According to a ResearchAndMarkets report published recently, the global security and vulnerability management market is expected to grow 10% annually over the next five years. The BFSI segment is expected to continue to hold the largest market share in the sector. Within geographies, the North American market will be the biggest market. Recently, Billion Dollar Unicorn Rapid7 (Nasdaq: RPD) announced its third quarter results that continued to outpace market expectations.

Rapid7’s Financials

Rapid7’s revenues for the quarter came in at $62.4 million, significantly ahead of the market’s expectations of $59.7 million. For the quarter, the company adopted the accounting standard 606 for reporting, hence the comparatives for the previous year are not available. It ended the quarter with a loss of $11.8 million or 25 cents per share. On an adjusted basis, losses came in $0.04 per share compared with the market’s estimates of a loss of $0.13 per share.

By segment, revenues from products came in at $43.8 million, maintenance and support revenues at $10.6 million and professional services at $7.9 million for the quarter.

Among other metrics, Rapid7’s annualized recurring revenue for the quarter grew 46% to $217.4 million with 120% renewal rates. Renewal rates include upsells and cross-sells of additional products and services. It ended the third quarter with 7,400 customers, an increase of 10% over the year. Calculated billings were $61.1 million under ASC 606. The company is continuing to push to a subscription-based model and believes that the calculated billings will no longer be a meaningful metric for operations.

For the current quarter, Rapid7 forecast revenues of $65.8-$67.2 million with a loss of $0.10-$0.08 per share. It expects to end the year with revenues of $241.1-$242.5 million and a net loss of $0.46-$0.43 per share.

Rapid7’s Acquisition

According to a recent Frost & Sullivan report, Rapid7 accounts for 24% of the global vulnerability management market. To continue to build on this market share, Rapid7 recently announced the acquisition of tCell.io, Inc., a leading provider of web application threat defense and monitoring, for $14.4 million.

San Francisco-based tCell was founded in 2014 to deliver web application security through a web-application firewall. Its firewall and protective solutions can detect application behavior, reduce false positives, protect applications from attacks, and provide actionable data to prevent future attacks. Its customers included names like Veeva Health and Zenefits. Prior to the acquisition, tCell was privately held and had raised $9.4 million from investors including Menlo Ventures and SV Angel. Its financial details were not disclosed. Rapid7 plans to integrate tCell’s run-time application self-protection (RASP) and web application monitoring into its Insight platform to help its customers better assess, monitor, and protect against application-based attacks.

Besides acquisitions, Rapid7 continues to work on product enhancement and last month began the global rollout of InsightConnect, a security orchestration and automation solution that helps security teams reduce manual workloads, create efficiency without sacrificing control, and work more efficiently with IT and development teams. The new service will allow seamless connection to existing security, IT, and development tools, simplified vulnerability remediation, accelerated threat detection, containment, and response and automation for IT teams.

The cyber security industry has a significant number of players vying for the market such as FireEye, Cylance, IBM, and Microsoft. Most companies offer similar tools and services as well. Over the past few years, several smaller players have also been acquired by bigger names. For instance, IBM acquired Resilient Systems in 2016 and Microsoft bought Hexadite last year. Market rumors suggest that BlackBerry may be looking at acquiring Cylance this year. To retain its independence, and to ensure growth, Rapid7 will need to continue to build on its product. What are the features that you would like to see Rapid7 add to its offerings? What is it that would make you want to select it over the several other vendors out there?

Rapid7’s stock is trading at $34.72 with a market capitalization of $1.6 billion. It had peaked to a record high of $39.10 in September this year and has been steadily climbing from the 52-week low of $17.64 that it was trading at a year ago. The market volatility in October impacted the stock as well, but it appears to be recovering.