- ARR was $251.3 million for Q2 2023, with growth accelerating to
25% year-over-year
- Total revenue was $58.3 million for Q2 2023, growing 22%
year-over-year
- Subscription SaaS, support & maintenance revenue was $38.1
million for Q2 2023, growing 29% year-over-year
ForgeRock, Inc. (NYSE: FORG), a global leader in digital
identity, today announced financial results for its second quarter
ended June 30, 2023.
“Q2 was a very strong quarter and our ARR growth accelerated
sequentially to 25% year-over-year, ending at $251 million,” said
Fran Rosch, CEO of ForgeRock. “Our net new ARR growth of $14
million in the quarter was 63% higher than the same period last
year and our growth year to date was driven by the acquisition of
large customers such as Carl Zeiss AG, the City of Toronto,
Domino's Pizza Enterprises Ltd. and Riyad Bank. Our SaaS growth
continues to be strong in Q2, with new SaaS logos representing 43%
of new customers in Q2 based on count and 60% based on ARR.”
“We continue to work closely with Thoma Bravo to support the
process to close our pending acquisition,” Rosch added. “We look
forward to completing the review process with the Department of
Justice and partnering with Thoma Bravo to drive further innovation
and benefits for our customers, employees, partners and
investors.”
“Our total revenue grew 22% year-over-year in Q2 and our
subscription SaaS, support & maintenance revenue grew 29%
year-over-year,” said John Fernandez, CFO of ForgeRock. “Our
quarterly subscription SaaS business combined with our support
& maintenance revenue now represents 65% of our total revenue,
which provides us with increasing revenue visibility as we scale.
We remain focused on achieving non-GAAP operating margin
profitability in Q4, especially as we have surpassed $250 million
in ARR, joining the ranks of the world's most successful software
companies. Our GAAP operating margin was (52)% in Q2 and includes
the impact of acquisition-related costs, and (47)% in Q2 of the
prior year. Our non-GAAP operating margin in Q2 of (25)% was a
significant improvement over the (30)% we experienced in Q2 of the
prior year.”
Second Quarter 2023 Financial Highlights:
- ARR: Annualized Recurring Revenue was $251.3 million, an
increase of 25% year-over-year.
- Revenue: Total revenue was $58.3 million, an increase of
22% year-over-year.
- Operating Loss: GAAP operating loss was $30.1 million,
or 52% of total revenue, compared to $22.3 million, or 47% of total
revenue, in the second quarter of 2022. Non-GAAP operating loss was
$14.6 million, or 25% of total revenue, compared to $14.3 million,
or 30% of total revenue, in the second quarter of 2022.
- Net Loss: GAAP net loss was $28.8 million, compared to
$22.4 million in the second quarter of 2022. GAAP net loss per
share was $0.32, compared to $0.26 in the second quarter of 2022.
Non-GAAP net loss was $13.2 million, compared to $14.5 million in
the second quarter of 2022. Non-GAAP net loss per share was $0.15,
compared to $0.17 in the second quarter of 2022.
- Cash Flow: Net cash used in operations was $14.9
million, compared to $20.3 million in the second quarter of 2022.
Free cash flow was $(14.9) million, or (26)% of total revenue,
compared to $(20.7) million, or (44)% of total revenue, in the
second quarter of 2022.
- Cash, cash equivalents and short-term investments were
$321.7 million as of June 30, 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”) issued a Second Request pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the “HSR Act”) in connection
with its review of the proposed acquisition of ForgeRock by Thoma
Bravo. 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 not to consummate the proposed acquisition less than 75 days
after compliance with the Second Request. ForgeRock continues to
cooperate with the DOJ in connection with its review of the
proposed acquisition and expects to consummate the transaction in
the third quarter of 2023.
Due to the Company's pending acquisition by Thoma Bravo, there
will not be a conference call or live webcast to discuss these
financial results. In addition, ForgeRock 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 and statements
regarding: the proposed acquisition by entities affiliated with
Thoma Bravo, the anticipated timing of such proposed acquisition,
our strategy, our products, including new offerings and the
capabilities of our platform, and our 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 August 8, 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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Revenue:
Subscription term licenses
$
16,488
$
15,527
$
42,045
$
35,185
Subscription SaaS, support &
maintenance
38,110
29,562
72,211
55,748
Perpetual licenses
94
19
159
105
Total subscriptions and perpetual
licenses
54,692
45,108
114,415
91,038
Professional services
3,592
2,569
7,012
4,731
Total revenue
58,284
47,677
121,427
95,769
Cost of revenue(1):
Subscriptions and perpetual licenses
9,527
6,415
17,849
12,268
Professional services
3,594
2,912
7,072
5,763
Total cost of revenue
13,121
9,327
24,921
18,031
Gross profit
45,163
38,350
96,506
77,738
Operating expenses(1):
Research and development
17,515
15,666
34,718
30,144
Sales and marketing
37,616
30,050
74,067
57,028
General and administrative
16,259
14,935
32,127
28,479
Acquisition-related costs
3,851
—
10,798
—
Total operating expenses
75,241
60,651
151,710
115,651
Operating loss
(30,078
)
(22,301
)
(55,204
)
(37,913
)
Foreign currency gain (loss)
(657
)
1,026
(1,199
)
1,461
Interest expense
(875
)
(881
)
(2,010
)
(1,780
)
Other income, net
3,198
275
5,034
343
Interest and other income (expense),
net
1,666
420
1,825
24
Loss before income taxes
(28,412
)
(21,881
)
(53,379
)
(37,889
)
Provision for income taxes
369
489
838
951
Net loss
$
(28,781
)
$
(22,370
)
$
(54,217
)
$
(38,840
)
Net loss per share attributable to
stockholders:
Basic and diluted
$
(0.32
)
$
(0.26
)
$
(0.62
)
$
(0.46
)
Weighted-average shares used in computing
net loss per share attributable to stockholders:
Basic and diluted
88,757
84,445
88,114
84,107
(1) Includes stock-based compensation as
follows (in thousands):
Three Months Ended June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Cost of revenue
$
1,015
$
615
$
2,020
$
1,132
Research and development
2,216
1,653
4,226
3,053
Sales and marketing
4,383
2,803
8,323
5,061
General and administrative
3,965
2,900
7,193
5,185
Total stock-based compensation expense
$
11,579
$
7,971
$
21,762
$
14,431
CONDENSED CONSOLIDATED BALANCE
SHEETS
(UNAUDITED)
(In thousands, except par
value)
June 30, 2023
December 31,
2022
Assets
Current assets:
Cash and cash equivalents
$
288,994
$
128,803
Short-term investments
32,716
207,248
Accounts receivable, net of allowance for
credit losses of $667 and $444, respectively
50,904
71,439
Contract assets
25,596
25,117
Deferred commissions
9,877
9,936
Prepaid expenses and other assets
13,058
14,810
Total current assets
421,146
457,353
Deferred commissions
21,589
20,379
Property and equipment, net
2,720
2,850
Operating lease right-of-use assets
9,377
10,190
Contract and other assets
3,888
3,408
Total assets
$
458,720
$
494,180
Liabilities and stockholders’
equity
Current liabilities:
Accounts payable
$
6,154
$
4,587
Accrued compensation
17,029
24,836
Accrued expenses
7,924
9,475
Current portion of operating lease
liability
1,927
1,902
Deferred revenue
82,016
82,036
Other liabilities
1,502
2,927
Total current liabilities
116,552
125,763
Long-term debt
39,675
39,611
Long-term operating lease liability
8,352
9,207
Deferred revenue
2,389
1,283
Other liabilities
2,838
2,150
Total liabilities
169,806
178,014
Stockholders’ equity
Common stock
89
87
Additional paid-in capital
667,230
641,983
Accumulated other comprehensive income
5,909
4,193
Accumulated deficit
(384,314
)
(330,097
)
Total stockholders’ equity
288,914
316,166
Total liabilities and stockholders’
equity
$
458,720
$
494,180
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In thousands)
Six Months Ended June
30,
2023
2022
Operating activities:
Net loss
$
(54,217
)
$
(38,840
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation
503
549
Noncash operating lease expense
1,229
1,147
Stock-based compensation expense
21,762
14,431
Amortization of deferred commissions
7,749
7,202
Foreign currency remeasurement loss
(gain)
1,093
(1,539
)
Amortization of premium / discount on
short-term investments
(1,117
)
1,247
Other
688
50
Changes in operating assets and
liabilities:
Deferred commissions
(8,900
)
(7,928
)
Accounts receivable
21,531
7,709
Contract and other non-current assets
(890
)
2,458
Prepaid expenses and other current
assets
2,090
(893
)
Operating lease liabilities
(1,282
)
(884
)
Accounts payable
1,529
(45
)
Accrued expenses and other liabilities
(10,781
)
(4,265
)
Deferred revenue
(190
)
(5,130
)
Net cash used in operating
activities
(19,203
)
(24,731
)
Investing activities:
Purchases of property and equipment
(322
)
(974
)
Purchases of short-term investments
(18,974
)
(64,971
)
Maturities of short-term investments
54,763
43,048
Sales of short-term investments
141,053
11,792
Net cash provided by (used in)
investing activities
176,520
(11,105
)
Financing activities:
Proceeds from exercises of employee stock
options
9,782
3,329
Payment of offering costs
—
(141
)
Employee payroll taxes paid for net shares
settlement of restricted stock units
(6,295
)
—
Proceeds from issuance of common stock
under employee stock purchase plan
—
4,374
Net cash provided by financing
activities
3,487
7,562
Effect of exchange rates on cash and cash
equivalents and restricted cash
(541
)
(1,036
)
Net increase (decrease) in cash, cash
equivalents and restricted cash
160,263
(29,310
)
Cash, cash equivalents and restricted
cash, beginning of year
131,324
128,437
Cash, cash equivalents and restricted
cash, end of period
$
291,587
$
99,127
Reconciliation of cash and cash
equivalents and restricted cash:
Cash and cash equivalents
$
288,994
$
99,083
Restricted cash included in prepaids and
other current assets
2,593
44
Total cash and cash equivalents and
restricted cash
$
291,587
$
99,127
Short-term investments, end of period
$
32,716
$
248,128
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Gross profit
$
45,163
$
38,350
$
96,506
$
77,738
Add: Stock-based compensation
1,015
615
2,020
1,132
Non-GAAP gross profit
$
46,178
$
38,965
$
98,526
$
78,870
Gross margin
77
%
80
%
79
%
81
%
Non-GAAP gross margin
79
%
82
%
81
%
82
%
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Research and development
$
17,515
$
15,666
$
34,718
$
30,144
Less: Stock-based compensation
2,216
1,653
4,226
3,053
Non-GAAP research and development
$
15,299
$
14,013
$
30,492
$
27,091
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Sales and marketing
$
37,616
$
30,050
$
74,067
$
57,028
Less: Stock-based compensation
4,383
2,803
8,323
5,061
Non-GAAP sales and marketing
$
33,233
$
27,247
$
65,744
$
51,967
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
General and administrative
$
16,259
$
14,935
$
32,127
$
28,479
Less: Stock-based compensation
3,965
2,900
7,193
5,185
Non-GAAP general and administrative
$
12,294
$
12,035
$
24,934
$
23,294
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Operating loss
$
(30,078
)
$
(22,301
)
$
(55,204
)
$
(37,913
)
Add: Stock-based compensation
11,579
7,971
21,762
14,431
Add: Acquisition-related costs
3,851
—
10,798
—
Non-GAAP operating loss
$
(14,648
)
$
(14,330
)
$
(22,644
)
$
(23,482
)
Operating margin
(52
)%
(47
)%
(45
)%
(40
)%
Non-GAAP operating margin
(25
)%
(30
)%
(19
)%
(25
)%
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Operating loss
$
(30,078
)
$
(22,301
)
$
(55,204
)
$
(37,913
)
Add: Depreciation
247
269
503
549
Add: Stock-based compensation
11,579
7,971
21,762
14,431
Add: Acquisition-related costs
3,851
—
10,798
—
Adjusted EBITDA
$
(14,401
)
$
(14,061
)
$
(22,141
)
$
(22,933
)
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net loss
$
(28,781
)
$
(22,370
)
$
(54,217
)
$
(38,840
)
Add: Stock-based compensation
11,579
7,971
21,762
14,431
Add: Acquisition-related costs
3,851
—
10,798
—
Tax effect on the provision for income
taxes
111
(71
)
225
(133
)
Non-GAAP net loss
$
(13,240
)
$
(14,470
)
$
(21,432
)
$
(24,542
)
Non-GAAP net loss per share, basic and
diluted
$
(0.15
)
$
(0.17
)
$
(0.24
)
$
(0.29
)
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 June
30,
Six Months Ended June
30,
2023
2022
2023
2022
Net cash used in operating activities
$
(14,896
)
$
(20,261
)
$
(19,203
)
$
(24,731
)
Purchases of property and equipment
(37
)
(486
)
(322
)
(974
)
Free cash flow
$
(14,933
)
$
(20,747
)
$
(19,525
)
$
(25,705
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230807050297/en/
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Media Contacts: Kristen Batch, ForgeRock
kristen.batch@forgerock.com
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