• 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.

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