ForgeRock, Inc. Class A

Today, ladies and gentlemen, welcome to ForgeRock's first quarter earnings conference call. As a reminder, this call is being recorded. I would now like to turn the call over to Mark Kang, ForgeRock's head of investor relations. Please go ahead.

Hello, everyone. Welcome to ForgeRock's Q1 2022 earnings conference call. On the call with me today are Fran Roche, 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 Q2 and full year 2022, 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 included in our SEC filings, including our annual report on Form 10-K filed with the SEC on March 9, 2022, 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 in 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 us to discuss our first quarter 2022 results. We had a fantastic start to 2022, and once again, outperformed our guidance across all metrics, highlighted by ARR growth of 35% year-over-year for the second consecutive quarter. Our ARR growth accelerated year-over-year by five percentage points, and we delivered 10.1 million and sequential net new ARR in Q1 versus 7.2 million in the same quarter last year, representing a 41% growth year-over-year. We continue to see strong demand across our portfolio, particularly for our SAS offering, which continues to beat our expectations. The strength of our customer demand gives us confidence to raise our full year 2022 guidance for ARR and our expected SaaS adoption. John will discuss this further in his remarks. Recent cybersecurity events have reminded us again that identity is critical to both securing the enterprise and enhancing customer experience. The threat landscape remains as challenging as ever, And security spending in general, which includes identity, remains a top priority for CIOs and CISOs. But it's not just about security. Digital transformation initiatives are driving enterprises to enhance customer and employee experience and modernize their IT infrastructure, therefore heightening demand for both our SIAM and workforce solutions. We differentiate ourselves by approaching the market with an integrated platform across identity, access, and governance for SIAM workforce and IoT use cases that supports all identity types. We empower our customers to choose how they want to deploy our software in their heterogeneous environments, such as self-managed public and private cloud environments through our SaaS offering, the 4DRAC Identity Cloud, or hybrid deployments. Adoption of our SaaS offering among our customers is strengthening, representing 65% of ARR from new customers in Q1, a new record for us. In the past, you've heard us talk about our multi-tenant SaaS architecture, the tenant isolation, which is unique in the identity market. Our differentiated SaaS architecture has a few distinct advantages. First, we leave our performances unmatched. It's important to note that we designed our SaaS offerings from the ground up to support the largest enterprises during their busiest times, like Black Friday or Cyber Monday. Unlike a typical multi-tenant approach, our tenant isolation means we don't throttle traffic to guard against noisy neighbor issues, which is a de facto approach among other identity providers. Fordock has delivered an average of four nines of availability since the inception of our SaaS offering. We are now committing to this level of service in our agreements. But not everyone delivers four nines the same way. And four nines doesn't matter if it comes with heavy, throttling caveats, which are so common in the industry. Often, SaaS architectures put a large number of enterprise customers in a single shared pod, meaning that if one enterprise is a massive scale event, all other enterprises in the pod may get throttled to ensure the resilience of shared resources. Technically, that's still considered four nines, but it doesn't feel like it because the throttling activity causes service disruptions, creates latency, and hinders the experience of their end users. Second, We provide our SaaS customers with data isolation that meets the regulatory requirements. We enable our customers to choose where their data resides in the cloud. For example, for some customers, it's critical for the data to reside on a server located in their country or region. We don't share endpoints, something that's very important from a security and availability standpoint. Third, we believe we have the most modern SaaS platform among major identity providers today. We leverage technologies such as Kubernetes and elasticity that wasn't available 10 years ago to build our tenant isolation approach. Our approach enables us to offer our customers massive scale without the typical noisy neighbor or throttling issues, and it's also cost-effective for us. We believe we are extremely well positioned for the road ahead due to our SaaS offering, which has been purpose-built for the enterprise market. And we continue to evolve our platform with cutting-edge technologies. Our market opportunity is massive and continues to expand, driven by our culture of product innovation and the passion of our Ford Rock identity experts. Today, we are excited to announce Ford Rock Autonomous Access, another AI-driven solution that helps organizations prevent cyber attacks and fraud in real time. Many of us have had our identities stolen, or worse, we've had cyber criminals actually accessing our accounts. Attacks involving usernames and passwords increased state staggering 450% in the last year, translating into more than 1 billion compromised records in the U.S. alone. As companies digitally transform and expand their online presence, their attack surface also increases, and bad actors will attempt to take advantage of it. Autonomous access is a new threat protection solution that helps enterprises eliminate account takeovers and prevent fraud in real time using a powerful combination of artificial intelligence, machine learning, and advanced pattern recognition. It continuously evaluates access behavior and assigns risk scores to prevent known attacks and detect new threats. With today's announcement, 4DRAC continues to deliver on its AI strategy with a new solution that enables smarter access decisions, delivering better protection along with seamless experiences for trusted users. Delivered from the 4DRAC Identity Cloud, Autonomous access empowers teams to create any number of personalized user access journeys with a simple drag-and-drop, no-code interface. Autonomous access is applicable to both SIAM and workforce use cases, and our sales team will begin selling the solution by the end of this month. We have a great pipeline of product innovation, and we will share updates with you in future quarters. The momentum we are seeing across our business is being driven by broader adoption of our platform across both SIAM and workforce use cases for self-managed SaaS or hybrid deployments. We continue to see a diverse mix of customer wins across industry verticals. I'd like to take a few minutes to highlight five customer wins from the first quarter. All five of these wins are with the Forge Academic Cloud, and three of them are Fortune 100 companies. Our first customer one example is an Asia-based multinational insurance and finance corporation with over 30 million customers. This customer is revamping their customer loyalty platform in Australia and selected the ForgeRock Identity Cloud because, unlike ForgeRock, their existing identity provider could not provide full data residency in Australia. ForgeRock was also selected because of our ability to easily integrate with a large number of existing applications, and we can deliver customizable MFA through our identity trees. Our next customer win is a Fortune 100 leader in shipping. This customer is migrating 40 million users from CA SiteMinder to the 4DROC Identity Cloud to streamline the login and authentication process. 4DROC was selected because of our ability to deliver more than a dozen ways to improve the customer experience while also reducing costs and fraud for the company. Moving on, we had another Fortune 100 customer win, but in the energy sector. This customer has numerous brands and wants to ensure a consistent user experience across brands globally. To meet these requirements on a global scale, the customer is implementing the 4DRAC Identity Cloud to support multiple brands and languages on one platform, an important differentiator for us. For our next Fortune 100 win, Like many global investment banks and financial institutions, this customer has numerous IM systems throughout the world. They're consolidating many of these systems in order to better understand customers and improve the user experience. They selected 4DRAC Identity Cloud to achieve its customer goals as well as realize potentially hundreds of millions in cost savings. For our final customer one example, we had an existing customer who expanded on their existing Fordruck Identity Cloud deployment. This global manufacturing conglomerate experienced rapid success with our SaaS offering for one of its leading brands and is expanding to support another mass consumer application. They are expanding with the Fordruck Identity Cloud because our identity trees enable numerous authentication journeys, such as social media logins, and they're also looking to strengthen security and reduce costs. Our demand continues to be strong across both SIAM and workforce. We tend to land on the SIAM side, and as at the end of Q1, 43% of our customers use us for both SIAM and workforce, 37% for SIAM only, and 20% for workforce only. Our customers expand with us through more identities, more use cases, more product modules, and more deployments. This has resulted in our ability to drive sales productivity by double-digit increases year-over-year, grow ARR by 35% in 2021, when our non-GAAP sales and marketing expense grew only 15% in 2021, and deepen relationships and increase sales leverage with our alliances and partners. Before I conclude, I'm very excited about our upcoming user conference, ID Live. It kicks off on May 23rd in Austin before heading to London and Melbourne this summer. I love this event because it's a chance to exchange ideas with our customers and partners. We will welcome hundreds of attendees from a variety of industries. They will get a sneak peek at our new products and learn from identity leaders, from customers like U.S. Bank, Toyota, Humana, Navy Federal Credit Union, and alliance partners, Accenture, PwC, and Deloitte. Finally, we remain deeply concerned about the war in Ukraine. While Fordrock doesn't operate in Ukraine or Russia and our business is unaffected, it is a terrible situation and we are hoping for a peaceful resolution soon. With that, I'll turn the call over to John to walk through our financial results in more detail. John?