- ARR grew 30% year-over-year to $164.0 million
- Revenue grew 38% year-over-year to $44.2 million
ForgeRock (NYSE: FORG), a global leader in digital identity,
today announced financial results for its third quarter ended
September 30, 2021.
“We are very pleased with the results we achieved in our first
quarter as a public company, highlighted by strong ARR and revenue
growth," said Fran Rosch, CEO of ForgeRock. "Identity is critical
to digital transformation as more companies recognize the need to
deliver both safe and seamless experiences to engage their
customers and keep employees productive to grow their businesses.
We see these trends continuing into our fiscal fourth quarter,
bolstering our confidence that we are well positioned to capitalize
on a large and growing market opportunity for enterprise-grade
identity."
Third Quarter 2021 Financial Highlights:
- ARR: Annualized Recurring Revenue was $164.0 million, an
increase of 30% year-over-year.
- Revenue: Total revenue was $44.2 million, an increase of
38% year-over-year.
- Operating Loss: GAAP operating loss was $8.8 million, or
(20)% of total revenue, compared to $6.7 million, or (21)% of total
revenue, in the third quarter of 2020. Non-GAAP operating loss was
$5.7 million, or (13)% of total revenue, compared to $4.9 million,
or (15)% of total revenue, in the third quarter of 2020.
- Net Loss: GAAP net loss was $15.3 million, compared to
$7.8 million in the third quarter of 2020. GAAP net loss per share
was $0.44 compared to $0.32 in the third quarter of 2020. Non-GAAP
net loss was $12.1 million, compared to $6.0 million in the third
quarter of 2020. Non-GAAP net loss per share was $0.35, compared to
$0.25 in the third quarter of 2020.
- Cash Flow: Net cash used in operations was $2.0 million
compared to $5.7 million in the third quarter of 2020. Free cash
flow was ($2.2) million, or (5)% of total revenue, compared to
($5.8) million, or (18)% of total revenue, in the third quarter of
2020.
- Cash, cash equivalents and short-term investments were
$378.1 million as of September 30, 2021.
ForgeRock uses certain non-GAAP financial measures, which are
described further below and reconciled to the most comparable GAAP
financial measure after the presentation of our GAAP financial
statements.
“Our strong third quarter results were highlighted by the growth
we are seeing in our large enterprise customer base and our ongoing
traction with the ForgeRock Identity Cloud,” said John Fernandez,
CFO of ForgeRock. “In particular, our customers with $100K of ARR
or greater grew 18% year over year, an increase from the prior
quarter.”
Financial Outlook:
For the fourth quarter of 2021, ForgeRock expects:
- Total ARR of $175.0 million to $176.0 million, representing 29%
year-over-year growth;
- Total revenue of $46.5 million to $47.5 million;
- Non-GAAP operating loss of $9.0 million to $8.0 million;
and
- Non-GAAP net loss per share of $0.14 to $0.12, assuming
weighted-average shares outstanding of approximately 82.3
million.
For the full year 2021, ForgeRock expects:
- Total revenue of $175.5 million to $176.5 million;
- Non-GAAP operating loss of $20.5 million to $19.5 million;
and
- Non-GAAP net loss per share of $0.96 to $0.94, assuming
weighted-average shares outstanding of approximately 41.8
million.
These statements are forward-looking and actual results may
differ materially. Refer to the Forward-Looking Statements safe
harbor below for information on the factors that could cause our
actual results to differ materially from these forward-looking
statements.
ForgeRock does not provide forward-looking guidance for certain
financial data, such as depreciation, stock-based compensation,
income (loss) from operations and net income (loss), and as a
result, is not able to provide a reconciliation of GAAP to non-GAAP
financial measures for forward-looking data without unreasonable
effort. The impact of such adjustments could be significant.
Conference Call Information:
ForgeRock will host a conference call and webcast at 2:00 p.m.
Pacific Time (5:00 p.m. Eastern Time) on Wednesday, November 10,
2021 to discuss its financial results and business highlights. To
access this conference call, dial 1-800-437-2398 or 1-323-289-6576
and use the conference ID 6948154. The live webcast and a webcast
replay of the conference call can be accessed from the investor
relations page of ForgeRock's website at
investors.forgerock.com.
Supplemental Financial and Other Information:
Supplemental financial and other information can be accessed
through ForgeRock's investor relations website at
investors.forgerock.com.
Non-GAAP Financial Measures and Key Metrics:
ForgeRock provides all information required in accordance with
generally accepted accounting principles (“GAAP”), but it believes
that evaluating its ongoing operating results may be difficult if
limited to reviewing only GAAP financial measures. Accordingly,
ForgeRock uses non-GAAP financial measures to evaluate its
operations. We use non-GAAP financial measures to understand and
evaluate our core operating performance and trends, to prepare our
annual budget, to monitor and assess our liquidity, and to develop
short-term and long-term operating plans. We believe that the
non-GAAP financial measures we review are each a useful measure to
us and to our investors because they provide consistency and
comparability with our past performance and between periods, as
these metrics generally eliminate the effects of the variability of
certain charges and expenses that may not reflect our overall
operating performance and liquidity. We believe that non-GAAP
financial measures, when taken collectively with GAAP financial
information, can be helpful to us and to investors because it
provides consistency and comparability with past performance and
assists in comparisons with other companies, some of which use
similar non-GAAP financial information to supplement their GAAP
results.
ForgeRock presents non-GAAP gross profit, non-GAAP gross margin,
non-GAAP research and development, non-GAAP sales and marketing,
non-GAAP general and administrative, non-GAAP operating loss,
non-GAAP operating margin and non-GAAP net loss per share, all of
which exclude stock-based compensation expense and some of which
exclude restructuring and impairment charges and tax effect on the
provision for (benefit from) income taxes. ForgeRock excludes
stock-based compensation expense as it can vary significantly from
period to period based on share price and the timing, size and
nature of equity awards. As such, ForgeRock and many investors and
analysts exclude stock-based compensation expense to better
evaluate its operating performance and cash spending levels
relative to its industry sector and competitors.
ForgeRock presents adjusted EBITDA, which is also a non-GAAP
financial measure. We define adjusted EBITDA as GAAP operating loss
before tax, adjusted for depreciation, stock-based compensation
expense and some of which exclude restructuring and impairment
charges and tax effect on the provision for (benefit from) income
taxes. ForgeRock excludes certain items that it believes are not
good indicators of ForgeRock’s current or future operating
performance. These items are depreciation, stock-based compensation
(as discussed above), and restructuring and impairment charges.
ForgeRock excludes depreciation given its standard exclusion in
EBITDA and adjusted EBITDA results. ForgeRock excludes
restructuring charges and impairment charges as they are generally
not relevant to assessing the long-term performance of ForgeRock.
In addition, the frequency and amount of such charges can vary
significantly based on the size and timing of the transactions.
Management believes items such as restructuring and impairment
charges are non-core transactions; however, these types of costs
may occur in future periods.
ForgeRock also presents free cash flow, which is also a non-GAAP
financial measure. We define free cash flow as net cash used in
operating activities less cash used for purchases of property and
equipment. ForgeRock provides free cash flow as it is a commonly
used non-GAAP financial measure to indicate the amount of cash
needed to fund its operations and capital expenditures.
The non-GAAP financial information is presented for supplemental
informational purposes only and should not be considered a
substitute for financial information presented in accordance with
GAAP and may be different from similarly-titled non-GAAP measures
used by other companies. The principal limitation of these non-GAAP
financial measures is that they exclude expenses that are required
by GAAP to be recorded in our consolidated financial statements. In
addition, they are subject to inherent limitations as they reflect
the exercise of judgment by our management about which expenses are
excluded or included in determining these non-GAAP financial
measures. A reconciliation is provided below for each non-GAAP
financial measure to the most directly comparable financial measure
stated in accordance with GAAP. Investors are encouraged to review
the related GAAP financial measures and the reconciliation of these
non-GAAP financial measures to their most directly comparable GAAP
financial measures.
ForgeRock also uses the key metric Annualized Recurring Revenue
(“ARR”), to evaluate its operations. We believe that ARR is a key
metric because it is driven by our ability to acquire new customers
and to maintain and expand our relationship with existing
customers. We define ARR as the annualized value of all contractual
subscription agreements as of the end of the period. To the extent
that we are negotiating a renewal with a customer after the
expiration of the subscription, we continue to include that revenue
in ARR if we are actively in discussion with such an organization
for a new subscription or renewal, or until such organization
notifies us that it is not renewing its subscription. We perform
this calculation on an individual customer basis by dividing the
total dollar amount of the customer’s contract by the total
contract term stated in months and multiplying this amount by 12 to
annualize. Calculated ARR for each individual customer is then
aggregated to arrive at total ARR.
ARR does not have a standardized meaning and therefore may not
be comparable to similarly titled measures presented by other
companies. ARR should be viewed independently of revenue, deferred
revenue and remaining performance obligations computed and/or
disclosed in accordance with GAAP and is not intended to be
combined with or to replace any of those items. Specifically, ARR,
as calculated under the definition herein, has the effect of
normalizing the impact of revenue recognition for term-based
subscription license agreements. ARR is calculated based upon
annualized contract value and not actual GAAP revenue. Under ASC
606, for term-based subscription license agreements, we recognize
approximately half of the total contract value upfront as license
revenue, with the remainder attributable to maintenance and support
that is recognized ratably over the license term. Annualizing
actual GAAP revenue for any particular period could result in a
meaningful difference from our ARR calculation, particularly when
we are experiencing increases or decreases in the mix of multi-year
term licenses. ARR is not a forecast and the active contracts at
the date used in calculating ARR may or may not be extended by our
customers.
Forward-Looking Statements:
This press release contains forward-looking statements within
the meaning of the federal securities laws, including but not
limited to the quotations of management, the section titled
“Financial Outlook,” and statements regarding our strategy and the
market for our products and services. Forward-looking statements
are subject to a number of risks and uncertainties, many of which
involve factors or circumstances that are beyond our control. Our
actual results could differ materially from those stated or implied
in forward-looking statements due to a number of factors, including
but not limited to our ability to attract new customers and retain
and sell additional functionality and services to our existing
customers, our ability to sustain and manage our growth, our
ability to successfully add new features and functionality to our
platform, our ability to compete effectively in an increasingly
competitive market, and general market, political, economic, and
business conditions, including the impact of COVID-19, and other
risks detailed in our filings with the Securities and Exchange
Commission ("SEC"), including our final IPO prospectus filed with
the SEC on September 17, 2021 and our quarterly report on Form 10-Q
which will subsequently be filed with the SEC.
Past performance is not necessarily indicative of future
results. The forward-looking statements included in this press
release represent our views as of the date of this press release.
These forward-looking statements should not be relied upon as
representing our views as of any date subsequent to the date of
this press release. We anticipate that subsequent events and
developments could cause our views to change. We undertake no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise,
except as required by law.
About ForgeRock
ForgeRock®, a global leader in digital identity, delivers modern
identity and access management solutions for consumers, employees
and things to simply and safely access the connected world. Using
ForgeRock, more than 1,300 organizations around the world
orchestrate, manage, and secure the complete lifecycle of
identities from dynamic access controls, governance, APIs, and
storing authoritative data – consumable in cloud or hybrid
environments.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(In thousands, except per
share amounts)
(Unaudited)
Three months ended September
30,
2021
2020
Revenue:
Subscription term licenses
$
19,364
$
16,102
Subscription SaaS, support &
maintenance
22,940
14,910
Perpetual licenses
183
158
Total subscriptions and perpetual
licenses
42,487
31,170
Professional services
1,739
953
Total revenue
44,226
32,123
Cost of revenue:
Subscriptions and perpetual licenses
4,517
2,976
Professional services
3,977
2,069
Total cost of revenue (1)
8,494
5,045
Gross profit
35,732
27,078
Operating expenses:
Research and development (1)
10,827
9,432
Sales and marketing (1)
22,509
18,135
General and administrative (1)
11,188
6,214
Total operating expenses
44,524
33,781
Operating loss
(8,792
)
(6,703
)
Foreign currency gain (loss)
(2,684
)
2,699
Fair value adjustment on warrants and
preferred stock tranche option
(2,729
)
(2,415
)
Interest expense
(1,195
)
(1,201
)
Other, net
339
(65
)
Interest and other expense, net
(6,269
)
(982
)
Loss before income taxes
(15,061
)
(7,685
)
Provision for income taxes
205
124
Net loss
$
(15,266
)
$
(7,809
)
Net loss per share attributable to Class A
and Class B common stockholders:
Basic and diluted
$
(0.44
)
$
(0.32
)
Weighted-average shares used in computing
net loss per share attributable to Class A and Class B common
stockholders:
Basic and diluted
34,680
24,039
(1) Includes stock-based compensation as
follows (in thousands):
Three months ended September
30,
2021
2020
Cost of revenue
$
26
$
35
Research and development
564
167
Sales and marketing
1,078
619
General and administrative
1,441
583
Total stock-based compensation expense
$
3,109
$
1,404
CONDENSED CONSOLIDATED BALANCE
SHEETS
(In thousands, except share
and per share data)
(Unaudited)
September 30,
2021
December 31,
2020
Assets
Cash and cash equivalents
$
197,221
$
99,953
Short-term investments
180,872
—
Accounts receivable, net of allowances of
$26 and $159, respectively
36,071
35,372
Contract assets
23,079
11,167
Deferred commissions
6,267
5,923
Prepaid expenses and other assets
7,224
3,802
Total current assets
450,734
156,217
Deferred commissions
12,242
8,825
Property and equipment, net
2,106
2,535
Operating lease right-of-use assets
4,358
—
Contract and other assets
1,543
817
Total assets
$
470,983
$
168,394
Liabilities, redeemable convertible
preferred stock and stockholders’ equity (deficit)
Accounts payable
$
878
$
1,370
Accrued compensation
15,319
13,891
Accrued expenses
5,927
3,179
Current portion of long-term debt
—
58
Current portion of operating lease
liability
1,766
—
Deferred revenue
49,890
50,341
Other liabilities
2,700
10,192
Total current liabilities
76,480
79,031
Long-term debt
39,451
39,338
Long-term operating lease liability
2,876
—
Deferred revenue
7,300
5,162
Other liabilities
1,568
3,538
Total liabilities
127,675
127,069
Redeemable convertible preferred
stock
—
231,503
Stockholders’ equity (deficit):
Common stock
82
24
Additional paid-in capital
587,371
20,602
Accumulated other comprehensive income
7,322
5,253
Accumulated deficit
(251,467
)
(216,057
)
Total stockholders’ equity
(deficit)
343,308
(190,178
)
Total liabilities, redeemable
convertible preferred stock and stockholders’ equity
(deficit)
$
470,983
$
168,394
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three months ended September
30,
2021
2020
Operating activities:
Net loss
$
(15,266
)
$
(7,809
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation
259
281
Noncash operating lease expense
249
—
Restructuring and impairment charges
—
356
Stock-based compensation expense
3,109
1,404
Amortization of deferred commissions
3,203
3,281
Foreign currency remeasurement loss
2,640
(2,688
)
Change in fair value of redeemable
convertible preferred stock warrant liability
2,689
399
Change in fair value of preferred stock
tranche option liability
—
2,014
Accretion of premium/ amortization of
discount on short-term investments
237
(4
)
Other non-cash
15
444
Changes in operating assets and
liabilities:
Deferred commissions
(4,789
)
(4,315
)
Accounts receivable
1,043
1,476
Contract and other non-current assets
(4,324
)
(1,440
)
Prepaid expenses and other current
assets
3,080
493
Operating lease liabilities
(414
)
—
Accounts payable
682
(558
)
Accrued expenses and other liabilities
1,339
1,908
Deferred revenue
4,213
(978
)
Net cash used in operating
activities
(2,035
)
(5,736
)
Investing activities:
Purchases of property and equipment
(118
)
(83
)
Purchases of short-term investments
(138,132
)
—
Sales of short-term investments
15,700
—
Net cash used in investing
activities
(122,550
)
(83
)
Financing activities:
Proceeds from initial public offering, net
of underwriting discounts and commissions
295,694
—
Payment of offering costs
(4,076
)
—
Proceeds from exercises of employee stock
options
719
128
Employee payroll taxes paid for net shares
settlement of restricted stock units
(3,528
)
—
Proceeds from issuance of debt, net of
issuance costs
—
115
Principal repayments on debt
(74
)
—
Net cash provided by financing
activities
288,735
243
Effect of exchange rates on cash and cash
equivalents and restricted cash
(390
)
252
Net decrease in cash, cash equivalents and
restricted cash
163,760
(5,324
)
Cash, cash equivalents and restricted
cash, beginning of year
33,484
106,687
Cash, cash equivalents and restricted
cash, end of year
$
197,244
$
101,363
Reconciliation of cash and cash
equivalents and restricted cash:
Cash and cash equivalents
$
197,221
$
101,307
Restricted cash included in prepaids and
other current assets
23
56
Total cash and cash equivalents and
restricted cash
$
197,244
$
101,363
FORGEROCK, INC.
NON-GAAP FINANCIAL MEASURES
AND RECONCILIATIONS TO GAAP RESULTS
Non-GAAP Gross Profit and Non-GAAP
Gross Margin
Gross profit is defined as GAAP revenue
less cost of revenue and gross margin is GAAP gross profit as a
percentage of total revenue. We define non-GAAP gross profit and
non-GAAP gross margin as GAAP gross profit and GAAP gross margin
adjusted to exclude stock-based compensation expense, and
restructuring and impairment charges (if applicable) as presented
below (in thousands, except percentages):
Three months ended September
30,
2021
2020
Gross profit
$
35,732
$
27,078
Stock-based compensation
26
35
Non-GAAP gross profit
$
35,758
$
27,113
Gross margin
81
%
84
%
Non-GAAP gross margin
81
%
84
%
Non-GAAP Research and
Development
We define non-GAAP research and
development as GAAP research and development adjusted to exclude
stock-based compensation expense, and restructuring and impairment
charges (if applicable) as presented below (in thousands):
Three months ended September
30,
2021
2020
Research and development
$
10,827
$
9,432
Less: stock-based compensation
564
167
Non-GAAP research and development
$
10,263
$
9,265
Non-GAAP Sales and Marketing
We define non-GAAP sales and marketing as
GAAP sales and marketing adjusted to exclude stock-based
compensation expense, and restructuring and impairment charges (if
applicable) as presented below (in thousands):
Three months ended September
30,
2021
2020
Sales and marketing
$
22,509
$
18,135
Less: stock-based compensation
1,078
619
Non-GAAP sales and marketing
$
21,431
$
17,516
Non-GAAP General and
Administrative
We define non-GAAP general and
administrative as GAAP general and administrative adjusted to
exclude stock-based compensation expense, and restructuring and
impairment charges (if applicable) as presented below (in
thousands):
Three months ended September
30,
2021
2020
General and administrative
$
11,188
$
6,214
Less: stock-based compensation
1,441
583
Less: restructuring and impairment
charges
—
356
Non-GAAP general and administrative
$
9,747
$
5,275
Non-GAAP Operating Loss and Non-GAAP
Operating Margin
We define non-GAAP operating loss and
non-GAAP operating margin as GAAP operating loss and GAAP operating
margin adjusted to exclude stock-based compensation expense, and
restructuring and impairment charges (if applicable) as presented
below (in thousands, except percentages):
Three months ended September
30,
2021
2020
Operating loss
$
(8,792
)
$
(6,703
)
Stock-based compensation
3,109
1,404
Restructuring and impairment charges
—
356
Non-GAAP operating loss
$
(5,683
)
$
(4,943
)
Operating margin
(20
)%
(21
)%
Non-GAAP operating margin
(13
)%
(15
)%
Adjusted EBITDA
We define adjusted EBITDA as operating
loss adjusted to exclude depreciation, stock-based compensation
expense, and restructuring and impairment charges (if applicable)
as presented below (in thousands):
Three months ended September
30,
2021
2020
Operating loss
$
(8,792
)
$
(6,703
)
Depreciation
259
281
Stock-based compensation
3,109
1,404
Restructuring and impairment charges
—
356
Adjusted EBITDA
$
(5,424
)
$
(4,662
)
Non-GAAP Net Loss and Non-GAAP Net Loss
per Share, Basic and Diluted
We define non-GAAP net loss as GAAP net
loss adjusted to exclude stock-based compensation expense,
including the tax effect of stock-based compensation expense on the
provision for (benefit from) income taxes as presented below (in
thousands, except per share amounts):
We define non-GAAP net loss per share,
basic, as non-GAAP net loss divided by GAAP weighted-average shares
used to compute net loss per share, basic.
We define non-GAAP net loss per share,
diluted, as non-GAAP net loss divided by GAAP weighted average
shares used to compute net loss per share, basic, adjusted for (i)
the dilutive effect of employee equity awards, excluding the impact
of unrecognized stock-based compensation expense and (ii) warrants;
unless these adjustments are anti-dilutive.
Three months ended September
30,
2021
2020
Net loss
$
(15,266
)
$
(7,809
)
Stock-based compensation
3,109
1,404
Restructuring and impairment charges
—
356
Tax effect on the provision for (benefit
from) income taxes
14
9
Non-GAAP net loss
$
(12,143
)
$
(6,040
)
Non-GAAP net loss per share, basic and
diluted
$
(0.35
)
$
(0.25
)
Free Cash Flow
We define free cash flow as net cash
provided by (used in) operating activities less cash used for
purchases of property and equipment as presented below (in
thousands):
Three months ended September
30,
2021
2020
Net cash used in operating activities
$
(2,035
)
$
(5,736
)
Purchases of property and equipment
(118
)
(83
)
Free cash flow
$
(2,153
)
$
(5,819
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211110006172/en/
Investor Relations Contacts:
Mark Kang, ForgeRock Nicole Borsje, The Blueshirt Group
investors@forgerock.com
Media Contacts:
Kristen Batch, ForgeRock kristen.batch@forgerock.com
Stacey Hurwitz, ForgeRock stacey.hurwitz@forgerock.com
Dillon Townsel, Edelman dillon.townsel@edelman.com
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