- ARR was $238 million for Q1 2023, growing 23%
year-over-year
- Total revenue was $63.1 million in Q1 2023, growing 31%
year-over-year
- Subscription SaaS, support & maintenance revenue was $34.1
million Q1 2023, growing 30% year-over-year
ForgeRock, Inc. (NYSE: FORG), a global leader in digital
identity, today announced financial results for its first quarter
ended March 31, 2023.
“We ended Q1 with $238 million of ARR, representing another
solid quarter of growth for ForgeRock,” said Fran Rosch, CEO of
ForgeRock. “Adoption of the ForgeRock Identity Cloud continued to
be strong, with these new SaaS customers representing the majority
of our new ARR and new logos in the quarter. The introduction of
Enterprise Connect Passwordless is another major step forward in
enabling our customers to deliver digital experiences that simply
and safely help people access the connected world. ForgeRock's
unique platform offers a full spectrum of passwordless capabilities
designed for all users, including workforce, consumer, and
partners.”
“Our revenue grew 31% year-over-year in Q1 and our gross margin
continues to be robust and consistent at 81% on a GAAP basis and
83% on a non-GAAP basis,” said John Fernandez, CFO of ForgeRock.
“We remain laser focused on balancing innovation and new business
growth with cost management and profitability. Our GAAP operating
margin was (40)% in Q1 and includes the impact of
acquisition-related costs, and (32)% in Q1 of the prior year. Our
non-GAAP operating margin in Q1 of (13)% was a significant
improvement over the (19)% we experienced in Q1 of the prior
year.”
First Quarter 2023 Financial Highlights:
- ARR: Annualized Recurring Revenue was $238 million, an
increase of 23% year-over-year.
- Revenue: Total revenue was $63.1 million, an increase of
31% year-over-year.
- Operating Loss: GAAP operating loss was $25.1 million,
or 40% of total revenue, compared to $15.6 million, or 32% of total
revenue, in the first quarter of 2022. Non-GAAP operating loss was
$8.0 million, or 13% of total revenue, compared to $9.2 million, or
19% of total revenue, in the first quarter of 2022.
- Net Loss: GAAP net loss was $25.4 million, compared to
$16.5 million in the first quarter of 2022. GAAP net loss per share
was $0.29, compared to $0.20 in the first quarter of 2022. Non-GAAP
net loss was $8.2 million, compared to $9.9 million in the first
quarter of 2022. Non-GAAP net loss per share was $0.09, compared to
$0.12 in the first quarter of 2022.
- Cash Flow: Net cash used in operations was $4.3 million,
compared to $4.5 million in the first quarter of 2022. Free cash
flow was $(4.6) million, or (7)% of total revenue, compared to
$(5.0) million, or (10)% of total revenue, in the first quarter of
2022.
- Cash, cash equivalents and short-term investments were
$335.7 million as of March 31, 2023.
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.
Transaction with Thoma Bravo
As previously reported, the U.S. Department of Justice (the
“DOJ”) has issued a Second Request in connection with its review of
the proposed acquisition of ForgeRock by Thoma Bravo pursuant to
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR
Act”). In February 2023, ForgeRock and entities affiliated with
Thoma Bravo entered into an agreement (the “Timing Agreement”) with
the DOJ in connection with the proposed acquisition and the Second
Request. Under the Timing Agreement, ForgeRock and Thoma Bravo
agreed that they will certify compliance with the Second Request no
earlier than May 1, 2023, and will not consummate the proposed
acquisition less than 75 days after compliance with the Second
Request. The Timing Agreement does not prevent ForgeRock and Thoma
Bravo from consummating the proposed acquisition sooner if the DOJ
closes its investigation of the proposed acquisition before that
date. The expiration or termination of the waiting period
applicable to the proposed acquisition pursuant to the HSR Act (and
the absence of any agreement with any governmental authority not to
consummate the proposed acquisition) is the only remaining approval
or regulatory condition required to consummate the closing of the
proposed acquisition.
Due to the Company's pending acquisition by Thoma Bravo that was
announced on October 11, 2022, there will not be a conference call
or live webcast to discuss these financial results. In addition,
the Company has suspended its financial guidance as a result of the
pending transaction.
Non-GAAP Financial Measures and Key Metrics:
Besides financial results prepared in accordance with U.S.
generally accepted accounting principles (“GAAP”), ForgeRock
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 acquisition-related costs, stock-based compensation
expense, and certain of which exclude the tax effect on the
provision for (benefit from) income taxes related to such excluded
items. ForgeRock excludes acquisition-related costs because they
are unrelated to our current operations and are neither comparable
to the prior period nor indicative of future results. We also
exclude 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, adjusted for depreciation, acquisition-related costs and
stock-based compensation expense. ForgeRock excludes certain items
that it believes are not good indicators of ForgeRock’s current or
future operating performance. These items are depreciation,
acquisition-related costs and stock-based compensation. ForgeRock
excludes depreciation given its standard exclusion in EBITDA and
adjusted EBITDA results. In addition, the frequency and amount of
such charges can vary significantly based on the size and timing of
the transactions.
ForgeRock also presents free cash flow, which is 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. Forward-looking
statements generally relate to future events or ForgeRock’s future
financial or operating performance. In some cases, you can identify
forward-looking statements because they contain words such as
"may," "will," "should," "expects," "plans," "anticipates,” “going
to,” "could," "intends," "target," "projects," "contemplates,"
"believes," "estimates," "predicts," "potential," "continue" or the
negative of these words or other similar terms or expressions that
concern ForgeRock’s expectations, strategy, priorities, plans or
intentions. Forward-looking statements in this release include, but
are not limited to the quotations of management, statements
regarding the proposed acquisition by entities affiliated with
Thoma Bravo, our strategy, products, including new offerings and
the capabilities of our platform, and financial condition.
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 the pendency of the
proposed acquisition by entities affiliated with Thoma Bravo or the
failure to complete such transaction, 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, and other risks
detailed in our filings with the Securities and Exchange Commission
("SEC"), including our Annual Report on Form 10-K filed with the
SEC on March 1, 2023 and in our Quarterly Report on Form 10-Q that
will be filed with the SEC on or about May 9, 2023.
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 (UNAUDITED) (In thousands, except per
share amounts)
Three months ended March
31,
2023
2022
Revenue:
Subscription term licenses
$
25,557
$
19,659
Subscription SaaS, support &
maintenance
34,101
26,185
Perpetual licenses
65
86
Total subscriptions and perpetual
licenses
59,723
45,930
Professional services
3,420
2,163
Total revenue
63,143
48,093
Cost of revenue:
Subscriptions and perpetual licenses
8,322
5,853
Professional services
3,478
2,850
Total cost of revenue
11,800
8,703
Gross profit
51,343
39,390
Operating expenses:
Research and development
17,203
14,479
Sales and marketing
36,451
26,978
General and administrative
15,868
13,545
Acquisition-related costs
6,947
—
Total operating expenses
76,469
55,002
Operating loss
(25,126
)
(15,612
)
Foreign currency gain (loss)
(542
)
435
Interest expense
(1,135
)
(899
)
Other income, net
1,836
68
Interest and other income (expense),
net
159
(396
)
Loss before income taxes
(24,967
)
(16,008
)
Provision for income taxes
469
462
Net loss
$
(25,436
)
$
(16,470
)
Net loss per share attributable to common
stockholders:
Basic and diluted
$
(0.29
)
$
(0.20
)
Weighted-average shares used in computing
net loss per share attributable to common stockholders:
Basic and diluted
87,463
83,766
(1) Includes stock-based compensation as
follows (in thousands):
Three months ended March
31,
2023
2022
Cost of revenue
$
1,005
$
517
Research and development
2,010
1,400
Sales and marketing
3,940
2,258
General and administrative
3,228
2,285
Total stock-based compensation expense
$
10,183
$
6,460
CONDENSED CONSOLIDATED BALANCE
SHEETS (UNAUDITED) (In thousands, except par value)
March 31, 2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents
$
143,971
$
128,803
Short-term investments
191,743
207,248
Accounts receivable, net of allowance for
credit losses of $664 and $444, respectively
47,097
71,439
Contract assets
27,203
25,117
Deferred commissions
9,480
9,936
Prepaid expenses and other assets
15,891
14,810
Total current assets
435,385
457,353
Deferred commissions
20,740
20,379
Property and equipment, net
2,922
2,850
Operating lease right-of-use assets
9,816
10,190
Contract and other assets
3,784
3,408
Total assets
$
472,647
$
494,180
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
8,564
$
4,587
Accrued compensation
15,735
24,836
Accrued expenses
8,649
9,475
Current portion of operating lease
liability
1,941
1,902
Deferred revenue
78,315
82,036
Other liabilities
2,526
2,927
Total current liabilities
115,730
125,763
Long-term debt
39,643
39,611
Long-term operating lease liability
8,790
9,207
Deferred revenue
920
1,283
Other liabilities
2,585
2,150
Total liabilities
167,669
178,014
Stockholders’ equity
Common stock
88
87
Additional paid-in capital
654,600
641,983
Accumulated other comprehensive income
5,823
4,193
Accumulated deficit
(355,533
)
(330,097
)
Total stockholders’ equity
304,978
316,166
Total liabilities and stockholders’
equity
$
472,647
$
494,180
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS (UNAUDITED) (In thousands)
Three months ended March
31,
2023
2022
Operating activities:
Net loss
$
(25,436
)
$
(16,470
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation
256
280
Noncash operating lease expense
613
535
Stock-based compensation expense
10,183
6,460
Amortization of deferred commissions
3,916
3,991
Foreign currency remeasurement loss
(gain)
552
(620
)
Amortization of premium / discount on
short-term investments
(867
)
646
Other
421
102
Changes in operating assets and
liabilities:
Deferred commissions
(3,822
)
(4,085
)
Accounts receivable
25,158
17,321
Contract and other non-current assets
(2,275
)
(122
)
Prepaid expenses and other current
assets
(913
)
(893
)
Operating lease liabilities
(634
)
(499
)
Accounts payable
3,957
(436
)
Accrued expenses and other liabilities
(10,382
)
(4,640
)
Deferred revenue
(5,034
)
(6,040
)
Net cash used in operating
activities
(4,307
)
(4,470
)
Investing activities:
Purchases of property and equipment
(285
)
(488
)
Purchases of short-term investments
(18,974
)
(52,994
)
Maturities of short-term investments
35,763
14,452
Sales of short-term investments
579
4,836
Net cash provided by (used in)
investing activities
17,083
(34,194
)
Financing activities:
Proceeds from exercises of employee stock
options
6,338
2,179
Payment of offering costs
—
(141
)
Employee payroll taxes paid for net shares
settlement of restricted stock units
(3,903
)
—
Net cash provided by financing
activities
2,435
2,038
Effect of exchange rates on cash and cash
equivalents and restricted cash
(50
)
(200
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
15,161
(36,826
)
Cash, cash equivalents and restricted
cash, beginning of year
131,324
128,437
Cash, cash equivalents and restricted
cash, end of period
$
146,485
$
91,611
Reconciliation of cash and cash
equivalents and restricted cash:
Cash and cash equivalents
$
143,971
$
91,580
Restricted cash included in prepaids and
other current assets
2,514
31
Total cash and cash equivalents and
restricted cash
$
146,485
$
91,611
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, as presented
below (in thousands, except percentages):
Three months ended March
31,
2023
2022
Gross profit
$
51,343
$
39,390
Add: Stock-based compensation
1,005
517
Non-GAAP gross profit
$
52,348
$
39,907
Gross margin
81
%
82
%
Non-GAAP gross margin
83
%
83
%
Non-GAAP Research and
Development
We define non-GAAP research and
development as GAAP research and development adjusted to exclude
stock-based compensation expense as presented below (in
thousands):
Three months ended March
31,
2023
2022
Research and development
$
17,203
$
14,479
Less: Stock-based compensation
2,010
1,400
Non-GAAP research and development
$
15,193
$
13,079
Non-GAAP Sales and Marketing
We define non-GAAP sales and marketing as
GAAP sales and marketing adjusted to exclude stock-based
compensation expense as presented below (in thousands):
Three months ended March
31,
2023
2022
Sales and marketing
$
36,451
$
26,978
Less: Stock-based compensation
3,940
2,258
Non-GAAP sales and marketing
$
32,511
$
24,720
Non-GAAP General and
Administrative
We define non-GAAP general and
administrative as GAAP general and administrative adjusted to
exclude stock-based compensation expense as presented below (in
thousands):
Three months ended March
31,
2023
2022
General and administrative
$
15,868
$
13,545
Less: Stock-based compensation
3,228
2,285
Non-GAAP general and administrative
$
12,640
$
11,260
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
acquisition-related costs, as presented below (in thousands, except
percentages):
Three months ended March
31,
2023
2022
Operating loss
$
(25,126
)
$
(15,612
)
Add: Stock-based compensation
10,183
6,460
Add: Acquisition-related costs
6,947
—
Non-GAAP operating loss
$
(7,996
)
$
(9,152
)
Operating margin
(40
) %
(32
) %
Non-GAAP operating margin
(13
) %
(19
) %
Adjusted EBITDA
We define adjusted EBITDA as operating
loss adjusted to exclude depreciation, stock-based compensation
expense and acquisition-related costs, as presented below (in
thousands):
Three months ended March
31,
2023
2022
Operating loss
$
(25,126
)
$
(15,612
)
Add: Depreciation
256
280
Add; Stock-based compensation
10,183
6,460
Add: Acquisition-related costs
6,947
—
Adjusted EBITDA
$
(7,740
)
$
(8,872
)
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 and
acquisition-related costs, 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 the
dilutive effect of employee equity awards, excluding the impact of
unrecognized stock-based compensation expense, unless these
adjustments are anti-dilutive.
Three months ended March
31,
2023
2022
Net loss
$
(25,436
)
$
(16,470
)
Add: Stock-based compensation
10,183
6,460
Add: Acquisition-related costs
6,947
—
Tax effect on the provision for income
taxes
114
62
Non-GAAP net loss
$
(8,192
)
$
(9,948
)
Non-GAAP net loss per share, basic and
diluted
$
(0.09
)
$
(0.12
)
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 March
31,
2023
2022
Net cash used in operating activities
$
(4,307
)
$
(4,470
)
Purchases of property and equipment
(285
)
(488
)
Free cash flow
$
(4,592
)
$
(4,958
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230508005596/en/
Investor Relations: investors@forgerock.com
Media Contacts: Kristen Batch, ForgeRock
kristen.batch@forgerock.com
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