Stock-based compensation expense for restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), stock options, purchase rights issued under our employee stock purchase plan, and earnout consideration and key employee consideration shares related to acquisitions was classified in the accompanying unaudited condensed consolidated statements of operations as follows (in thousands):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2026		2025		2026		2025
Stock-based compensation expense:
Cost of revenue	$	1,473	$	2,457	$	4,775	$	7,301
Research and development	7,189		9,399		24,837		30,037
Sales and marketing	4,351		7,255		13,865		21,948
General and administrative	10,233		7,216		19,484		21,773
Total stock-based compensation expense	$	23,246	$	26,327	$	62,961	$	81,059

Our Compensation Committee adopted and approved the performance goals, targets and payout formulas for our 2026 and 2025 bonus plans. In 2025, this approval included permitting executive officers and certain other employees the opportunity to receive payment of their earned bonuses in the form of common stock (in lieu of cash), which was subsequently eliminated by the Compensation Committee in the fourth quarter of 2025 and not offered in 2026. For the three and nine months ended September 30, 2025, we recognized stock-based compensation related to such bonuses in the amount of a reduction of expense of less than $0.1 million and expense of $0.7 million, respectively, based on the probable expected performance against the pre-established corporate financial objectives as of September 30, 2025.

In September 2026, our Compensation Committee awarded 290,626 RSUs as inducement grants to three employees in connection with the commencement of their employment. The RSUs vest over a three year period, with 1/3 vesting on September 15, 2027, and the remaining vesting in quarterly increments thereafter, subject to continuous service as of each such date.

In May 2026, our Compensation Committee awarded 525,000 RSUs as an inducement grant to our new Chief Product and Technology Officer, in connection with the commencement of his employment. The RSUs vest over a three year period, with 1/3 vesting on June 15, 2027, and the remaining vesting in quarterly increments thereafter, subject to continuous service as of each such date.

In March 2026, our Compensation Committee awarded 467,945 RSUs and 1,051,538 PSUs as inducement grants concurrently with the acquisition of Kenzo. The PSUs require the achievement of certain milestones based on our attainment of year over year managed MDR and security information and event management ("SIEM") annualized recurring revenue goals. The PSUs have two measurement and vesting dates through March 31, 2029, subject to the award recipients' continuous service as of each such date. If achievement of the milestones are not met, no PSUs will be earned. In the three and nine months ended September 30, 2026, we recorded $0.6 million and $1.2 million, respectively, of stock-based compensation expense related to these PSUs based on estimated achievement of the performance criteria.

In February 2026, our Compensation Committee awarded 567,108 PSUs based on achievement of total new annualized recurring revenue ("New ARR") and adjusted EBITDA (pre-bonus) targets for fiscal year 2026, with each metric weighted 50%. New ARR is defined as the annual value of new recurring revenue from new and existing customer contracts executed during fiscal year 2026. Adjusted EBITDA Pre-Bonus is a non-GAAP measure that we define as net income before interest income, interest expense, other income (expense), net, provision for income taxes, depreciation expense, amortization of intangible assets, stock-based compensation expense, acquisition-related expenses, litigation-related expenses, impairment of long-lived assets, restructuring expense, impairment of equity investment, and corporate bonus expense. Payout ranges from 0%-150% of targets, with no PSUs earned if minimum performance thresholds are not achieved. The performance period is one year, and any earned PSUs will vest in three equal annual installments, subject to the participants' continuous service. For the three and nine months ended September 30, 2026, we recorded $0.6 million and $1.3 million, respectively, of stock-based compensation expense related to these PSUs based on estimated achievement of the performance criteria.

PSUs activity classified as liability during the nine months ended September 30, 2026 was as follows:


	Shares	Weighted Average Grant Date Fair Value








Unvested balance as of December 31, 2025	—	$	—
Granted	4,313,750	3.19

Forfeited	(337,500)	1.81
Unvested balance as of September 30, 2026	3,976,250	$	3.31

As of September 30, 2026, our liability-classified PSUs had a balance of $6.9 million recorded within other long-term liabilities on our unaudited condensed consolidated balance sheet. We recorded $5.9 million and $6.9 million, respectively, of stock-based compensation expense related to these PSUs for the three and nine months ended September 30, 2026.

The PSUs are structured to be settled in cash upon vesting, unless the Compensation Committee makes a one-time irrevocable election to settle the awards in shares of Rapid7 common stock in lieu of cash. Once an election to settle the PSUs in common stock is made, it cannot be revoked, and the award will be settled exclusively in shares. Absent such an election, the awards will be settled in cash based on the fair market value of our common stock on the settlement date.

The number of shares that may ultimately vest is based on the specified price hurdles when our common stock closes at or above the specified price on average for 30 consecutive calendar days. For a 30 consecutive calendar day price between price hurdles, the payout is determined utilizing a linear interpolation. The PSUs are also subject to continued employment through the end of the performance period, except in the case of certain qualifying terminations. The stock price thresholds and related payout percentages between the two plans are as follows:

Given these PSUs contain a market-based vesting condition, we estimate the fair value of the awards using a Monte Carlo simulation model, which is required because the stock price hurdles affect the number of shares that will ultimately vest. The simulation models tens of thousands of potential stock price paths for the Company to estimate the probability of achieving various stock price hurdle outcomes. The expense is recognized over the requisite service period based on the award's fair value remeasured at each reporting date using a Monte Carlo simulation model, with cumulative expense adjusted in the period of each remeasurement to reflect changes in fair value. The following table summarizes the assumptions used in the Monte Carlo simulation model to estimate the fair value of the liability-classified PSUs as of September 30, 2026:


	Grant Date			As of September 30, 2026
	Plan 1(1)	Plan 1(2)	Plan 2(1)	Plan 1	Plan 2
Expected term (in years)	3.00	2.79	3.00	2.5	2.5
Expected volatility	50.1%	51.6%	50.1%	57.9%	57.9%
Risk-free interest rate	3.85%	4.07%	3.85%	4.91%	4.91%
Expected dividend yield	—%	—%	—%	—%	—%
Fair value per unit	$2.37	$4.42	$1.81	$13.57	$12.15

In March 2026, the Company's Compensation Committee granted 2,188,750 PSUs to executive officers and other key employees under the 2015 Plan. These PSUs were granted under two separate plan designs with distinct payout targets, with 726,250 shares issued under Plan 1 and 1,462,500 issued under Plan 2. These PSUs contain market-based performance conditions tied to the achievement of specified stock price hurdles for our common stock over a three-year performance period ending March 31, 2029.

As the awards default to cash settlement, the awards are classified as liabilities until such time as the Compensation Committee makes an irrevocable election to issue shares. As of September 30, 2026, the Compensation Committee has not approved a settlement in shares; therefore, these PSUs remain classified as a liability. The liability associated with these awards is initially measured at the estimated fair value of the award that is ultimately expected to vest on the grant date and is subsequently remeasured to fair value at each reporting date until the earlier of (i) settlement in cash or (ii) the election to settle the PSUs in shares. Changes in fair value are recognized as compensation expense (or a reduction thereof) in the period of change. The stock-based compensation expense associated with these awards will be recognized over the three-year performance period associated with the awards.


	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)








Outstanding as of December 31, 2025	223,232	$	13.38		$	498


Forfeited/cancelled	(63,473)	13.68
Outstanding as of September 30, 2026	159,759	13.27		0.36	—
Vested and exercisable as of September 30, 2026	159,759	$	13.27	0.36	$	—

Under the Rapid7, Inc. 2015 Employee Stock Purchase Plan ("ESPP"), employees may set aside up to 15% of their gross earnings, on an after-tax basis, to purchase our common shares at a discounted price, which is calculated at 85% of the lesser of: (i) the market value of our common stock at the beginning of each offering period and (ii) the market value of our common stock on the applicable purchase date.