ForgeRock, Inc. Class A

Welcome to ForgeRock's third quarter earnings conference call. As a reminder, this call is being recorded. I would like to turn the call over to Mark King, ForgeRock's head of investor relations. Please go ahead.

Hello, everyone. Welcome to ForgeRock's Q3 2021 conference call. On the call with me today, our friend Rosh, CEO of ForgeRock, and John Fernandez, our chief financial officer and EVP of global operations. Before we begin, I'd like to remind you that our discussion today includes forward-looking statements within the meaning of the federal securities laws. Forward-looking statements include statements related to our expected results for Q4 and full-year 2021 results, our future offerings and enhancements to our current offerings, the market for our offerings, customer demand for our offerings, and other matters. Actual results could differ materially from those indicated by these forward-looking statements. We encourage you to review the risk factors that we have included in our SEC filings including our final IPO perspectives filed with the SEC on September 17th, 2021, for some of the factors that could cause actual results to differ from those indicated by the forward-looking statements. All non-GAAP numbers referenced in today's call are reconciled in our press release and slides available on our investor relations website. With that, I'll hand the call over to Fran.

Thanks, Mark. And thanks to everyone for joining our first earnings call as a public company. Before I get started, I would like to thank our employees, customers, partners, and investors for their support over the years. I'm very excited to have completed a successful IPO in September, and we are looking forward to this next stage of our growth. We're pleased with the results we achieved in our first quarter as a public company. Revenue in the third quarter grew 38% year over year to $44 million, while ARR grew 30% to $164 million. we continue to see traction with the 4DRAC Identity Cloud, our SaaS offering, which is seeing growing adoption with both new and existing customers. Identity continues to be 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. 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 for enterprise-grade identity. Before I elaborate on our highlights of the third quarter, given this is our first earnings call, I'd like to tell you more about ForgeRock, our opportunity, and why I'm so excited about the future ahead. If you take a moment to look around, it's easy to spot how the world is changing. Activities that we used to conduct in person are now happening digitally. Banking, healthcare, and retail, to name a few. We're using facial recognition on our phones to get access to applications, and ForgeRock is helping to power this new digital economy and drive this massive digital transformation. ForgeRock is a global leader in consumer, workforce, and IoT identity, and our unique technology breaks the forced compromise that has been the status quo for far too long. We help people access the connected world with intuitive digital experiences that provide enhanced security in a zero-trust environment. Our mission is to create identity experiences for people at work, at home, or on the go that are so simple and secure that two things happen. Identity recedes into the background completely and users never have to log in again. We purpose-built our enterprise-grade, unified, and full suite platform to serve the modern digital identity needs of enterprise, who are under ever-increasing competitive pressure to deliver personalized and seamless omnichannel experiences. This competitive pressure is driving enterprises to focus on identity as a key strategic initiative to provide differentiated experiences to increase loyalty with consumers and enhance productivity for employees. However, enterprises are saddled with complex, heterogeneous IT environments driven by the accumulation of a myriad of applications and infrastructures resulting from decentralization of IT, mergers and acquisitions, and decades of homegrown or legacy systems. and evolving regulatory and compliance mandates at additional pressure as enterprises operate globally. These challenges faced by our enterprise customers present a massive opportunity for ForgeRock. Based on our bottoms-up analysis using our current product suite, we estimate our market opportunity to be $71 billion across consumer, workforce, IoT, and services. We estimate the consumer opportunity, often referred to as consumer identity and access management, or SIAM, to be $41 billion, which we believe to be the fastest growing part of the identity market. Also, we are focused on enterprises who make up the majority of business information and communications technology spend. And a big reason why we win is because we give our customers the power of choice. Our customers choose how they want to deploy our software in their heterogeneous environments, including self-managed environments, such as public and private cloud environments, and through our SaaS offering, the ForgeRock Identity Cloud, or a combination of both. ForgeRock has always had a differentiated approach to solving the identity challenge. We launched in 2010 with the intention of building the most comprehensive, digital identity platform on the market. A full suite identity solution, purpose built for all kinds of identities that can easily integrate into complex hybrid enterprise environments and provide blazingly fast performance. When we ask our customers why they selected ForgeRock, here are the key reasons that they give us. We provide our customers with the power to build simple, flexible identity experiences that are embedded with security by leveraging our identity tree capabilities. Their developers love this drag and drop capability that allows them to quickly create customer identity journeys in minutes. Our unified platform is purpose-built for all kinds of identities, consumers, workforce, IoT, and services, and across the identity lifecycle, including identity management, access management, including MFA and single sign-on, and governance administration. Our customers want to avoid the complexity and expense related to cobbling together and operating multiple point solutions. What they want is a more comprehensive platform like ForgeRock. Our customers choose ForgeRock because of our unique approach to the cloud. ForgeRock offers the choice between private, public, and SaaS, and our modern architecture provides our customers with more control over their data and performance. This differentiated cloud architecture is so important to global companies who face requirements to keep their identity data in their respective countries to ensure data sovereignty. The ForgeRock platform enables our customers to create sophisticated identity experiences and to integrate into complex hybrid environments and performance scale with high reliability. More than 1,300 organizations around the world leverage our platform to manage, in aggregate, over 3 billion identities. Our platform is capable of managing over 60,000 user-based access transactions per second per customer. This is particularly important for customers who have tens of millions or hundreds of millions of identities, like the BBC, HSBC, and telecom cell. the largest wireless carrier in Indonesia. Our trust network allows our customers to quickly integrate with our network of over 120 technology partners across biometrics, identity proofing, and risk analysis. These integrations are part of the ForgeRock Identity Platform and are prebuilt, tested, and always up to date. Lastly, our customers appreciate our track record of innovation, across important areas such as passwordless authentication, governance, AI, and our SaaS offering. We expect our rapid pace of innovation to drive our future growth. We've taken a modern approach to the 4DRAC Identity Cloud. Our multi-tenant SaaS architecture with complete tenant isolation provides our enterprise customers with more control over how their data is stored and where it resides. While all companies value this increased data control, this is particularly important to ForgeRock, as around 50% of our revenue is generated from customers located outside of the US, and these customers face many requirements to maintain data sovereignty and information privacy. Our modern architecture also helps our customers to maximize performance and service reliability by not throttling or rate limiting individual customer environments, which can be critical for enterprises, especially during large usage spikes such as Cyber Monday or media events like the World Cup or Royal Wedding. We also protect against noisy neighbor issues so that traffic from one customer will not affect another customer's performance. The holiday season is expected to be more digital than ever. With retail trends like click and collect at curbside growing, companies cannot afford the front door of their businesses to be shut down due to large usage spikes, something our unique architecture prevents. As I mentioned previously, we provide our customers with the power to choose how they want to consume our software, whether it be self-managed or SaaS. For our new customers in Q3, 75% chose our self-managed offering, and 25% chose the ForgeRock Identity Cloud. Demand for our self-managed offering is strong because many global enterprises need a combination of on-premise and cloud deployments for their hybrid IT environments. Our SaaS offering continues to experience rapid growth since its launch, with 50% of ARR from new customers in Q3 coming from SAS. Now let's discuss some of the recent highlights on the product front. We've continued to invest in our platform to drive innovation, and the biggest areas of focus for us recently have been in the 4DRAC Identity Cloud as well as AI. We released enhanced sign-in capabilities to the 4DRAC Identity Cloud to ensure every customer touchpoint along a buyer's journey feels personal and effortless. This is especially useful for companies that manage multiple brands and want to deliver personalized experiences across a variety of channels like web and mobile and have a single view of all their identities. Called UI theming, it offers out-of-the-box design options for developers so they can quickly and easily configure identity journeys that recognize the consumer across brands and digital channels for a personalized experience. Our customers are telling us that they want to go passwordless as part of their digital transformation journey. For many hybrid IT organizations, maintaining sensitive passwords on-prem while moving other operations to the cloud creates a significant challenge. Teams must evaluate the best authentication approach that will maximize security while preserving a greater user experience. But a move to the cloud often means adding more passwords or forced password resets, which is a bad experience for users. To help these customers, we released two new features, pass-through authentication and just-in-time migration. Now, 4DRAC Identity Cloud empowers enterprises to move to the cloud without the headaches of managing even more passwords and causing customer inconveniences that can erode brand loyalty. We continue to provide more benefits to customers who buy the ForgeRock Identity Cloud by obtaining certifications that are important to CISOs and CIOs. Healthcare records are prime targets for attackers. During the quarter, we achieved HIPAA compliance to give healthcare customers a safe and secure way to protect electronic health information. We also completed the SOC 2 Type 2 certification. This additional third-party industry validation confirms ForgeRock provides enterprise-grade security, availability, confidentiality, and privacy for customer data managed by the ForgeRock Identity Cloud. Our investments in AI and ML continue to benefit our customers who rely on us to better govern our identities for the workforce. we released a market-first capability to our AI-driven autonomous identity product that we believe is superior to traditional role-based access control, commonly known as RBAC, used by many companies for provisioning access. RBAC can be costly to administer and often can't keep up in agile environments. That changes with our new roles workshop capability, which uses AI to quickly analyze and recommend the optimal role structure to manage access for the enterprise. Customers are the crown jewel of ForgeRock, and I'm excited to share several notable wins from the quarter. DirecTV is a new SIAM customer. The company chose our SaaS offering, the ForgeRock Identity Cloud, to establish a single, unified identity platform for their millions of users. This will give their subscribers the ability to seamlessly log in to DIRECTV services across devices, automate actions like password resets and more. Ultimately, this will lead to a superior customer experience while helping DIRECTV retain subscribers and reduce costs. Our next customer example is a top 25 US retailer that has been using ForgeRock over the past five years for both consumer and workforce use cases. This customer significantly expanded their relationship with us in Q3, driven by digital transformation and more shoppers moving to online retail. They were looking to unify identity for employees, customers, partners, and vendors, and chose ForgeRock as their sole enterprise authentication and identity and access management platform. On the consumer side, they leveraged the ForgeRock Identity Platform to improve their omnichannel capabilities as their customers were seeking the same purchase experience across in-store, online, curbside pickup, and same-day delivery. Through ForgeRock, they were able to provide a better user experience while also boosting security for the consumer and workforce use cases. In Australia, we're helping the Australian Department of Home Affairs reopen the country's borders. Our identity platform is enabling digital passenger declaration cards to replace physical travel documentation. Travelers to Australia will be able to complete the digital passenger declaration process in minutes from their mobile device or computer. ForgeRock, in partnership with Accenture, will be used for this initiative due to the flexibility, scale, and unified and extensive identity platform that we provide. An industry-leading global transportation company experiencing massive growth, particularly with its B2B business, selected ForgeRock in the quarter. This customer saw immense potential for growth through its end users and is embarking on a new digital strategy based on identity. The company chose ForgeRock to get a 360-degree view of its customers to enable personalized digital experiences, offer new products, streamline compliance, and reduce costs. Moving to our market leadership, ForgeRock continues to be recognized by multiple third-party industry analysts. In fact, ForgeRock has once again been named a leader in the 2021 Gartner Magic Quadrant for Access Management. were pleased to receive leadership recognition in back-to-back years. We continue to be the only identity provider recognized as a leader by Gartner for Access Management and Forrester and Coventry Coal for SIAM. During the quarter, we added impressive new talent to the team. Shudie Smith joined Fordrock as our new Chief People Officer. She joined us from Cisco, where she served as Senior Vice President of people and communities overseeing talent, rewards, recruiting, and leadership development strategies. We also appointed two new members to our board of directors, Rinki Sethi and Johanna Flower. Rinki is currently the Chief Information Security Officer at Twitter and built her career leading and developing innovative online security infrastructures for Fortune 500 companies. Johanna served as CrowdStrike's first CMO, and was instrumental in helping the company grow from $12 million to nearly $800 million in ARR. We're pleased to welcome Shuti, Rinki, and Johanna to the ForgeRock team that now exceeds 750 people worldwide. Overall, I'm very pleased with the momentum we're seeing across our business. Identity continues to be 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. We see these trends continuing into our fourth quarter, bolstering our confidence that we are well positioned to capitalize on a large and growing market opportunity for enterprise-grade identity. With that, I'll turn the call over to John to walk through our financial results in more detail.