Rapid7 to lay off 18% of its workforce

Cuts come despite 14% revenue rise

Despite double-digit growth in its most recent fiscal quarter, security vendor Rapid7 will lay off about 18% of its workforce – about 470 employees, with significant cuts to sales and engineering – as well as permanently close some office locations and invest in managed service providers (MSPs).

The cuts are a "difficult decision" and "may be surprising" to employees "when we are meeting performance expectations," Rapid7 CEO Corey Thomas said in a blog post. But "making decisions from a place of strength allows us the opportunity to restructure intentionally."

"I would always prefer to speak to each of you individually. Unfortunately, there is no ideal way to have this conversation with all of our global Moose simultaneously, and I regret that some of you will be reading this after the news is public," Thomas said. "I will remain online with you as morning reaches each timezone to host town hall meetings with local teams and leaders."

Notably, earlier this year, publicly traded Rapid7 reportedly considered a sale to private equity investors. In March, Rapid7 acquired Minerva Labs for $38 million in cash and stock.

Thomas continued: "It is difficult and heartbreaking to say goodbye to Moose [Moose is Rapid7's mascot and also a term it uses for its employees] who have been integral to our teams over the years. We would not go forward if we were not confident that this is the best and only way we will be able to deliver the experience that our customers demand, vault over our competition, and remain the best place to work for the most Moose possible."

On the vendor's quarterly earnings call Tuesday, Thomas told listeners that Boston-based Rapid7 sees "massive potential to drive high-margin managed services, both through existing offerings and investing in accelerating our strategic managed service partnerships," according to a transcript of the call.

"We are not interested in commodity, low-value managed services that do a poor job security for customers," Thomas said. "We want to have world-class services that are good. We're also not interested in low-margin businesses."

Although the vendor has sustained 20%+ growth "for many years," customers have sought a more integrated experience from the vendor, according to Thomas' post.

Rapid7 will focus on expanding managed detection and response (MDR) leadership across all security operations, invest in more adoptable cloud capabilities and align operations for improved customer engagement and support, Thomas said in the blog post. Roles were cut in organisations throughout the vendor, which had 2,673 employees at the end of 2022.

Quickly adding capabilities as customers demand them led to an increased employee base, new regions and "unnecessary friction and inefficiencies which hinder our customer experience," said Thomas.

"This restructuring and near-term reduction will set up our teams and customers for long term success," he said. "It will increase our capacity to invest where customers need it, and give us the flexibility to scale intentionally, foster innovation, and improve processes."

Rapid7's Q2 results

Wall Street appeared to hail news of the layoffs, with Rapid7's stock soaring about 18%.

Rapid7 reported results for its second fiscal quarter Tuesday - a quarter that ended 30th June.

The vendor saw annualised recurring revenue of $751 million from about 11,000 customers, up 14% year-over-year. Total revenue was $190 million, up 14% year-over-year. Products revenue was $182 million, another increase.

However, using generally accepted accounting principles (GAAP), Rapid7 reported an operating loss of $52 million. Not using GAAP, Rapid7 reported an operating income of $13 million.

Rapid7 expects to report current quarter revenue between $196 million and $198 million, according to the company. That would be year-over-year growth of 12%-13%. The vendor expects non-GAAP income from operations between $29 million and $31 million.

Dell, Microsoft, Ingram Micro, Cisco and Accenture are among the tech companies to announce or conduct job cuts in recent weeks.

A version of this story first appeared on CRN.