Form 10-Q for the three months ended March 31, 2020.

Second Quarter and Full-Year 2020 Guidance
Rapid7 anticipates annualized recurring revenue, revenue, and non-GAAP income (loss) from operations to be in the following ranges:

  Second Quarter 2020   Full-Year 2020
Annualized recurring revenue (in millions)         $ 387.0
 
to $ 407.0
 
Year-over-year growth         14% to 20%
Revenue (in millions) $ 94.6
 
to $ 96.2
 
  $ 388.0
 
to $ 395.0
 
Year-over-year growth 20% to 22%   19% to 21%
Non-GAAP income (loss) from operations (in millions) $ 1.0
 
to $ 2.0
 
  $ (3.0) to $ (1.0)

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