Good afternoon. My name is David, I'll be your conference operator today. At this time, I'd like to Welcome everyone to the Rapid7 Q4 2022 Earnings Call. Today's conference is being recorded. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there'll be a question-and-answer session. If you'd like to ask a question during this time, simply press the star key followed by the number one on your touch tone keypad. If you'd like to withdraw your question, press star one once again. Sunil Shah, Vice President of the Investor Relations, you may begin your conference. Thank you, operator, and good afternoon, everyone. We appreciate you joining us today to discuss Rapid7's 4th quarter and full year 2022 financial and operating results, in addition to our financial outlook for the 1st quarter and full fiscal year 2023. With me on the call today are Corey Thomas, our CEO, and Tim Adams, our CFO. We've distributed our earnings press release over the wire and is now posted on our website at investors.rapid7.com, along with the updated company presentation and financial metrics file. This call is being broadcast live via webcast and following the call, an audio replay will be available at investors.rapid7.com. During this call, we may make statements related to our business that are considered forward-looking under federal securities laws. These statements are made pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995 and include statements related to the company's positioning, strategy, business plans, and financial guidance for the 1st quarter and full year 2023, and the assumptions underlying such goals and guidance. These forward-looking statements are based on our current expectations and beliefs and on information currently available to us. Actual outcomes and results may differ materially from the future results expressed or implied in these statements due to a number of risks and uncertainties, including those contained in our most recent quarterly report on Form 10-Q, filed on November 3, 2022, and the subsequent reports that we file with the SEC. The information provided on this conference call should be considered in light of such risks. Actual results and the timing of certain events may differ materially from the results or timing predicted or implied by such forward-looking statements, and reported results should not be considered as an indication of future performance. Rapid7 does not assume any obligation to update the information presented on this conference call, except to the extent required by applicable law. Our commentary today will be primarily in non-GAAP terms and reconciliations between our historical GAAP and non-GAAP results and guidance can be found in today's earnings press release and on our website at investors.rapid7.com. At times in our prepared remarks or in response to your questions, we may offer incremental metrics to provide greater insight into the dynamics of our business or quarterly results. Please be advised that this additional detail may be one-time in nature, and we may or may not update these metrics in the future. With that, I'd like to turn the call over to our CEO, Corey Thomas. Corey? Thank you, Sunil. Good afternoon, everyone on today's call. Thank you for joining us. Rapid7 finished 2022 with $714 million in ARR, consistent with our expectations, or 19% over the prior year. Revenue exceeded our expectations, and we delivered better than expected operating profit and free cash flow as we continue to drive operational efficiencies in our business. ASP and ARR per customer continued to rise during Q4 as customers are using more of the Insight Platform, reflecting Rapid7's growing value as a platform consolidator. While it's still early days for our new platform consolidation offerings, the early results are positive. Over 10% of new ARR in the 4th quarter was generated either by Threat Complete or Cloud Risk Complete consolidation offering. We are pleased with the early traction we're seeing in key areas of our business as we look to improve execution even as certain economic headwinds escalated during the 4th quarter. Consistent with the range of scenarios embedded in our outlook, we saw greater economic pressure during the 4th quarter in our mid-market segment, which represents roughly half of our total ARR. The net result was that positive traction in key parts of our business was offset by macro dynamics, bringing us to the midpoint of our ARR outlook to end the year. A few comments on the current spending environment. Customers continue to face an evolving and complex threat landscape, and there remains broad-based executive and board-level support for cybersecurity projects. Despite this fundamental demand, the ability to obtain incremental budgets for these projects has gotten more difficult in the current environment. As a result, CSOs are being forced to scrutinize and prioritize their budgets, driving longer deal cycles and more uncertainty around deal timing as contracts take longer to push through procurement. This dynamic is exacerbated by the increasing size of our deal opportunities as we gain traction as a platform consolidator. Despite a challenged budget environment, we're seeing certain tailwinds gain traction. Constrained security budgets are accelerating customers' focus on security vendor consolidation, with greater value being placed on the efficiency and impact of integrated platform technology in a fragmented IT landscape. We're seeing solid engagement with enterprise customers as they look to consolidate vendors and gain better security outcomes from their budget dollars. Our Insight Platform is positioned to benefit from this shift by empowering security teams to more effectively and efficiently manage the expanding scope of their security operations. Rapid7 is resonating with security teams looking to manage and consolidate their vendors. As CSOs and security practitioners evaluate their SecOps stack, Rapid7's platform stands out for a few important reasons. We have built the breadth of critical capabilities on our platform that customers require to run a best-in-class security operations program. These capabilities are deeply integrated to deliver a highly productive automation-centric platform and experience. Our platform is built for security practitioners by security practitioners, further enabling us to offer on-demand security expertise as part of our direct and partner managed offerings to help customers scale their security operations efficiently and effectively. The breadth and value of our Insight Platform is illustrated by $800,000 deal during the 4th quarter with a high-growth software company. This existing customer had a small VM footprint and was going through an RFP to replace their existing detection and response solution with a mandate to gain visibility into their expansive cloud environment. Rapid7 stood out during the technical evaluation as one of a few partners who could address their comprehensive set of use cases. As part of the deal, the customer standardized on Rapid7's SecOps platform by consolidating VM and VNR through our Threat Complete offering, while adding cloud security, automation, and threat intelligence. In addition to offering a compelling platform technology, Rapid7's new Threat Complete and Cloud Risk Complete consolidation offerings are refining how our sales force goes to market. These solutions lean into vendor consolidation as well as the prioritization of security budgets around critical spending areas that include detection and response and cloud security. As a reminder, our Threat Complete enables customers to consolidate our best-of-breed, expert-driven threat detection and response solution along with unlimited coverage of our market-leading VM through a single subscription offering. Cloud Risk Complete is our cloud-centered risk visibility offering, which consolidates unlimited visibility across customers' on-prem, cloud, and external environments at various stages of transition to the cloud. It enables use of cloud and application security with unlimited VM coverage together in one platform subscription. These solutions are part of the realignment of our sales strategy and an important step in advancing our platform selling motion. The strong value proposition of Rapid7's leading platform technology and compelling new go-to-market offerings are evident in a multiyear seven figure deal with a Fortune 500 manufacturing company in the 4th quarter. As an existing vulnerability management customer, we knew their security team was looking for a better way to manage, detect, and respond to threats across their organization. After a robust and competitive process, our Managed Threat Complete offering was chosen to replace their existing SIEM solution and managed service provider based on the quality of both our technology and the support that we can offer around it. Their decision was reinforced by the compelling economic value of consolidating multiple features across our platform and speaks to the early traction we're seeing in the market for our new consolidation offerings. As we look to build upon this early traction, we're cognizant of the need to balance our execution optimism with the current macroeconomic and budgetary headwinds as we frame our forward outlook for 2023. Tim will discuss these dynamics in greater detail. At a high level, I will point to three critical areas of focus that I expect will have the largest impact on our performance this year. The 1st two are under our control and related to the executional challenges we spoke about on the last call. The introduction of our Risk and Threat Complete consolidation offerings, the training and enablement of our sales force as they master a platform selling motion. We see positive early traction in these areas exiting 2022. We believe we remain on track to see improvements support growth in the 2nd half of 2023. The 3rd key area is the broader macroeconomic environment. Looking ahead, we expect a continuation of the customer budget pressure we saw in the 4th quarter and are incrementally more cautious in the near term on the mid-market customer segment, which slowed as we exited 2022. We assume moderate ongoing deterioration in this segment as we enter the year and have accounted for elongated sales cycles and large deal timing uncertainty, particularly as we begin to drive more growth from our platform consolidation offerings. All in all, we're taking a prudent view of our full-year outlook to account for a more uncertain economic backdrop. With that said, we remain confident in the mid to long-term sustainable growth profile of our business, while acknowledging the timeline for re-acceleration will depend on the severity and duration of the macroeconomic pressure we're currently seeing. Lastly, I want to reinforce our commitment to scaling profitably by executing against our margin expansion targets for this year. This is a dedicated focus area for me as we look to drive continued operational efficiency and increased rigor around how we invest for growth. The work we're doing to make our business more efficient will support our commitment to profitability both in the current environment and as the economy recovers. Our strong focus on cost optimization across the business gives us confidence in meeting our 300 basis point operating margin expansion target while doubling free cash flow this year. With that, thank you for joining us on the call today. I will now turn the call over to our CFO, Tim Adams, to share additional detail on our financial results and outlook. Tim? Thank you, Corey. Good afternoon, everyone, and thank you for joining us on the call today. Before I turn to the results, a quick reminder that except for revenue, all financial results we will discuss today are non-GAAP financial measures unless otherwise stated. Additionally, reconciliations between our GAAP and non-GAAP results can be found in our earnings press release. Rapid7 ended the year with ARR of $714 million, growing 19% year-over-year. Growth was led by our detection and response and cloud security solutions, areas where customers continue to prioritize projects despite navigating a more difficult budget environment. As Corey mentioned earlier, we saw growth moderate within our mid-market customer segment in the 4th quarter as these customers navigate more uncertain macroeconomic picture. This drove a moderation in new ARR bookings in this segment, alongside a modest headwind to retention rates in international markets. We continue to see a mix of growth coming from both new and existing customers, with a growing bias toward existing customers in this environment. Our customer base grew 6% year-over-year to end 2022 with over 10,900 customers globally. ARR per customer grew 12% over the prior year to $65,400 at year-end as customers continued to expand and use more of our Insight Platform. Full year revenue of $685 million grew 28% over the prior year and exceeded the high end of our guidance range. Product revenue grew 29% over the prior year to $648 million. Our commitment to profitable growth was evident in our results, which exceeded our outlook on all of our profitability metrics. In 2022, we made a number of critical company-wide improvements on how we manage spending decisions, including more robust ROI analysis and shared financial accountability throughout the organization. These actions and process improvements were priorities when I joined the company a year ago, and we increased this focus as the macroeconomic environment shifted in the 2nd half of the year. All in all, we drove $30 million of operating income in 2022, which represents margin expansion of 300 basis points and is consistent with our stated profitability framework. We generated $41 million of free cash flow. Turning to our Q4 results. Total Q4 revenue of $184 million was up 22% over the prior year and above the high end of our guidance. Product revenue grew 22% year-over-year to $173 million. Our international revenue grew 25% and represented 21% of total revenue for the 4th quarter, while North America revenue grew 21% over the prior year and represented 79% of total revenue. Product gross margin was 77% in the quarter, higher than the prior year as we continued to drive scale efficiencies. Total gross margin for the quarter was 74% near the high end of our range of expectations. We continue to expect product gross margin to trend in the mid-70s and overall gross margin to be in the low 70s. We managed operating expenses closely in the 4th quarter as we executed against our profitability framework. Sales and marketing expense grew 4% year-over-year and represented 38% of revenue, down from 44% in the prior year. R&D expense was slightly lower than the prior year and represented 18% of revenue, down from 22%, while G&A represented 8% of revenue, roughly in line with the prior year. Fourth quarter operating income of $19 million was better than our guidance. Our adjusted EBITDA was $25 million in the quarter, and net income per share was $0.35. Moving to our balance sheet and cash flow. We ended the year with cash equivalents and investments of $301 million compared to $268 million at the end of Q3 2022. We delivered better than expected 4th quarter cash from operations on higher operating profitability, which drove $28 million of free cash flow for the quarter. This brings us to our guidance for this year. As Corey shared, the three largest drivers of our ARR growth performance this year will be related to traction on executional improvement, both in terms of better sales enablement and success around consolidation offerings, as well as how the broader macroeconomic environment impacts customer buying behavior. Our guidance range reflects a modest level of deterioration from current levels, particularly in mid-market. We are not assuming any macroeconomic improvement in the back half of this year, although we do expect to see continued executional improvements by then. Given the dynamic macroeconomic backdrop this year, we don't anticipate updating our ARR outlook until we see stabilizing trends in the spending environment. With that in mind, for the full year of 2023, we expect ending total ARR of $815 million-$825 million, which represents growth of 14%-16%. This range implies a net new ARR decline for the year, which we believe is appropriately cautious given the current macroeconomic trends and the limited visibility into 2023 customer budget dynamics at this stage in the year. As part of the macroeconomic deterioration embedded in our full year ARR outlook. We continue to see customers going through a Q1 budget setting process that is more tentative than in prior years. While we do not typically guide to quarterly ARR targets, in this unique environment, we believe it is appropriate to share directional context for Q1. Specifically, as customers reconcile their spending plans, we anticipate a more muted net new ARR in Q1, driving ARR growth in the range of approximately 16% year-over-year, with the expectation that we will begin to see stabilization in our net new ARR performance in Q2 as customer budgets settle with steady improvement through the 2nd half of the year as our execution improvements take hold. We expect total revenue for the full year to be in the range of $771 million-$778 million, representing growth of 13%-14% with high single-digit growth contribution from professional services revenue. On profitability measures, we anticipate operating income to be in the range of $57 million-$62 million for the full year, which implies operating margin expansion of 300 basis points or greater. We expect net income per share in the range of $0.81-$0.88 based on an estimated 67.4 million diluted weighted average shares outstanding. For full year 2023, we expect to double free cash flow, generating approximately $80 million from expanding operating cash flow as well as lower capital expenditures. This represents at least 400 basis points of free cash flow margin expansion. In terms of free cash flow seasonality, we expect negative cash flow in the 1st quarter as a number of cash expenses are concentrated early in the year, including FY 2022 bonus payments and timing of tax payments and capital expenditures. We would anticipate a notable ramp in free cash flow in the 2nd quarter with continued improvement through the balance of the year. Moving to quarterly guidance. For the 1st quarter of 2023, we expect total revenue in the range of $180 million-$182 million, representing year-over-year growth of 14%-16%. We expect non-GAAP operating income in the 1st quarter in the range of $5 million-$7 million and non-GAAP net income per share of $0.07-$0.10, which is based on 66.4 million diluted weighted average shares outstanding. We are firmly focused on driving growth as the vendor of choice for security operations and enterprise-wide risk visibility and analytics, supporting both on-prem and cloud environments. As we navigate uncertainty around the current spending environment, our strategy is supported by our commitment to providing a strong value proposition for customers as a platform consolidator, refining our go-to-market motion and improving sales productivity, and driving durable growth and margin expansion consistent with our profitability framework. Thank you for taking the time to join us on the call today. With that, we will open the call for questions. Operator? Thank you. At this time, I'd like to remind everyone in order to ask a question, press star then the number one on your telephone keypad. We ask that you please limit yourself to one question to allow everyone an opportunity. If you have a follow-up question, you may requeue. We'll pause for just a moment to compile the Q&A roster. We'll take our 1st question from Saket Kalia with Barclays. Your line's open. Okay, great. Hey, guys. Thanks for taking my question here. Corey, maybe just to get a housekeeping question out of the way, just given it's topical, and I expect it's a tough question to answer, but wanna make sure it's asked in an open forum. Is there any comment that you'd like to make just in the reports that Rapid7 has hired advisors to explore sort of options down the road? No, thanks, Saket. Well, 1st and foremost, we have a pretty massive opportunity in front of us, and we're executing well against it. You know, in that context, it's not a shocker that people will talk about us because we have both a good opportunity and we're well-positioned to actually capture that opportunity in the broader market. That said, we just have a policy of not commenting on any rumors or speculation, and we're gonna continue that. Absolutely. If you'll allow me a business question here, Corey. Corey, for you, I'd love if you could talk about the couple bundles that you mentioned on the call, Threat Complete and Threat Risk Complete. Particularly, how the pricing there for the vulnerability management part works, and how that might be a differentiator. Yeah, look, what we found is that, especially in this environment, customers are really looking to how to actually do two things. One, how to improve their security and secure not just their past environment, but their increasingly strategic cloud assets. That's two core components. One, they have to manage the risk profile and visibility of that environment, and they actually have to be able to monitor and stop and detect attacks in that environment. Our strategy is pretty straightforward, is we are taking a cloud 1st, because that's where strategic assets are as we go forward, and a holistic risk view and a holistic threat view in the environment. In that context, vulnerability management is strategic. We have people working on it. We have teams who are dedicated to it. It is a feature and component of our platform. We are a SecOps cloud-1st company that actually offers vulnerability management as a part of our platform that allows people to have the visibility that they need to manage their overall security. As part of that overall strategy, it is just a part of our offering is included in the price point. By the way, as you saw from the early demo momentum, the price points are larger, the deals are larger, and we're succeeding in our consolidation strategy. Next, we'll go to Rob Owens with Piper Sandler. Your line is now open. Stock is an old pro. They're sneaking two questions in, I'll see what I can do to ask one, but really ask two. Wanted to touch on churn in the current environment and I guess what you guys are seeing from both the customer perspective, and you talked about some weakness in the mid-market, but I guess also within your own employee base, if you will, kind of where you're at, what your thought process is moving forward in terms of hiring. Thanks. Yeah, I'll take that. First on the employees, we're actually seeing very good. You know, after a couple of years of a very tight labor market, the labor market's still tight, but we're seeing our employees double down and focus on our customers, and we're seeing very healthy employee retention rates. As it relates to broader, I think customer sort of like retention overall, Tim Adams commented on his script. What I would say is that if you look North America, we see very consistent retention of customers, and the performance is actually quite healthy and quite good. We are seeing some incremental pressure in Europe, and we're focused on that. That's primarily tied to budget pressures, and we think we're addressing that by being proactive and going out to those international, specifically mid-market customers with consolidation offers that allow them to save money. Again, overall North America is fairly healthy. International mid-market, we're seeing a little bit of incremental pressure there. Next, we'll go to Hamza Fodderwala with Morgan Stanley. Your line's open. Thanks for taking my question. On the sort of the more clear sales motion that you guys have around the two product categories, I'm curious if you've seen any improvements around the ability to enable your sales force to sell that broader platform. Are you assuming any improvement in sales productivity throughout the year in your guidance? Thank you. No, it's a great question. One, we are seeing improvements in our overall sales force's efforts there. That's part of what actually gave us the confidence. We're just rolling it out more broadly. You know, the way to think about it is that when you introduce something new, which we introduced at the beginning of the year, you actually roll it out sort of like in waves, as you would expect. As we start rolling it out, as we actually kicked off, we actually saw good momentum on both the pipe build side and also just the sales rep receptivity. You know, part of it you actually think you're used to doing is kind of what's the feedback you're getting from your sales team. Our sales team have incredible confidence in the consolidation offers that we're actually rolling out. Excuse me. As far as our assumptions actually go, consistent with the feedback that we actually gave you last time, we expected sort of productivity to improve over the course of the year, and we're seeing us tracking well towards that progress. The productivity goals are not sort of like aspirational. It's actually steady productivity increases, in line with what we think about as a more pressured economic environment. Yeah, Hamza, I would just share that. Look, when we had many discussions about the guidance for this year, and there certainly is this macroeconomic environment that is challenging for everyone, and you clearly see that in the mid-market. We're not assuming that that really improves for us. Corey talked a lot in the prepared comments and just now about the consolidation packages that we are bringing to market that we're very optimistic about. We think it solves a lot of challenges for customers who are budget constrained, who have too many vendors, and our sales team is really getting behind this with a lot of enthusiasm. We think that coupled is gonna help us in the 2nd half of the year. Okay. Next, we'll go to Fatima Boolani with Citi. Your line is now open. Hi, good afternoon. Thank you for taking the questions. Corey, this one's for you. Just going back to the pricing and packaging reconstitution that you've now formally undertaken and now completed, in the form of, you know, making more digestible and more intuitive bundles that will resonate in this environment. Can you talk to us about what type of uplift you're seeing relative to maybe predecessor configurations of the solutions that you're now newly bundling? I'd love to get a better sense of, you know, that if you're seeing better yield, whether it's in terms of price or being able to cover a larger environment, which means it would give you a higher TCV or ACV. Just as a sneaky follow-up for Tim, just on the guidance, where should we see most of the leverage from a line item basis coming next year? Just kind of giving us your on the operating, profitability outlook. That's it for me. Thank you. Yeah. I'll start off, and then Tim will pick up on the guidance question. As far as the pricing strategy, you know, we are seeing sort of those larger deal sizes. I think I talked about sort of like for the 10%, which was actually exceeded our expectations of the momentum that we saw in the over 10% to be clear, that we saw in the quarter of our consolidation offerings. The size of the deals is actually much larger. I think I represented my script that was the 4x. That said, I wouldn't apply that as an average because again, we did see a little bit more traction in those areas in our Enterprise space in general. What I would say is we're seeing uplifts on ASPs, we're seeing more coverage in general, and we're seeing more share of the wallet. I think that the specific sort of like multiple of the uplift will actually come in a little bit later as we continue to grow our adoption, but we're trending quite well. Yeah, the team on the leverage, we're really looking at everything. You know, when you look across the PNL, it's everything that we're investing our dollars in. Our focus has been, and this started early in 2022, and it really continues, and the team is really engaged to, you know, assist on this journey, that we just wanna be more efficient at everything we do. We look at cost to sale, we look at cost to serve, we look at gross margins, all the E to R ratios. It is across the board that we're just trying to really optimize our cost structure and drive more efficiencies. I think you'll see pretty broad strokes of leverage. Thank you. Okay. Next, we'll go to Joel Fishbein with Truist Securities. Your line's open. Thanks for taking the question, and I'm going to ask a follow-up to continue this question about the goals around free cash flow and margin expansion, which are pretty impressive. Thanks for that. Just in terms of how you're going to continue to hire or what is the hiring plans in that environment or what does that contemplate so as you come out and get more traction from the sales force, then you can reaccelerate the growth when the macro improves, just to understand how that's going to flow. Thanks, Tim. Yeah. Joel, one of the opportunities we have, as you know, we have locations across the globe, and we do have some lower cost locations, and we're seeing that particularly in the R&D area where we saw a little leverage recently, where you can still attract the right type of talent that you want, and you can find some of these lower cost locations. That's gonna be one piece of how we try to drive more of the leverage. The plans regarding hiring, if you could just in terms of sales capacity. Yeah. We are hiring this year. You know, we don't disclose the exact numbers, but we are still focused on driving, you know, growth overall with the company, and we are gonna add to the head count overall this year. It'll be more modest, but we are still hiring. Just to follow up on his point. It's a more modest headcount, but because we actually have a pretty strong employee base coming into the year, with a good set up in terms of their ability to contribute, we feel pretty strongly that with a target hiring model, we can actually achieve our performance targets. Next, we'll go to Adam Tindle with Raymond James. Your line's now open. Okay. Thank you. Tim, I wanna continue the conversation on operational improvement and just ask if there's any way we could think about a ceiling on that. I ask it in light of, you got a competitor in the core VM space that has profitability margin on EBITDA line, you know, 30%, 40%. I know they do a lot more outsourcing to 3rd to lower cost countries, but it sounds like you're starting to do that as well. Maybe you could just tackle the, how you think about the ceiling longer term, any structural differences between you and that main competitor, how we can think about this runway to profitability longer term. Thanks. Yeah. Adam, we feel very confident, as you can see in the guidance for this year and the improvements we made in 2022, that we can continue to drive attractive profitability. You have to look at everything across the board. It is the type of labor, the sourcing of labor. We use AWS as part of the platform. We've renegotiated that contract. We have a team that really focuses on how we optimize the efficiency of utilizing that platform. It really is very broad across the company. We have an opportunity to continue to focus and drive gross margins. We've made some improvement there, and we will continue on that effort. It really does go, I think it's very broad across the company where our focus is. Yeah. I think I would just reiterate is that, one, we had a planning target last year on really driving efficiencies. you know, the customer feedback that we've gotten is that we've broadened the platform in a way that we think is relevant to customers over the next five years. We are sitting in, I think, a pretty good situation where we're into, and I'll just say the early days of our efficiency development, but we actually have gains to profitability. We actually have a platform that actually has strategic relevance for a modern cloud world that's actually focused on all the aspects of Security Operations. That allows us to actually, again, have our businesses mid-market. That's a little bit more pressure this year. What it allows us to do is to have an increasing profit profile, even as we have sort of like mid and long term global growth, outside of the economic sort of pressure, in the global economy right now. Next, we'll go to Gregg Moskowitz with Mizuho. Your line is now open. Thank you for taking the question. Good afternoon, guys. Corey, it may just be too early and obviously, sales cycles are longer for pretty much everyone these days, but have you seen any progress with regard to the frequency with which you're getting in front of C-level executives? Then the quick one for Tim, you know, last quarter, I think the comment was that the approach behind the initial preliminary guidance of slightly below 20% ARR growth for 2023 was to de-risk the macro. You know, today the ARR guidance is obviously quite a bit lower than that. I'm wondering if you could speak to the latest assumptions and specifically if it's solely due to a tougher than expected mid-market business in terms of the delta, or if you're assuming a weaker enterprise business as well. Thank you. Yeah. Mine will be quick, is yes, we actually do see, again, as we look at more of the cloud-based offerings, we see sort of both larger deals that are from the CISOs more, especially in this budgetary environment. Part of that is just that CISOs are having to do more work with their procurement and finance partners. Yes, we actually are selling more to CISOs because now we're a strategic partner for them. Yeah. Gregg, I would just reiterate some of the comments that both Corey and I made earlier. We are seeing a challenging environment out there, certainly in the mid-market, we do not expect that that is going to improve through the course of 2023. In fact, we think it probably gets modestly a little bit worse than where we are today. That is really the driver of, you know, what we said three months ago to where we are right now. Again, I think we're taking an appropriately cautious view to the year when we give guidance, but we are seeing economic challenges that are out there in the customer base in that mid-market segment. Next, we'll go to Jonathan Ho with William Blair. Your line is now open. Hi, good afternoon. Just one quick one from me. You know, I guess relative to your 2023 ARR guide, you know, how should we maybe think about the breakdown between new customer acquisition and ARR per customer? You know, are the ratios gonna remain, you know, somewhat consistent with prior periods or any, you know, sort of shift here in terms of the makeup of that incremental ARR? Thank you. Yeah. Thanks, Jonathan. look, we have an increased focus with our consolidation offerings on our install base, across the company, one, as you can actually imagine, but also in our sales team. We would expect, and we do expect internally, to see a much heavier weighting towards ARR per customer, versus new customer adds. We have a pretty good install base that's actually looking to actually consolidate and have great relationships with, and is looking to reorient towards the future that's actually more cloud-based. That's our focus for this year. It's not necessarily a permanent focus. We'll add customers, but right now we're heavily focused on ARR per customer. Next, we'll go to Brian Essex with J.P. Morgan. Your line is now open. Yeah, thank you. Good afternoon. Thank you for taking the question. I guess, you know, more of a topic, but my one question kind of around, Corey, what you're seeing from the, you know, spending side within your customers and specifically regard to, you know, how you see them kind of pivoting spend. I think I saw one survey that indicated like 39% of security budgets are staff and compensation. I guess on that side, are, you know, vendor consolidation obviously makes a lot of sense. Anything on the automation front? Are you starting to see any kind of, draw in from budgets outside the CIO/CISO level kind of maybe a little color of what you're seeing and could there be levers with the way your portfolio is positioned to kind of gain some incremental upside when those or if those budgets pivot? Yeah. One, yes, I do think that there's upside. Again, we have to actually just respond and make our assumptions about what we see today. You know, similar to Mark, I think we're a bit more thoughtful about how we approach it. Let me just give a breakdown of sort of like how we see the overall spend environment. You know, the 1st thing is, I think we're in a short time period where people are trying to figure out what the right budgets are. That was every year, and I think going forward, those are the two, one. One of the dominant themes that we hear from lots of our customers is security, especially in the mid-size market, even a little bit in the enterprise, but especially in the mid-market, is that security is a big priority, but they're trying to figure out the overall health of their business, what their budgets are, and what's the shape of their budgets. You see not a budget freeze, but I would just say a budget rationalization where people are trying to determine what the budgets are. We expect security projects to be greenlit coming out of that, which is why we're not pessimistic. We are cautious and actually thoughtful about it. That's just one overall dynamic that we just see lots of security teams and their finance counterparts actually just going through a budget planning process that's a little bit more intense because they're trying to figure out their own assumptions for their own business. The 2nd thing that I would say that we actually see is that every organization is trying to figure out how to get a handle on spending. It really comes down to sort of like two big things. As you said, security is one of the bigger wage inflationary areas, so they're actually trying to figure out how to actually think about managing the fact that they got a lot of overhead in an expensive talent market, and so how to manage that. There's lots of actually security tools that require a lot of manual intervention. We actually tackle both of those, which is why we believe that we actually have lots of leverage over the mid and the long term is from a core platform perspective. We built a broad platform, but we have the core capabilities that mostly we have a heavy automation focus that's really focused on driving the productivity of our customers and security operations across vulnerability management, across cloud security, and across detection and response. The 2nd thing is that we actually focus heavily on expertise, both directly and through our partners, to actually help customers manage their security costs more meaningfully. What I mean by that is customers can actually afford the resources they need, and us and our partner ecosystem can actually provide core security for customers, resources to them cost effectively. Those two things together, the automation focus, the consolidation-enabled budgeting pricing, plus the expertise by us and our ecosystem are things that we actually think give us both durability and give us upside. Okay. Next, we'll go to Mike Walkley with Canaccord Genuity. Your line is now open. Hey, guys. Good afternoon. This is Daniel on for Mike. Thanks for taking my question. You spoke about some of the weakness in the mid-market. Just curious if you could just provide some color on how the traction has been within your larger enterprise accounts. Are the macro headwinds still impacting this segment of your business as well, or has it been a bit more steady? Yeah. The larger enterprise has been a bit more steady. We have better visibility. We have healthy pipeline there. We are seeing some deal delays, but they're episodic. I'll say the impact has been larger in the mid-size enterprise. Lots of the consolidation stuff that we actually talked about and the momentum is happening in the larger accounts. I think they'll apply to the mid-size enterprise. We're very optimistic about the mid-size enterprise. It's just that the economy's focus is going to impact those organizations differently. We anticipate long term that there'll be a core strategic 3rd-party business. Right now you see actually more budgeting and more spend in the larger enterprise space. We think our teams are executing well against that. Next, we'll go to Gray Powell with BTIG. Your line is now open. Great. Thanks for taking the question. Yeah, I may have missed it in the prepared remarks, but did you guys call out growth in the security transformation line? Is that something you're still gonna disclose? Just how should we think about the split there this year between transformation and that VM and other category that you used to give? Yeah. As we actually execute our platform consolidation offers, it just doesn't make sense to break it out, mostly because it was just an allocation of some like back-end allocation. Because again, VM is part of the core offerings as well as Risk Complete and Threat Complete going forward. As that has gotten more momentum than we expected out of the gate, we're not gonna be breaking that out going forward. Again, VM will be a core capability of all of our solutions. But it's actually sold on a less standalone basis. Yeah, Corey, the metric I think that, you know, we pay attention to, and I think investors will as well, is the ARR per customer, because these packages are driving more wallet share from customers than you'll see in the ARR per customer. We just won't have that exact breakout. Next, we'll go to Rudy Kessinger with D.A. Davidson. Your line is now open. Great. Thanks for taking my questions, guys. You know, some of your competitors have called out pricing pressure in the space recently. I guess I'm just curious, you know, in those product packages, good to see 10% of new ARR come from those two packages. Just what's the level of discount you're throwing in there versus list price for the products individually? Is there anything more tangible, you know, you could share around the improvement you've seen thus far in sales force productivity? You know, I don't know if you track the percentage of reps selling the full portfolio or those packages in the quarter, but anything more tangible there would be great too. Yeah, look, we'll talk about some of that later. Right now we're just rolling it out, so we have to get momentum. It's a week by week increase. I'd say our goal is sort of by, you know, the end of Q1, all of our reps are actually selling the infrastructure, and I think we're tracking quite well towards that. As far as the rep onboarding, part of why we're excited for the momentum is that, one, we actually had higher sales attainment on the packages and the platform consolidation offers than we expected and two, both the rep feedback and ramp is actually ahead of schedule. That's what we can actually say there. The other part of the question, what was the other part of the question on pricing? On pricing. Look, it's too premature. Look, it's very compelling in general, but it's too premature to do it because again, it was only 10% of the sales in the quarter. What I would say from a core pricing strategy is that, you know, we're at, you know, over $60, 000 ARR per customer, but our total potential is sort of like probably between eight roughly. The way that I look at it is that, look, what's the velocity that we actually get to $120, 000 ARR per customer and then $180, 000 ARR per customer. Yeah, I'll share the upside with the customer. If it turns out that I actually change our total ARR potential on average from $520, 000- $350, 000, but we accelerate our velocity to getting to $180, 000 per customer, I would actually make that trade all day long in consolidation. We have lots of room to play there. Again, what we're focused on is share of wallet and customer economics, which drives total profitability. It's how do we actually have more possible customers that are building their security operations on top of us. We think we have momentum and strategies to do that, and that's what we're focused on. Next, we'll go to Robert Galvin with Stifel. Your line is now open. Hi, this is Rob Galvin on for Brad Reback. Thanks for taking the question. A couple of quarters ago, you had mentioned that you were oversubscribed for the backlog of partners to get onboarded on Rapid7 for MDR. I want to know how Rapid7 has worked through the backlog of partners, if you had seen an inflection in MDR growth or if there's been some delays in customer deployments. Thank you. That's a good question. I would say we're still working through that. I mean, lots of it has to do with, as you can imagine, we've built a very good brand around our detection and response and our Security Operations offerings. The partners want to use our brand, and so we're continuing to have the infrastructure in place to make sure that those partners are certified and available, and they have the right quality level. We're continuing that effort. It'll be a steadily expanding number of partners in our ecosystem. We think that that is a midterm, sort of like tailwind to the overall business. Next, we'll go to Matt Hedberg with RBC Capital Markets. Your line's open. Great. Thanks for taking my questions, guys. I'll just bundle two together here. First of all, Corey, can you talk, you mentioned some of the mid-market weakness, but, you know, how did the quarter progress in terms of like linearity? Did things sort of deteriorate? Did you see maybe a little bit of budget flush and maybe how has that trended into 1Q? Maybe 2ndarily, any thoughts on your CRO position? Great question. As the quarter progressed, things did actually, one, not a lot of budget flush. I think when I talk on our call we didn't anticipate lots of it. I'll say as quarters progress, and especially in the mid-market, people heard more economic news. Part of it you just have the economic buzz, and some economic pessimism. They were also concerned about their own business. We saw things start to slow down as we exit the quarter, which is why. Look, that was in our maintenance outcomes. I would say that basically that got progressively more challenging over the course of the quarter, that was factored into our assumptions about 2023, that that continues to frankly get a little bit more deteriorating from that perspective. Now, I do think that customers are gonna come to some conclusions about what their overall budget profile is, and we think a little bit of that will lighten, but we are expecting a more pressured environment, especially in the mid-market entering this year based on the exit rates as we have asked you. Then just on the CRO search. CRO, also, look, and we're seeing great candidates, with a good platform for folks, and I'm very optimistic about it. We'll update you when it's time to update you. Our final question comes from Joshua Tilton with Wolfe Research. Your line's now open. Hey, guys. Thanks for sneaking me in here. Just a simple one for me. It sounds like the guidance assumes that things get worse for your mid-market customers. Is there any reason why you guys wouldn't assume that it gets worse for the enterprise customers as well? It's a great point. Yes, we actually are assuming that the macroeconomic environment is slightly worse. It's just that the degrees of impact are just different between them. It's not that we're actually saying that like enterprise is completely unaffected. It's just that it's not impacting the same degree as the mid-size enterprise. I just wanna be clear about that. We did make some assumptions there. When we did our outlook, we factored in, frankly, higher coverage ratios across the board. That's just one of our outlooks. It's just like, A, the pipeline looks very healthy, we have to actually look at higher coverage ratios because you have things like deal pushes, delays and other things. That's, you know, we did factor that in. That does conclude today's question and answer session. I'll now turn the call back over to Corey Thomas, CEO, for any additional or closing remarks. Well, I just wanna thank everyone for joining us this evening, and we appreciate it. Have a good night. This concludes today's conference call. You may now disconnect.