Early this month, Rapid7 (Nasdaq:RPD), a leading provider of security analytics and automation, reported a strong quarter that beat market estimates yet again for the four times in a row.

Rapid7’s Financials

Rapid7’s revenues for the third quarter grew 33% to $83.2 million, ahead of the market’s expectations of $80.1 million. Non GAAP income was $571 million or $0.01 per share compared with the Street’s forecast of a loss of $0.03 per share. It ended the quarter with cash balance of $258 million.

By segment, revenues from products grew 54% to $67.2 million, maintenance and support revenues fell 14% to $9.2 million and professional services revenues declined 16% to $6.7 million.

By region, revenues from North America grew 31% to $69.9 million and Rest of world grew $13.3 million.

Total ARR grew to $310 million, up 43%, primarily driven by strong customer growth. Its customer count increased by 17% to over 8,600 customers globally. Its customer economics remain strong, with average ARR per customer increasing to $36,000, up 22%.

Strong growth in ARR over the past year drove 44% growth in recurring revenue, and recurring revenue now constitutes 88% of total revenue compared to 82% a year ago. Its focus on recurring revenue drove a 54% increase in the product revenue year over year. This was partially offset by a decline in maintenance and support revenue as Nexpose customers migrated to the insight platform, resulting in reclassification of maintenance revenue to product revenue.

For the fourth quarter, Rapid7 forecast revenues of $87.4-$89 million with a loss of $0.02-$0 per share. The Street was looking for revenues of $88.2 million and a loss of $0.01 per share. Rapid7 expects to end the current year with revenues of $322.7-$324.3 million and earnings of $0.03 to $0.05 per share. The market had forecast revenues of $323.3 million with a loss of $0.04 per share.

Rapid7’s Cloud SIEM Focus

Rapid7 focuses on strong technical innovation for not just delivering insights but also to leverage those insights to drive collaboration and operational productivity. It is gaining market share in vulnerability management as customers appreciate its platform roadmap and tightly knit integration with the broader security ecosystem. In addition, its results are driven by the significant strength of its cloud-based Security Information and Event Management (SIEM) tool InsightIDR as its SecOps vision resonates with the resource-constrained organizations of all sizes.

According to market analytics from Technavio, the SIEM market is expected to be worth $5.93 billion by 2021. Leading vendors in the market include IBM, Hewlett Packard Enterprise, Intel Security, LogRhythm, and Splunk. Microsoft has also recently launched Azure Sentinel, its cloud-based SIEM. Though SIEM is getting crowded, cloud-based offerings are very few and this is where Rapid7 scores.

Rapid7 was venture funded with $89 million raised from investors including Bain Capital Ventures and Technology Crossover Ventures. Their last round of funding was held in December 2014, when they raised $30 million at an undisclosed valuation. Rapid7 went public on the Nasdaq under the ticker RPD in 2015 by selling 6.45 million shares at $16 per share to raise $103.2 million – translating to a pre-trading valuation of $605 million.

Its stock is trading at $52.82 with a market capitalization of $2.7 billion. It had peaked to a record high of $66.01 in July. It hit a 52-week low of $26.27 in November last year.