[Starts Abruptly] Thank you, operator, and good afternoon, everyone. We appreciate you joining us to discuss Rapid7's Q2, 2017 financial and operating results in addition to our financial outlook for the third quarter and the full fiscal year 2017. I'm Jeff Bray, VP of Investor Relations and I'm here today with Corey Thomas, our President and CEO; and Jeff Kalowski, our CFO. We distributed our Q2 2017 earnings press release over the wire and have posted it on our website at investors.rapid7.com. We have also posted our updated company presentation and financial metrics file on our Investor Relations website. This call is being webcast and can be accessed at investors.rapid7.com. The webcast of this call will be archived and a telephone replay will be available on our website until August 11, 2017. We would like to bring the following to your attention. The date of this call is August 7, 2017. Our discussion today contains forward-looking statements about events and circumstances that have not yet occurred, including without limitations, statements regarding our objectives for future operations and future financial and business performance. These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. Statements containing words such as anticipate, believe, continue, estimate, expect, intend, may, will, and other similar statements, are intended to identify such forward-looking statements. Actual outcomes and results may differ materially from the expectations contained in these statements due to a number of risks and uncertainties including those contained in the risk factors section of our most recent quarterly report on Form 10-Q filed with the Securities and Exchange Commission and subsequent reports that we file with the Securities and Exchange Commission. The information provided on this conference call should be considered in light of such risks. Actual results and…

Thanks, Jeff. And good afternoon everyone. Thank you all for joining us today on our second quarter 2017 earnings call. Q2 was further evidenced Rapid7 has a live strategy as we continue to take share in the strong market. We delivered revenue growth of 27%, grew recurring revenues by over 30%, improved our operating loss and grew billings by 20%. Once again we saw consistent performance in our Threat Exposure Management, our TEM business and continued strong contribution from our Incident Detection and Response business or IDR. As customers recognize the value of our solutions, they are consolidating their spend with Rapid7 by covering more of the environments, which is leading to higher adoption and usage and larger deal sizes. Additionally, as they recognize the breadth and strength of our product portfolio and the value of having a single source for all of their critical IT and security data, we are seeing cross-selling of over 60% over the last year. Q2 was a landmark quarter for our product development, as we launched InsightVM, InsightAppSec and InsightOps making Rapid7's Insight platform the first to offer all three major pillars of IT and security analytics, vulnerability management, UBA powered SIEM, and IT log analytics, all operating on a shared cloud and data collection infrastructure. Our platform uses the same lightweight agent, data collectors and scan engines across all of its solutions to aggregate data from endpoints, machine logs, cloud asset applications and other sources. We continue to expand globally by deploying the Rapid7 Insight platform to a third region adding Japan to better access the needs and demand of customers' in the APAC's region. Instead of trying to manually integrate a variety of overlapping point products, IT and security professionals can collect data once and use that single source of data across…

Thanks Corey. We are pleased with our strong performance in the second quarter. Total Q2 revenue was $47.4 million, an increase of 27% year-over-year and above the high end of our guidance. Product revenue was $27.2 million increasing 27% year-over-year, driven by strength in both TEM and IDR with expanding recurring revenue. Maintenance and support revenue was $11.3 million increasing 27% and our professional services revenue was $8.9 million, an increase of 30% year-over-year. We continue to have very high visibility into our revenue forecast with 88% of Q2's revenue having been on the balance sheet as of the first day of the quarter. 70% of our revenue was subscription based recurring revenue versus 67% in Q2 of last year, and our recurring revenue grew 31% year-over-year. In Q2, 2017 80% of our product revenue was recurring, up from 75% last year and we are pleased with the continued uptick in recurring revenue. Total deferred revenue grew 25% year-over-year to $180.4 million at the end of Q2. Calculated billings for the second quarter were $60.2 million, or up 20% year-over-year, driven by another strong quarter from IDR, good initial uptake of our InsightVM offering, ongoing strength across mid-market and improving momentum in our enterprise segment. Average contract lengths were 23 months for total billings, consisting with the prior-year period. With the evolution of the Rapid7 Insight Platform and the availability of our two new cloud-based subscription products, InsightVM and InsightAppSec; we continue to expect that more of our billings will come from our new subscription products, which tend to have shorter contract lengths. As mentioned in our previous calls, we believe that our average contract duration will begin to shorten in the back half of the year. Looking at the business geographically, North America revenue was $40.2 million, an increase…

Thank you, Jeff. Our second quarter results are a great validation that Rapid7 has the right strategy across our markets. Our approach of providing multiple high-impact analytics solutions based on the Rapid7 Insight platform is resonating with customers and driving consolidation of spending with Rapid7, as lean IT and security teams strive to leverage their scarce resources and improve their effectiveness. Our customers are also responding with higher usage and broader adoption of our platform-based products. With that, I'll turn the call over to the operator for Q&A. Operator?

Thank you. [Operator Instructions] Our first question comes from the line of Saket Kalia with Barclays Capital. Please go ahead.

Excellent. Hey thanks very much for taking my questions here guys.

Thank you.

Hey, Corey or actually maybe Jeff, I will start with you. Can you just talk a little bit more about the billings growth this quarter? Especially with the comparable that you had. I think billings were up about 45% year-on-year in last Q2. Were there any areas that surprised you to the upside this quarter? And if so what were they?

Yes Saket, So there is a combination of couple of things. The contract duration for overall was 23 months. And our IVM business a lot of that pipeline converted from Nexpose perpetual to the IVM. So there were more multi-year deals in that segment. We also had a lot more cross-sellers Corey mentioned in his comments this quarter, which contribute to that as well. And also, what we did see is there is more penetration, more IPs on the initial buy. So it was really a combination of all three factors that contributed to the performance this quarter.

And let me just take a step back, I mean one of the things we saw and as part of the feedback that we got from our sales team is we see a pretty robust demand environment. And we see our strategy of consolidation is working and that come through both in to what we saw in the cross-sell performance. But also and what we saw in the usage for customer which increased. So we feel pretty good about the overall dynamic that we're seeing.

Got it. Maybe for my follow-up for you Corey. You talked about the change in sales leadership in the U.S. I believe Eric just joined early this year. So to the extent that you can, can you share anything on what changed? And just as importantly, looking forward, do you feel like you've adequately accounted for any potential disruption from that change in the guide for the rest of the year?

We always take a deep look at the business. And we feel very good about the fundamentals especially as it relates to our guidance, as we look out over the rest of the year. We have good insight visibility on multi-sales team, on the customer demand environment. So from a guidance perspective, we feel very comfortable with the guidance that we actually gave. As far as the path forward, we think this is a great opportunity for us to actually bring in someone for the U.S. that has SaaS back on the experience that's reflecting the rapid adoption of our SaaS and platform technologies that we're already seeing today. And that we believe is going to be indicative of our business as we go forward.

Got it. That's very helpful, thanks very much guys.

Thank you, appreciate it.

Our next question comes from the line of Michael Turits with Raymond James. Please go ahead with your question.

Hey guys. Thanks for taking my question, congrats on the quarter. Keep going with Corey, you said that the demand environment is robust. Can you maybe comment on if there is any measurable impact from the various ransom ware incidence and or GDPR or actually some people even said that there is a pause because of that. So what's been the impact?

For us, we continue to see a robust demand environment. It's driven by several different factors. One, I think you've had a shift we've talked about this before where people really are figuring out how do I get more done with fewer resources. And the answer to that is they got to make sure that those resources are focused on the right things, which is where analytics come on. And increasingly one of the reasons that we made the investment in Komand is that looking at how do they actually drive the productivity of their teams. We think we're well positioned to solve the underlying problem is that people have too much to do and too few resources to do with. And we continue to see that resonate and we continue to see consolidation around that. As far as the other drivers in the market, you do see some benefits from the awareness this generated by the attacks that go on in the newspapers. And they tend to show up a couple of different ways, one is you have deals that have been in the pipe for a whole, those are catalysts but those to free up. And so we definitely see some effect of that. As far as GDPR we think we're incredibly well positioned for that opportunity. We think there will be huge opportunity overtime the things that were not quite sustaining when we talked about some of the people in the industry is exactly what's the time and enforcement around that. But we think that there is lots of drivers in the market that are marketing enterprise wide analytics more strategic that makes the perspective of automation more attractive to customers. And then generally the markets that we play in much more strategic to our customer base.

And then just a follow-up on the number side. First of all, Jeff since the cash flow did miss all these consensus I know you don't guide there, but it wasn't seem like it was owing to the subscription patch because programming and billings were strong so, what was the issue there and then also maybe why any thoughts on the slight guide below 3Q?

Yes, so, couple of comments on the cash flow. Number one, we're still saying we're going to come in around where we were last year. We have a bit of a touch comparable, because if you go back a year ago, our DSO and AR was around 76 days or so and has been consistently now around 70. So, in the quarter prior you had more cash coming in, which gave us a bit of a tough comp. So, we are also spending more and is still investing in growth. And I think those factors created this touch comp, but we're not - cash flow can vary quarter-over-quarter we're not really guiding to that other than we'll come in where we through at the end of the year, right around last year's number.

And to add [ph] a bit while of course we're focus on the quarterly metrics we look and see what the strengths indicate, our clear focus on the business is achieving both growth which we believe we're on track to achieve and scale and leverage we're focused on profitability over time. And we feel very good about our path on those and our target performance for the year.

But I guess my the last thing I'd ask a little bit about 3Q just not much, but just a slight guide below on both rev and EPS, any thoughts or anything going on?

Mike, just repeat that question again, I'm sorry.

With the slight guide below on both rev and EPS for third quarter. So, any reason we're seeing any kind of a pause there at all obviously the year was great?

Yes, the contract lengths for the Q2 bookings came at a little higher than we have projected. So, that - there was a slight change for the second half. But overall we stayed in line with our annual guidance.

I think, if you look at the net takeaway, I think we - from an annual perspective which is what we've focus on, we're more confident on our annual billings, which is why we raised that. If you look at the midpoint of revenue we feel more confident about that. And we - those are sort of puts and takes. But we feel that we're actually continuing to actually gain scale and leverage in the business and are focused on profitability over time. As I know the things can actually vary especially by falling out quarter-to-quarter but again we continue to manage to ongoing growth and scale the business. And we're achieving it.

Thanks Corey, thanks Jeff.

Thank you.

Our next question comes from the line of Gregg Moskowitz with Cowen & Co. Please go ahead with your question.

Okay. Thank you very much and good afternoon guys. Congrats on a solid quarter. So, we're only one quarter, actually less than one quarter in with InsightVM and InsightAppSec of course but Corey, how would you characterize the uptake relative to our initial expectations as well as what you are seeing in the pipe?

Yes, I mean, well the real comparison on our initial expectation the reception has been much higher than we expected, we see that both in reflection of the existing Nexpose pipe that converted to InsightVM, as well as the build of the InsightVM pipe itself. So, the performance both to-date though we're still early I will give that caveat it's still early is much better than we expected.

Okay, great. And then with InsightOps given and you're primarily selling to a different buyer, when do you think that realistically speaking you will begin to close deals and perhaps start to see a contribution from that product?

Yes, we think it's still early there again InsightOps is the different position as you mentioned it's a different market for us. And it's a different position that we're in. But our expectation that over the tail end of this year and into 2018 we'll start to continue to actually have that as a growth driver for our overall business targeting IT segment.

Okay, perfect. And if I could ask one last one, just with respect to your federal business, can you update us on the status of those federal deals that had slipped out of the Q3 from last year and if they are still out there on the table et cetera? Thank you.

We're seeing - when you look on annual basis, we're seeing increasing confidence that federal will be a stronger business this year than it was last year. And so we think significantly less risk to the overall federal business from an annual prospective this year versus our visibility and confidence last year.

Terrific, thanks very much.

Thank you.

Our next question comes from the line of Matthew Hedberg with RBC Capital Markets. Please proceed with your question.

Hi, guys, thanks for taking my questions. Corey, I'm wondering if you continue to rollout the Insight platform. Can you talk about how you expect ASPs to trend maybe just the general idea of cross-selling this expanded line maybe just illustrate with that?

It's a good question especially since we actually saw higher ASPs in the last quarter due to both cross-selling and customers consolidating their workloads on us. My expectations which really is on the balance sheet if you think about our economic model one we want to add new customers in some way that's harder when you actually have an environment where your sales force can actually get a higher dollar from a customer which is a positive thing from our strategic perspective. And so we're very happy that we're seeing some of that strategic benefit there. That's primarily driven by what we see as customers looking to consolidate by customers now they're trying to figure out how to really charge high their limited resources actually looking at analytics over a larger share of the environment. And so really the balance that we are striking is that customers that are actually having deeper engagements with you overtimes versus customers that actually come in and get started. So I'd say our land versus our expanded ASP and how much of your business in any given quarter is on the land versus the expand. All things being equal, I would like to see ASPs consistent to slightly up, because I think that demonstrates the balance of - you have lower dollar deals from customers coming to the partnership with you. And you see that expand significantly overtime with higher dollar deals. And we constantly strive to achieve that balance of customer growth. The thing that I would say if you look at our market especially around VM, I think we from all the reported numbers I have seen are leading the customer expansion. And I think that's something that we want to continue to do overtime even while we're actually getting larger share of wallet for a customer.

That's great, thanks Corey. And then maybe as you continue - your mix of ratable is impressive and it continues to move higher. As you continue on that trajectory, how do you think about maybe additional incentives whether it be sales force incentive or customer incentives to maybe even drive that behavior even further. And I guess from a license and maintenance perspective is there a point where the license option is no longer available?

It's good question. We're very focused on driving recurring revenue and especially product repairing revenue in the business. And we look at a mix of both how do we actually incentivize customers as you say but also how do we actually set comp and incentivize our sales force. And I would say all things are on the table, as well as at the end of the day customer friendly, which is a huge focus area for us too. But we're continuing to incentivize and drive and focus on recurring revenue growth. If you look at our total recurring revenue growth it was over 30% for the first half of the year we feel very good about that. And it is going to be an ongoing area of focus for us. And it's something that Jeff and myself and the rest of our leadership team look at on a weekly basis.

Great guys. Well done on the quarter.

Thank you very much.

Our next question comes from the line of Jonathan Ho with William Blair. Please proceed.

Good afternoon, I just wanted to start with Komand, can you talk a little bit about the opportunity there as a standalone product. And is this have the potential to be another chip of a spear for your portfolio solution?

It's great question. So I do think it has some potential. And frankly Jonathan I would have expected a [ph] couple of weeks ago as we saw lots of early interest in Komand in new customer basis. I think about in two ways so one, is that we've done a great job of consolidating enterprise wide of data and helping customers understand the things that are most important for their business and how they get benefit from their limited resources. And now we're in natural position with our recommendation engine, with our analytics to actually help customers do more. And if you think about the fundamental value of Komand and its orchestration and automation, we can take our data and we can do data driven automation which allows our customers to actually do more and make their people more productive. And by the way productive teams have productive people is something that resonates really well today. The second aspect though is that if customers have other analytics solutions whether it'd be VM or whether it'd be SIEM in their environment meaning of those customers are also looking and how they can actually drive productive improvements. And Komand is an open platform that integrates with lots of solutions. So it allows us to go into other customer environments where we're not yet with our analytic solutions and provide automation and orchestration against our existing data sets. We like that one two products that allows us to continue to grow and expand the business while achieving our overall vision.

Got it. And then relative to the AVA percent renewal rate, is this pretty much where we should expect to stay or you guys looking at maybe some steps to raise over time?

Yes, I would say that the we've been between how far back you go to 87%, 89% renewal rate for a little bit and I'd say really what we have is the multiple factors that are actually coming in there. You have mature products like Nexpose which of course have much higher renewal rates, you have enterprise customers which have much higher renewal rates. And then you also have new products you have lower end customers as to beat customers that have lower renewal rate. And so really what you see in the average renewal rate is a factor of us executing well across multiple customer environments. And so I think it's a safe assumption that it will be in that range as we grow and expand and continue to execute on multiple frontiers at once.

Great, thank you.

Thank you.

[Operator Instructions] Our next question comes from the line of Melissa Frances [ph] with Morgan Stanley. Please proceed with your question.

Great, thanks for taking my question. Corey in the prepared remarks, you talked about strong mid-market results and you talked a little bit about enterprise seeing it stable, but I'm just hoping you can maybe elaborate on what you're seeing in the enterprise space? Is it performing better than what you expected or do you feel like there is still more work to be done?

Yes, over the first half of the year, we feel very good about it, it performed better, we have a stronger, better team in place. If you think about Q2, that were a very tough comparable for the enterprise team and it was very solid performance. And so it's all are relative thing the mid-market performance was exceptional but we're approaching 40% of Fortune 1000 companies, customers of Rapid7 continue to see growth, we continue to see healthy team. So, we feel very, very good about the enterprise business in total. We also are pragmatic and know that build out is a long-term build out and it's something that we continue to focus on and we continue to see progress also. While we feel good, it's something that we keep our eye on and something that we continue to focus on.

Okay, got it. And then a follow-up on the billings guide for Jeff. So, if I just look at the full year, the second half billings growth is expected to slow down relative to what we've seen in the first half. I am just wondering if that's largely just to the contract duration challenge that you noted before, is there anything else that we should be aware of?

No, it's consistent with what we said, we are expecting contract durations slow down as we sell more of our subscription based products. So, that's really all the risk to that, we still raise the overall billings guidance, but that's it in a nutshell it's just a contract duration.

Okay, that's helpful. Thank you.

Thank you.

Our next question comes from the line of Robert Breza with Northland Capital Markets. Please proceed with your question.

Hi, thanks for taking my questions. Corey, just maybe with the Head of U.S. Sales changing out here, have you seen any additional sales force turnover meaning more than maybe in the bottom 5% which we typically see. Or just curious to make sure that coverage ratio that you normally look forward in terms of your overall sales force and business plan are kind of working together?

It is the question we're excessively focused around both our coverage ratios and business plan. What I would say is that when we look out over both the course of the year and the second half of the year, we're in a great position on our plan, our model, our sales coverage and that includes better performance this year versus last year from the sales force and the number of people in the account and segmentation. When you have any change you always factor in some, but even with that factor in we feel very good about the position that we are in.

Great. Maybe just a quick follow-up for Jeff, as you think about the change in the contract duration, how do you think about let's say billings starting to grow faster than revenue or how should we think about or if you could try to help us with a range of when that kind of crosses over or we start to see the overall calculated billings growing actual than revenue?

I think you have to focus on the annual recurring revenue portion that is growing faster than the billings growth, it's growing over 30%. So, you are moving away from TCV, the total contract value billings growth to more recurring revenue. So, that's really the way you have to look at it. And this year is kind of a mix bag, but when we finish the year as we get a higher concentration of the subscription based products, we'll be able to provide better metrics for that going into next year.

Sounds great. Thank you, guys.

Thank you.

There are no further questions at this time. I'll now turn the call back to the Presenters.

Thank you all for joining us today on our conference call. We look forward to talk to you in the next call.

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines.