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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-37496
 
RAPID7, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 35-2423994
(State or other jurisdiction of
incorporation or organization)
 (I.R.S. Employer
Identification No.)
120 Causeway Street 
Boston,MA02114
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (617247-1717
Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:
Title of each classTrading symbol(s)Name of each exchange on which registered
Common Stock, $0.01 par value per shareRPDThe Nasdaq Global Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes      No  ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large Accelerated Filer
Accelerated Filer
Non-accelerated Filer
Small Reporting Company
Emerging Growth Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No  
As of October 31, 2022, there were 59,235,920 shares of the registrant’s common stock, $0.01 par value per share, outstanding.



Table of Contents

i

PART I—FINANCIAL INFORMATION
Item 1.Financial Statements.

RAPID7, INC.
Consolidated Balance Sheets (Unaudited)
(in thousands, except share and per share data) 
September 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$168,353 $164,582 
Short-term investments83,231 58,850 
Accounts receivable, net of allowance for credit losses of $2,241 and $1,978 at September 30, 2022 and December 31, 2021, respectively
121,017 146,094 
Deferred contract acquisition and fulfillment costs, current portion33,307 29,974 
Prepaid expenses and other current assets33,402 33,236 
Total current assets439,310 432,736 
Long-term investments16,707 34,068 
Property and equipment, net55,002 50,225 
Operating lease right-of-use assets85,250 83,751 
Deferred contract acquisition and fulfillment costs, non-current portion61,857 57,191 
Goodwill515,631 515,258 
Intangible assets, net103,660 111,591 
Other assets18,132 11,191 
Total assets$1,295,549 $1,296,011 
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable$13,864 $3,521 
Accrued expenses64,427 82,620 
Operating lease liabilities, current portion11,858 9,630 
Deferred revenue, current portion391,761 372,067 
Other current liabilities5,254 842 
Total current liabilities487,164 468,680 
Convertible senior notes, non-current portion, net814,947 812,063 
Operating lease liabilities, non-current portion90,427 90,865 
Deferred revenue, non-current portion31,659 33,056 
Other long-term liabilities13,636 17,342 
Total liabilities1,437,833 1,422,006 
Stockholders’ equity (deficit):
Preferred stock, $0.01 par value per share; 10,000,000 shares authorized at September 30, 2022 and December 31, 2021; 0 shares issued at September 30, 2022 and December 31, 2021
  
Common stock, $0.01 par value per share; 100,000,000 shares authorized at September 30, 2022 and December 31, 2021; 59,690,872 and 58,181,816 shares issued at September 30, 2022 and December 31, 2021, respectively; 59,204,064 and 57,695,008 shares outstanding at September 30, 2022 and December 31, 2021, respectively
592 577 
Treasury stock, at cost, 486,808 shares at September 30, 2022 and December 31, 2021
(4,764)(4,764)
Additional paid-in-capital717,946 615,032 
Accumulated other comprehensive loss(6,698)(812)
Accumulated deficit(849,360)(736,028)
Total stockholders’ equity (deficit)(142,284)(125,995)
Total liabilities and stockholders’ equity (deficit)$1,295,549 $1,296,011 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
1

RAPID7, INC.
Consolidated Statements of Operations (Unaudited)
(in thousands, except share and per share data)
 
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Revenue:
Products$166,496 $131,149 $474,643 $359,581 
Professional services9,269 8,745 25,961 24,185 
Total revenue175,765 139,894 500,604 383,766 
Cost of revenue:
Products45,957 36,497 135,296 99,315 
Professional services7,893 6,973 24,118 19,753 
Total cost of revenue53,850 43,470 159,414 119,068 
Total gross profit121,915 96,424 341,190 264,698 
Operating expenses:
Research and development48,622 43,880 147,341 112,265 
Sales and marketing75,968 63,041 229,148 174,264 
General and administrative20,561 23,818 62,967 57,527 
Total operating expenses145,151 130,739 439,456 344,056 
Loss from operations(23,236)(34,315)(98,266)(79,358)
Other income (expense), net:
Interest income498 84 853 302 
Interest expense(2,749)(2,962)(8,200)(11,415)
Other income (expense), net(2,205)(299)(5,211)(1,217)
Loss before income taxes(27,692)(37,492)(110,824)(91,688)
Provision for income taxes1,035 208 2,508 10,021 
Net loss$(28,727)$(37,700)$(113,332)$(101,709)
Net loss per share, basic and diluted$(0.49)$(0.67)$(1.95)$(1.86)
Weighted-average common shares outstanding, basic and diluted58,730,651 55,976,671 58,229,872 54,743,538 
The accompanying notes are an integral part of these unaudited consolidated financial statements.

2

RAPID7, INC.
Consolidated Statements of Comprehensive Loss (Unaudited)
(in thousands)
 Three Months Ended September 30,Nine Months Ended September 30,
 2022202120222021
Net loss$(28,727)$(37,700)$(113,332)$(101,709)
Other comprehensive income (loss):
Change in fair value of cash flow hedges(3,355)(774)(7,280)(975)
Adjustments for net losses (gains) realized on cash flow hedges and included in net loss1,361 (8)2,438 (386)
Total change in unrealized losses on cash flow hedges(1,994)(782)(4,842)(1,361)
Change in unrealized losses on investments(166)(10)(1,044)(22)
Total other comprehensive loss(2,160)(792)(5,886)(1,383)
Comprehensive loss$(30,887)$(38,492)$(119,218)$(103,092)

The accompanying notes are an integral part of these unaudited consolidated financial statements.


3

RAPID7, INC.
Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)
(in thousands)
 Common stockTreasury stockAdditional
paid-in-capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
stockholders’
(deficit)
 SharesAmountSharesAmount
Balance, June 30, 202258,636 $586 487 $(4,764)$681,194 $(4,538)$(820,633)$(148,155)
Stock-based compensation expense— — — — 31,746 — — 31,746 
Issuance of common stock under employee stock purchase plan137 1 — — 6,232 — — 6,233 
Vesting of restricted stock units381 4 — — (4)— —  
Shares withheld for employee taxes(23)— — — (1,637)— — (1,637)
Issuance of common stock upon exercise of stock options73 1 — — 415 — — 416 
Other comprehensive loss— — — — — (2,160)— (2,160)
Net loss— — — — — — (28,727)(28,727)
Balance, September 30, 202259,204 $592 487 $(4,764)$717,946 $(6,698)$(849,360)$(142,284)

 Common stockTreasury stockAdditional
paid-in-capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
stockholders’
(deficit)
 SharesAmountSharesAmount
Balance, June 30, 202155,748 $557 487 $(4,764)$562,652 $(137)$(653,703)$(95,395)
Stock-based compensation expense— — — — 27,929 — — 27,929 
Issuance of common stock under employee stock purchase plan74 1 — — 4,808 — — 4,809 
Vesting of restricted stock units377 4 — — (4)— —  
Shares withheld for employee taxes(42)(1)— — (4,700)— — (4,701)
Issuance of common stock upon exercise of stock options77 1 — — 846 — — 847 
Issuance of common stock related to acquisition207 2 — — (2)— —  
Other comprehensive loss— — — — — (792)— (792)
Net loss— — — — — — (37,700)(37,700)
Balance, September 30, 202156,441 $564 487 $(4,764)$591,529 $(929)$(691,403)$(105,003)









4

RAPID7, INC.
Consolidated Statements of Changes in Stockholders' Equity (Deficit) (Unaudited)
(in thousands)
 Common stockTreasury stockAdditional
paid-in-capital
Accumulated
other
comprehensive
loss
Accumulated
deficit
Total
stockholders’
(deficit)
 SharesAmountSharesAmount
Balance, December 31, 202157,695 $577 487 $(4,764)$615,032 $(812)$(736,028)$(125,995)
Stock-based compensation expense— — — — 96,111 — — 96,111 
Issuance of common stock under employee stock purchase plan218 2 — — 11,941 — — 11,943 
Vesting of restricted stock units1,147 11 — — (11)— —  
Shares withheld for employee taxes(82)— — — (6,743)— — (6,743)
Issuance of common stock upon exercise of stock options193 2 — — 1,619 — — 1,621 
Issuance of common stock in connection with conversion of convertible senior notes— — — — (3)— — (3)
Issuance of common stock related to acquisition33 — — — — — —  
Other comprehensive loss— — — — — (5,886)— (5,886)
Net loss— — — — — — (113,332)(113,332)
Balance, September 30, 202259,204 $592 487 $(4,764)$717,946 $(6,698)$(849,360)$(142,284)

 Common stockTreasury stockAdditional
paid-in-capital
Accumulated
other
comprehensive
gain (loss)
Accumulated
deficit
Total
stockholders’
equity (deficit)
 SharesAmountSharesAmount
Balance, December 31, 202052,225 $522 487 $(4,764)$692,603 $454 $(617,279)$71,536 
Stock-based compensation expense— — — — 72,700 — — 72,700 
Issuance of common stock under employee stock purchase plan222 2 — — 9,274 — — 9,276 
Vesting of restricted stock units1,251 13 — — (13)— —  
Shares withheld for employee taxes(122)(2)— — (11,370)— — (11,372)
Issuance of common stock upon exercise of stock options356 4 — — 3,364 — — 3,368 
Purchase of capped calls related to convertible senior notes— — — — (76,020)— — (76,020)
Issuance of common stock in connection with repurchase and conversion of convertible senior notes2,200 22 — — (2,720)— — (2,698)
Issuance of common stock in connection with inducement of convertible senior notes35 — — — 2,740 — — 2,740 
Issuance of common stock related to acquisition274 3 — — (3)— —  
Cumulative-effect adjustment for the adoption of ASU 2020-06— — — — (99,026)— 27,585 (71,441)
Other comprehensive loss— — — — — (1,383)— (1,383)
Net loss— — — — — — (101,709)(101,709)
Balance, September 30, 202156,441 $564 487 $(4,764)$591,529 $(929)$(691,403)$(105,003)

The accompanying notes are an integral part of these unaudited consolidated financial statements.
5

RAPID7, INC.
Consolidated Statements of Cash Flows (Unaudited)
(in thousands)
 Nine Months Ended September 30,
 20222021
Cash flows from operating activities:
Net loss$(113,332)$(101,709)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization30,587 23,513 
Amortization of debt issuance costs3,036 2,886 
Stock-based compensation expense92,304 73,872 
Deferred income taxes 3,924 
Induced conversion expense 2,740 
Other3,828 1,655 
Changes in operating assets and liabilities:
Accounts receivable21,425 23,522 
Deferred contract acquisition and fulfillment costs(7,999)(9,772)
Prepaid expenses and other assets(5,303)3,091 
Accounts payable8,504 2,079 
Accrued expenses(12,241)(4,554)
Deferred revenue18,297 24,389 
Other liabilities(1,144)3,593 
Net cash provided by operating activities37,962 49,229 
Cash flows from investing activities:
Business acquisition, net of cash acquired (358,420)
Purchases of property and equipment(13,087)(4,835)
Capitalization of internal-use software costs(12,648)(7,162)
Purchases of investments(94,486)(59,308)
Sales/maturities of investments86,379 124,838 
Other investments(1,000)(3,000)
Net cash used in investing activities(34,842)(307,887)
Cash flows from financing activities:
Proceeds from issuance of convertible senior notes, net of issuance costs paid of $14,976 for the nine months ended September 30, 2021
 585,024 
Purchase of capped calls related to convertible senior notes (76,020)
Payments of debt issuance costs(71) 
Payments for repurchase and conversion of convertible senior notes(12)(184,649)
Payments related to business acquisitions(300)(12,118)
Taxes paid related to net share settlement of equity awards(6,743)(11,372)
Proceeds from employee stock purchase plan11,943 9,276 
Proceeds from stock option exercises1,621 3,279 
Net cash provided by financing activities6,438 313,420 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(5,707)(849)
Net increase in cash, cash equivalents and restricted cash3,851 53,913 
Cash, cash equivalents and restricted cash, beginning of period165,017 173,617 
Cash, cash equivalents and restricted cash, end of period$168,868 $227,530 
Supplemental cash flow information:
Cash paid for interest on convertible senior notes$4,087 $4,758 
Cash paid for income taxes, net of refunds$1,503 $824 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents$168,353 $227,104 
Restricted cash included in prepaid expenses and other assets515 $426 
Total cash, cash equivalents and restricted cash$168,868 $227,530 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
6

RAPID7, INC.
Notes to Consolidated Financial Statements (Unaudited)
Note 1. Description of Business, Basis of Presentation and Consolidation and Significant Accounting Policies
Description of Business
Rapid7, Inc. and subsidiaries (“we,” “us” or “our”) are advancing security with visibility, analytics, and automation delivered through our Insight Platform. Our solutions simplify the complex, allowing security teams to work more effectively with IT and development to reduce vulnerabilities, monitor for malicious behavior, investigate and shut down attacks, and automate routine tasks.
Basis of Presentation and Consolidation
The accompanying unaudited consolidated financial statements have been prepared by us in accordance with accounting principles generally accepted in the United States of America (“GAAP”), as well as pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), regarding interim financial reporting. Accordingly, certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 24, 2022.
The consolidated financial statements include our results of operations and those of our wholly-owned subsidiaries and reflect all adjustments (consisting solely of normal, recurring adjustments) which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. All intercompany transactions and balances have been eliminated in consolidation. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for any future period or the entire fiscal year.
Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. The management estimates include, but are not limited to the determination of the estimated economic life of perpetual licenses for revenue recognition, the determination of standalone selling prices in revenue transactions with multiple performance obligations, the estimated period of benefit for deferred contract acquisition and fulfillment costs, the useful lives and recoverability of long-lived assets, the valuation for credit losses, the valuation of stock-based compensation, the fair value of assets acquired and liabilities assumed in business combinations, the incremental borrowing rate for operating leases and the valuation for deferred tax assets. We base our estimates on historical experience and on various other assumptions that we believe are reasonable. Actual results could differ from those estimates.
The COVID-19 pandemic has resulted in a sustained global slowdown of economic activity that has decreased demand for a broad variety of goods and services, including from our customers. While we have not experienced significant disruptions from the COVID-19 pandemic during the three and nine months ended September 30, 2022, we are unable to accurately predict the extent to which the ongoing COVID-19 pandemic may impact our business, results of operations and financial condition going forward. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates, assumptions and judgments or revise the carrying value of our assets or liabilities. These estimates may change as new events occur and additional information is obtained and will be recognized in the consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements.
Significant Accounting Policies
Our significant accounting policies are described in Note 2, Summary of Significant Accounting Policies, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2021. There have been no changes to the significant accounting policies during the three and nine-month periods ended September 30, 2022.
7

Recent Accounting Pronouncements
Accounting Pronouncements Recently Adopted
In October 2021, the FASB issued ASU 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which clarified the accounting for acquired revenue contracts with customers in a business combination. ASU 2021-08 requires acquirers to measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606. As a result, it is generally expected that an acquirer will recognize and measure contract assets and liabilities in a manner consistent with how they were recognized by the acquiree in its preacquisition financial statements. This standard is effective for interim and annual periods beginning after December 15, 2022, with early adoption permitted. We early adopted this standard on January 1, 2022. This guidance will be applied prospectively to all business combinations that occur on or after January 1, 2022.
Note 2. Revenue from Contracts with Customers
We generate revenue primarily from: (1) subscriptions from the sale of cloud-based subscriptions, managed services, term software licenses, content subscriptions and maintenance and support associated with our software licenses, (2) perpetual software licenses, and (3) professional services from the sale of our deployment and training services related to our solutions, incident response services, penetration testing and security advisory services.
The following table summarizes revenue from contracts with customers for the three and nine months ended September 30, 2022 and 2021:
Three Months Ended September 30,Nine Months Ended September 30,
2022202120222021
(in thousands)
Subscriptions$165,687 $129,157 $470,925 $353,338 
Perpetual software licenses759 1,840 3,226 5,990 
Professional services9,269 8,745 25,961 24,185 
Other50 152 492 253 
Total revenue$175,765 $139,894 $500,604 $383,766 
Subscriptions
Subscriptions consists of revenue from our cloud-based subscription, managed services offerings, term software licenses, content subscriptions and maintenance and support associated with our software licenses.
We generate cloud-based subscription revenue primarily from sales of subscriptions to access our cloud platform, together with related support services to our customers. These arrangements do not provide the customer with the right to take possession of our software operating on our cloud platform at any time. Instead, customers are granted continuous access to our cloud platform over the contractual period. Revenue is recognized over time on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Our cloud-based subscription contracts generally have annual or multi-year contractual terms which are billed in advance of the annual subscription period and are non-cancellable.
Managed services offerings consist of fees generated when we operate our software and provide our capabilities on behalf of our customers. Revenue is recognized on a ratable basis over the contract term beginning on the date that our service is made available to the customer. Our managed services offerings generally have annual or multi-year contractual terms which are billed in advance of the annual subscription period and are non-cancellable.
For our term software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, we recognize the license revenue over the contractual term of the content subscription. For our term software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.
Content subscriptions and our maintenance and support services are sold with our perpetual and term software licenses. Revenue related to our content subscriptions associated with our software licenses is recognized ratably over the contractual period. Maintenance and support services are distinct from the perpetual and term software license and revenue attributable to maintenance and support services is recognized ratably over the contractual period.
8

Perpetual Software Licenses
For our perpetual software licenses where the utility to the customer is dependent on the continued delivery of content subscriptions, the content subscription renewal options result in a material right with respect to the perpetual software license. As a result, the revenue attributable to the perpetual software license is recognized ratably over the customer’s estimated economic life of five years, which represents a longer period of time in comparison to the initial contractual period of maintenance and support. The estimated economic life of five years represents the period which the customer is expected to benefit from the material right. We estimated this period of benefit by taking into consideration several factors, including the terms and conditions of our customer contracts and renewals and the expected useful life of our technology.
For our perpetual software licenses which are not dependent on the continued delivery of content subscriptions, the license is considered distinct from the maintenance and support, and we therefore recognize revenue attributable to the license at the time of delivery.
Professional Services
All of our professional services are considered distinct performance obligations when sold stand alone or with other products. These contracts generally have terms of one year or less. For the majority of these contracts, revenue is recognized over time based upon the proportion of work performed to date.
Contracts with Multiple Performance Obligations
If the contract contains a single performance obligation, the entire transaction price is allocated to the single performance obligation. The majority of our contracts with customers contain multiple performance obligations. For these contracts, we account for individual performance obligations separately if they are distinct. The transaction price is allocated to the separate performance obligations on a relative standalone selling price (“SSP”) basis. We determine SSP of our products and services based on our overall pricing objectives using all information reasonably available to us, taking into consideration market conditions and other factors, including the geographic locations of our customers, negotiated discounts from price lists and selling method (i.e., partner or direct). When available, we use directly observable stand-alone transactions to determine SSP. When not regularly sold on a stand-alone basis, we estimate SSP for our products and services utilizing historical sales data, including discounts from list price. The historical data is aggregated and analyzed by geographic location and selling method to establish a median or average price. Once SSP is established it is applied consistently to all transactions including that product or service utilizing a portfolio approach.
Contract Balances
Contract liabilities consist of deferred revenue and include payments received in advance of performance under the contract. Such amounts are recognized as revenue over the contractual period consistent with the above methodology. For the three months ended September 30, 2022 and 2021, we recognized revenue of $153.8 million and $117.5 million, respectively, and for the nine months ended September 30, 2022 and 2021, we recognized $308.3 million and $237.5 million, respectively, that was included in the corresponding contract liability balance at the beginning of the periods presented. Deferred revenue that will be realized during the succeeding 12-month period is recorded as current, and the remaining deferred revenue is recorded as non-current.
We receive payments from customers based upon contractual billing schedules. Accounts receivable are recorded when the right to consideration becomes unconditional. Unbilled receivables include amounts related to our contractual right to consideration for both completed and partially completed performance obligations that have not been invoiced. If the right to consideration is based on satisfaction of another performance obligation in the contract other than the passage of time, we record a contract asset. As of September 30, 2022 and December 31, 2021, unbilled receivables of $1.2 million are included in prepaid expenses and other current assets in our consolidated balance sheet. As of September 30, 2022 and December 31, 2021, we had no contract assets recorded on our consolidated balance sheet.
9

Transaction price allocated to the remaining performance obligations
The following table includes estimated revenue expected to be recognized in the future related to performance obligations that are unsatisfied or partially unsatisfied as of September 30, 2022. The estimated revenues do not include unexercised contract renewals.
Next Twelve MonthsThereafter
 (in thousands)
Subscriptions$434,495 $158,385 
Perpetual software licenses878 184 
Professional services19,406 3,371 
Total$454,779 $161,940 
Note 3. Business Combinations
IntSights
On July 16, 2021, we acquired IntSights Cyber Intelligence Ltd. (“IntSights”), a provider of contextualized external threat intelligence and proactive threat remediation, for a purchase price with an aggregate fair value of $322.3 million. The purchase consideration consisted of $319.2 million in cash paid at closing, $3.4 million in deferred cash payments and a $0.3 million receivable for purchase price adjustments. The deferred cash payments will be held by us to satisfy indemnification obligations payable within eighteen months of the acquisition date.
The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the assets acquired and liabilities assumed was recorded as goodwill. The fair value of net assets acquired, goodwill and intangible assets were $61.1 million, $260.9 million and $65.2 million, respectively. The goodwill was allocated to our one reporting unit. The acquired goodwill and intangible assets were not deductible for tax purposes.
Velocidex Enterprises Pty Ltd
On April 12, 2021, we acquired Velocidex Enterprises Pty Ltd (“Velocidex”), a leading open-source technology and community used for endpoint monitoring, digital forensics, and incident response. The purchase price consisted of $2.7 million paid in cash and $0.3 million in deferred cash payments. The purchase price was allocated to a developed technology intangible asset which has an estimated useful life of 6 years.
Alcide.IO Ltd.
On January 28, 2021, we acquired Alcide.IO Ltd. (“Alcide”), a leading provider of Kubernetes security, for a purchase consideration of $50.5 million, which was funded in cash.
The assets acquired and liabilities assumed were recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the assets acquired and liabilities assumed was recorded as goodwill. The fair value of net assets acquired, goodwill and intangible assets were $(0.7) million, $40.8 million and $10.4 million, respectively. The goodwill was allocated to our one reporting unit. The acquired goodwill and intangible assets were not deductible for tax purposes.
10

Note 4. Investments
Our investments, which are all classified as available-for-sale, consisted of the following:
 As of September 30, 2022
 Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
 (in thousands)
Description:
U.S. government agencies$70,556 $2 $(718)$69,840 
Corporate bonds16,891  (334)16,557 
Commercial paper7,630   7,630 
Agency bonds5,969  (58)5,911 
Total$101,046 $2 $(1,110)$99,938 
 As of December 31, 2021
 Amortized CostGross Unrealized GainsGross Unrealized LossesFair Value
 (in thousands)
Description:
Commercial paper$37,778 $ $ $37,778 
Corporate bonds32,059  (32)32,027 
U.S government agencies22,396  (31)22,365 
Agency bonds749  (1)748 
Total$92,982 $ $(64)$92,918 
As of September 30, 2022, our available-for-sale investments had maturities ranging from 1 to 22 months. As of December 31, 2021, our available-for-sale investments had maturities ranging from 2 to 23 months.
For all of our investments for which the amortized cost basis was greater than the fair value at September 30, 2022 and December 31, 2021, we have concluded that there is no plan to sell the security nor is it more likely than not that we would be required to sell the security before its anticipated maturity. In making the determination as to whether the unrealized loss is other-than-temporary, we considered the length of time and extent the investment has been in an unrealized loss position, the financial condition and near-term prospects of the issuers, the issuers’ credit rating and the time to maturity.
Note 5. Fair Value Measurements
We measure certain financial assets and liabilities at fair value. Fair value is determined based upon the exit price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants, as determined by either the principal market or the most advantageous market. Inputs used in the valuation techniques to derive fair values are classified based on a three-level hierarchy, as follows:
Level 1: Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.
Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset or liability.
We consider an active market to be one in which transactions for the asset or liability occur with sufficient frequency and volume to provide pricing information on an ongoing basis, and we consider an inactive market to be one in which there are infrequent or few transactions for the asset or liability, the prices are not current, or price quotations vary substantially either over time or among market makers.
The following table presents our financial assets and liabilities measured and recorded at fair value on a recurring basis using the above input categories:
11

 As of September 30, 2022
 Level 1Level 2Level 3Total
 (in thousands)
Description:
Assets:
U.S. Government agencies$69,840 $ $ $69,840 
Money market funds67,749   67,749 
Corporate bonds 16,557  16,557 
Commercial paper 7,630  7,630 
Agency bonds 5,911  5,911 
Foreign currency forward contracts designated as cash flow hedges (prepaid expenses and other current assets)