Earnings Transcript for FORG - Q3 Fiscal Year 2021

Operator: 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 Kang, ForgeRock’s Head of Investor Relations. Please go ahead.

Mark Kang: Hello, everyone. Welcome to ForgeRock’s Q3 2021 conference call. On the call with me today are Fran Rosch, 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 to 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 prospectus filed with the SEC on September 17, 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 will hand the call over to Fran.

Fran Rosch: Thanks, Mark and thanks 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 am very excited to have completed a successful IPO in September and we are looking forward to this next stage of our growth. We are 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 ForgeRock Identity Cloud, our SaaS offering, which is seeing growing adoption to 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, health care and retail, to name a few. We’re using facial recognition on our phones to get access to applications. And ForgeRock has 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 to force 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

John Fernandez: Thank you, Fran, and thank you to everyone for joining us. Before I get into the results from the quarter, I want to provide a quick overview of our business model and the key metrics that we look at to measure our business. Customers license our software platform, primarily through subscription licenses for our self-managed or SaaS offering. Our subscription revenue includes recurring revenue from term licenses, SaaS, maintenance and support. We run our business and focus its growth on ARR. We believe it’s the best metric to measure our business performance. Due to ASC 606, our revenue growth is impacted by the amount of revenue recognized upfront versus that which is recognized ratably. We believe our ARR numbers normalize for this. As of the end of Q3, ARR was $164 million, up 30% year-over-year. Our ARR growth was driven by new customer wins and expansion within our existing customer base through more identities, more use cases, more product modules and more deployments. Based on our process of continuous improvement in targeted lead generation, qualification of leads in pipeline and conversion rates, we have confidence in the sustainability of our growth. We have a very strong customer base that includes many of the world’s leading brands. We ended Q3 with over 1,300 customers globally who leverage our software to manage over 3 billion identities. We ended Q3 with 369 large customers defined as customers with $100,000 of ARR or greater. Our large customer base grew 18% year-over-year, and our large customers represented 89% of our total ARR as of the end of Q3. Our net retention rate for Q3 was 112%. Our average ARR from new customers in Q3 again exceeded $200,000 of ARR, demonstrating that we tend to land larger with new customers. Also, due to an increase in new logo acquisition over the past few quarters, the mix of new ARR from existing customers was slightly lower on a relative basis. Total revenue was $44.2 million an increase of 38% year-over-year. We have transitioned to a nearly 100% subscription model over the past 2.5 years and 96% of our Q3 revenue was subscription revenue. Our revenue growth was primarily driven by the growth in our customer base, expansion within existing customers, multiyear subscription licenses and SaaS revenue. Before turning to profitability and expense items, I would like to point out that I will only be discussing non-GAAP results going forward. Non-GAAP results exclude stock-based compensation and restructuring and impairment charges. Our press release contains our GAAP results and reconciliations to our non-GAAP results. Q3 gross profit was $36 million, and gross margin was 81%. As we continue to scale our SaaS offering, we will see increasing investment in cloud infrastructure and incur higher hosting costs. Our strong subscription gross margin is offset by our professional services gross margin as we continue to invest in supporting our customers through further build-out of our customer success and support organizations. Turning now to operating expenses. We remain focused on investing for growth to capture additional share in the large market opportunity that Fran discussed earlier. Sales and marketing expense for Q3 was $21.4 million compared to $17.5 million in Q3 last year. This represents 48% of total revenue for Q3 compared to 55% in Q3 of last year. The percent of revenue improvement was primarily driven by an increase in sales productivity. As we continue to expand our footprint and scale our business, we believe we will continue to see operating leverage. R&D expense in Q3 was $10.3 million compared to $9.3 million in Q3 last year. This represents 23% of total revenue for Q3 versus 29% in Q3 of last year. Given the strong demand we are seeing for consumer and workforce identity use cases, we continue to invest in advancing our products and innovation in areas such as our enterprise SaaS offering, our AI machine learning capabilities and our identity trees that empower our customers to create orchestration journeys focused on great customer experience without compromising security. We believe the continued investment in our product differentiation will further cement our market leadership in Identity. G&A expense was $9.7 million for the quarter compared to $5.3 million in the third quarter last year. G&A was 22% of revenue versus 16% of revenue last year. Our G&A expenses increased in absolute dollars and as a percentage of revenue due to new public company expenses in Q3 of this year. However, over time, we expect growth in G&A expense as a percentage of revenue to decrease as we optimize our back office costs as we scale. Operating loss was $5.7 million versus a loss of $4.9 million in Q3 a year ago. Operating margin was negative 13% versus negative 15% a year ago. Despite the increase in absolute dollars year-over-year in our operating expenses, we continue to see operating leverage in our business with revenue growth outpacing the growth in our operating expenses. We view our strong top line growth as an indicator that our investments are paying off, and we expect this trend to continue. Turning to the balance sheet, we ended the second quarter with $378.1 million in cash, cash equivalents and marketable securities. Turning now to guidance, for the fourth quarter of 2021, we expect Total ARR of $175 million to $176 million, representing 29% year-over-year growth. Total revenue of $46.5 million to $47.5 million. Non-GAAP operating loss of $9 million to $8 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, we expect 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. That concludes my remarks for Q3. And now I’ll turn the call back to Fran for closing remarks.

Fran Rosch: Thank you, John. Thanks to everyone for being with us on our call today. I am very pleased with the momentum that we are seeing across our business. The market for both consumer and workforce identity is massive and growing. And we believe ForgeRock is well positioned to capitalize on the opportunity. And this is just the beginning. Operator, you may now open the call for questions.

Operator: Thank you. [Operator Instructions] And we will take our first question today from Hamza Fodderwala with Morgan Stanley.

Hamza Fodderwala: Hey, guys. Good afternoon. Thank you for taking my questions. Just first question for Fran. I was wondering if you could elaborate a little bit more on the ForgeRock Identity Cloud recently achieving HIPAA compliance. What does that mean for you? And obviously, ForgeRock sort of differentiates itself and being able to handle more complexity over some of it’s competitors. So I’m curious how you see the opportunity within the healthcare vertical, how penetrated do you think it is? And what’s the strategy there going forward?

Fran Rosch: Great. Hamza, thank you so much and good to hear form you. Yes, I think the healthcare vertical continues to really grow and be important to us. I think with digital transformation and a lot of driven through COVID, everyone is doing much more online. And that has led a lot of people to look for healthcare and telemedicine and move all that online. And – when I talk to our healthcare customers, they are looking to compete in their markets and to differentiate. And a lot of that is how easy it is for patients to come in and enroll and get access and meet with doctors and that whole ease of uses Identity is key part of that. But there is also a lot of requirements around data privacy and security. So it really is a vertical that really drives toward what ForgeRock does really well. And it’s been growing and we expect to continue to grow, which is why it made sense for us to get the HIPAA certification as that’s really important to so many different healthcare companies.

Hamza Fodderwala: Got it. And maybe just a follow-up for John, I think you mentioned 25% of new customers who bought the SaaS solution, I think – if I remember correctly, I think you were getting to a point where close to half of new customers were buying the SaaS solution. So I’m curious why maybe that was a little bit lower in Q3. Does it have to do with summer seasonality? Do you expect to see a stronger Q4 when it comes to SaaS offering? Any color you can give us there would be helpful.

John Fernandez: Sure, Hamza. Yes. So that’s right. In Q2, we shared that 41% of our new customers had bought SaaS, and that was now 25%. We also showed a new metric which was that, that 25% was actually 50% of the new ARR. And so we are seeing a little bit of that variability from period to period. And we think that’s great because remember that in this period, when 25% bought SaaS, 75% chose self-manage, which was really important in the enterprise because we can serve them quite uniquely with our offering and with choice. As we look at this and as we look forward to next year, we will look to provide some additional detail around of our total ending ARR, what is SaaS. Then obviously, as we look forward into ‘23, we will actually go to full revenue segmentation is the intended plan. So that’s a little bit of additional color for you on that.

Hamza Fodderwala: Thank you.

Fran Rosch: Next question.

Operator: Certainly. We will hear from Sterling Auty with JPMorgan.

Sterling Auty: Yes, thanks. Hi, guys. Let’s carry on with the SaaS questions. And just what I’m curious about is, when you look at the customers that chose SaaS and you look at those use cases, is there any common thread that you kind of can pull through in terms of either size of the deployment that you’re looking at or use case that can give you a trend line for what you think the bigger adoption areas for SaaS will be?

Fran Rosch: Yes. I think what we’re seeing is, as John mentioned, we’re really glad to be able to have both options because there is good market out – their opportunity for SaaS as well as self-managed, and we really kind of have it all covered. But when we look at SaaS, I think we’re seeing a lot of traction in the science space. I think that companies, whether they be in digital retail or financial services and how they are expanding, they want to move fast, and they don’t want to run a lot of infrastructure. So we’re really seeing that CIAM use cases, the one that’s driving most of the growth and our SaaS, especially from new customers. So we’re going to continue to focus on that. And then, of course, once we get that CIAM business, we have the opportunity to cross-sell and upsell workforce as well. So I think the trend we’re seeing is the CIAM opportunity is bigger, more greenfield, lot of homegrown, and that’s a key driver of our SaaS business. And to that point, we’re seeing some big deals. DIRECTV was really important for them to have a easy CIAM solution so that they can make it easy for their subscribers to enroll and get services and manage their accounts. And they were ready to go to the cloud so they can move fast. That’s kind of an example of the type of CIAM SaaS deals we’re seeing.

Sterling Auty: That makes sense. And then one follow-up, when you look at the new business that you brought on in the quarter, can you give us a sense of how much of that was actually displacement of perhaps some of the legacy solutions like the old SiteMinder versus greenfield projects that were being put into place?

Fran Rosch: So generally, because we tend to focus on enterprise and large enterprise, there is typically something in place today because these customers already have employees, and they already have customers. So we’re typically displacing something. I think it is a mix and we kind of put into three groups. There is a fair amount of homegrown, especially in the CIAM space, where people just try to build their own identity solutions and they are finding, they are not giving them the flexibility, they need to be build grade journeys or they can’t scale on performance they need. So that’s kind of one is homegrown. Second is definitely the legacy. We’ve done some additional Oracle and CA SiteMinder replacements this past quarter, and we consider – continue to see that as a big opportunity going forward. I was looking at our pipeline recently, there is definitely a fair amount that’s still in the pipeline. And then the third is a lot of enterprises, large enterprises have kind of a group of point solutions. They just put in place over the years, maybe one for mobile and one for med, one for call center. They are looking to kind of consolidate and looking for comprehensive solutions. So that’s the kind of way we look at what we’re displacing. As I said, we’re typically always displacing something.

Sterling Auty: Understood. Thank you.

Fran Rosch: Thank you.

Operator: Next, we will hear from Patrick Colville with Deutsche Bank.

Patrick Colville: Hey, thank you so much for taking my question and congrats guys on your first quarter as a public company. So my question is about, I guess, the market more broadly, this time 12 months ago, doing the kind of the mix of the pandemic. Now we’re hopefully kind of exiting the pandemic. Can you just help us understand how the demand environment has shifted throughout that process? And then I guess probably the most interesting bit is what are you guys seeing or what did you see over the last kind of 3 months?

Fran Rosch: Yes. I would say that when John and I look at this, we almost see kind of different phases of COVID, what we call kind of COVID tailwinds. I think in the first 6 months or a year, companies were just trying to react very quickly to respond to the shift to digital as it wasn’t safe to go out and do a lot of business in-person. So mostly we had something in place today, and they had to just scale it up and make it work. So for a lot of our customers, that went really successfully. We talked about one of our customers that’s a 300% increase in the digital banking traffic is really they just had to scale up and adopt. And then I think as people realize this digital transformation is not going back, people aren’t going to go back to the old ways, they are going to stay with digital. That they had to really say, okay, it’s going to become our primary channel. What do we have in place today? Is it able to give us a depth of experiences we need, the security kind of scale and perform? Because when identity is a front door to your business, it has to be reliable and be there. So we’re kind of seeing a second wave that people are saying, we’ve got to move to something. And we talked about one of our customers in the quarter is a U.S. retailer. And as they see the holidays coming on board, they know they are going to have less people coming in-person shopping, especially with some of the labor shortages and more digital, so more opportunity for us to expand. So we’ve seen acceleration in the past 3 months, more FPs, bigger pipeline, particularly in CIAM, but workforce as well.

Patrick Colville: Great. That’s helpful. And then I guess as sort of I think about the ARR guidance, fiscal fourth quarter, a pretty big number 175 – can you just help us understand the kind of the puts and takes there? And the reason I ask is, doing kind of analysis around sequential dollar ARR adds and kind of quarter-on-quarter growth. I guess how much conservatism is in that number?

John Fernandez: Yes. So that represents 29% year-over-year growth. And we have a lot of confidence in that number and in that range. And for us, Q4 does because of enterprise buying cycles, it does tend to be our largest quarter. So I think that’s important and historically fits the pattern very well, so again, a lot of confidence in the range and in those numbers. And obviously, the point we’re out in the quarter as well, we have a lot of visibility into our pipeline.

Fran Rosch: And just, Patrick, when you talk about the puts and takes, we look at those puts and takes as brand new logos that are coming on and buying contributing new ARR to ForgeRock, our ability to cross-sell and upsell into our base, which we have a lot of opportunities on both CIAM to workforce, workforce to CIAM as well as software to SaaS, help our customers move to cloud. And that third put and take is, our gross retention of our customers. And we’ve invested more in customer success, more in our professional services, and we’re seeing our customers stick with us longer. So we are very focused as a company on those puts and takes and contributing to our confidence in that guidance.

Patrick Colville: Great. Thank you and nice job once again on the IPO.

Fran Rosch: Thank you.

Operator: Gregg Moskowitz with Mizuho has our next question.

Gregg Moskowitz: Okay. Thank you for taking the questions. Good afternoon, guys. Fran, wondering if you could speak to what the early feedback has been like for your ForgeRock Autonomous Identity offering? And then maybe also tell us why it’s important to IGA solutions out there?

Fran Rosch: Yes. It’s Fran, Gregg. Thank you. So, let me just kind of frame the problem we hear from customers. And what IGA and our Autonomous Identity product is all about is helping our enterprise customers understand of their employees who has access to what and to be able to manage that access. And there are kind of two competing priorities that our customers have. One is, of course, they want all the employees to be productive, right. They want everyone to get access to the applications and services they need to do their job. So that lends them to kind of say, “Well, let’s open it all up and get people get access.” But the flip side is they have to manage risk. And this whole idea of kind of least privilege, where the goal is to have only people have access to what they need, so it just reduces risk because you don’t have that inappropriate access from someone. So, we really recognize that they have these competing priorities. And what our auto ID does is brings the AI capability to be able to look at the groupings of users and exactly what they need to do their jobs and be able to kind of automatically ensure that employees are only approved to get access to if they need their jobs and they don’t get access to what they don’t need. And that way that we can deliver both for our customers, which is productivity of their workers while managing the risk. So, that’s kind of what we are all about with auto ID and IGA. And we have seen some great growth this year, and we see a great pipeline going forward, and it will continue to be a big focus and a big differentiation for us in 2022.

Gregg Moskowitz: Okay. That’s very helpful. Thanks Fran. And then, John, your subscription SaaS support and maintenance revenue line item, saw some good acceleration this quarter on a year-over-year basis. I would expect that, within that line item, SaaS is probably the predominant driver, if not the sole driver of that, any more color there would be helpful.

John Fernandez: Yes, sure. So, we did see that nice 54% increase in that subscription SaaS support and maintenance. And yes, a part of that is the SaaS product that we have. And really, it’s really that ongoing focus, again, just around the ratable and continuing to do that, but SaaS certainly contributed meaningfully for the first time.

Gregg Moskowitz: Perfect. Thanks very much.

Fran Rosch: Thanks Gregg.

Operator: Our next question comes from Gray Powell with BTIG.

Gray Powell: Great. Thanks for taking the question and congratulations on the quarter.

Fran Rosch: Thanks, Gray.

Gray Powell: Absolutely. Yes. So, I want to follow-up on earlier question. So, I mean, if I just kind of look at the building blocks here, you are growing the customer base in the high-teens net retentions in the 12% to 13% range the last few quarters. You have a new SaaS product that’s gaining momentum. Is there any reason why ARR growth would not further improve off of this current 30% pace over the next few quarters?

John Fernandez: Yes. So, I think we again, forecasted 29% with respect to our guidance for Q4, and we feel very confident about that. I think we have a lot of upside levers in our growth that we focus on. I think our installed base is a big one. One of the things we talked about throughout the IPO process was the opportunity to unleash the multiple in moving some of our customer base over from self-managed to SaaS. And that statement remains true. We continue to be able to – we are in the early innings of that, so to put it. And so I think that remains a huge opportunity for upside. And that’s really focused on, obviously, not just ARR overall, but also net retention as a core metric. And so that’s one of those I think SaaS on a standalone basis, aside from the installed base remains a huge opportunity. Again, we see that as an opportunity to sell into, not to migrate additional usage into our installed base to attract new customers and even to attract new customers that are really in verticals that are more prone to buy SaaS that we have access to now with that product. So, a variety of different vectors there that we believe provide strong upside for us in the future.

Gray Powell: Understood. That’s really helpful. Thanks. And then just one other one. So yes, I mean I know the SaaS business is relatively new. How should we think about the SaaS business as we exit 2021? Are you still expecting it to be in sort of that 10% of ARR range by the end of the year, just kind of a ballpark number?

John Fernandez: So, we – as our expectations have not changed from that perspective, and we do anticipate to disclose that number at the end of Q4 and as I mentioned then to provide that into ‘22 and then revenue segmentation in ’23, that is the intended plan and expectations remain the same, correct.

Fran Rosch: And I would just say, we as a company are really focused on that SaaS market. We think that more and more that’s the way customers are going to want to consume identity to be able to get going very quickly. And we have a unique cloud architecture and that’s really resonating in the market. So, this ability to have the tenant isolation to ensure the reliability and the scalability of that service it’s really resonating. So, I think that, as John said, we are not – we feel comfortable in that guidance we have given in the past on that. But we as a company, are really focusing on the growth and the success of that SaaS offering.

Gray Powell: Perfect. Okay. Thank you very much.

Operator: Next, we will hear from Rob Owens with Piper Sandler.

John Fernandez: Hi Rob. Good afternoon.

Rob Owens: Hi guys. Thanks for taking my question. Maybe if you could touch a little bit on partners and alliances and just I know it was in the slide deck relative to 2020, but the trends that you are seeing throughout this year? And does that lend more towards the workforce side or the CIAM side?

John Fernandez: Rob, thanks, this is John. I will take the first part of that. As it relates to the S-1 as a reminder for folks, what we talked about was 15%, 31% and 44% for 2018, 2019 and 2020, respectively, that were – the level of opportunities that we had closed that were sourced out of our partner network. And that’s a significant point of leverage for the company. As we are today sitting here at the end of Q3, we are now above those 2020 levels of 44%. So, I think that remains a consistent, strong leverage point for the company along those lines.

Fran Rosch: Yes. And I would say that when we look at our partners, they are incredibly great accelerators for our business, right. They are working with their customers on larger digital transformation initiatives and they are bringing ForgeRock in. And we have got great connections in with the identity and the security team which does lean itself a little bit more to the workforce to your question, Rob. But we are forging new relationships with both within those GSIs and engaging with their teams that do digital transformations because they have got huge initiatives that they are engaging with retail companies, governments, public sectors to help them go through that digital transformation, separate from their security and identity practices. So, we are bringing on new types of partners. So, we are really looking at and understanding that these two segments, CIAM and Workforce are both critically important and critically large, but also different. And that means we have to add different messaging and different types of partners to ensure that we are in as many of the opportunities as possible.

Rob Owens: Great. And I guess focusing a little bit on OpEx and where some of the efficiency was in the quarter. Could you touch on R&D a little bit? I mean it’s up $1 million year-over-year. And I think it given the scale of the company you might be leaning in a little bit more aggressively on product development. So, how should we think about this line item going forward?

John Fernandez: Yes. I think we are seeing a lot of efficiencies, right. I think for a variety of reasons our platform is all organic – single platform, single-code base, right. So, I think we have the ability to both be an enterprise where we have always been, provide a lot of functionality, do it across self-managed and SaaS and be able to do that in that single code base. I think that’s really a core reason for that. And what you are still seeing is this incredible innovation that we are releasing out to the market period-over-period. So, I think we will see that go down over time to reasonable levels from a long-term model perspective that we shared during the IPO road show. We believe without question that will hold is what we trend to. And I don’t think we will see any levels of variability in that in either the short or mid-term.

Fran Rosch: But I would say, Rob, our Chief Product Officer, Peter Barker is going to love that you asked that question. So, thanks for asking. And as John talked about it, that as a percent of revenue. So obviously, in real dollars, it’s continuing to go up year-on-year quite a bit. And we are going to continue to bring on new engineering talent to continue to invest in innovation. So, it will be scaling. It will just be scaling slightly slower than our top line. So, we will see the improving productivity. But we are a technology company at our heart, and we are hiring more engineers right now. So, if you know anybody send them over.

Rob Owens: It sounds good. Thanks guys.

Fran Rosch: Thanks Rob.

Operator: Next, we will hear from Joel Fishbein with Truist.

Joel Fishbein: Hi. Good evening guys. Fran, can you talk about the competitive dynamics around that DIRECTV deal, and if it was a competitive bake-off?

Fran Rosch: Sure. Yes, it absolutely was a competitive bake-off. And I think almost every opportunity we have is that. And companies are out there looking at their alternatives and they are choosing ForgeRock over the competition. And we feel really, we have never felt better about our ability to win these deals. And I think it comes down to kind of four main reasons when we look at the competition. One is, just the ability to have a full identity experience as a single platform across Identity Management, Authentication, MFA and Governance, a single platform to cover all identities. And then we – especially in the cloud, people really appreciate the uniqueness of that architecture. The ability to have that type of tenant isolation of our multi-tenant size that gives them confidence in the performance, the scalability and the data privacy is really huge. And I think that’s why we see our ability to win with great customers like DIRECTV and many others.

Joel Fishbein: And then just as a follow-up, can you talk about the large deal pipeline? And have you seen an uptick since you have become a public company?

Fran Rosch: So, our pipeline is absolutely increasing for sure. Sometimes it’s hard to tag exactly what it’s for. Is it because we went public, is it because we – the Gartner MQ came out, recognizes us as the leader again, growing our sales team and our go-to-market engine. But we have definitely seen an uptick in the pipeline and feel confident that we have got the pipeline to deliver on the growth rate here for the company.

Joel Fishbein: Great. Thank you.

Fran Rosch: Thank you.

Operator: We will now hear from Jonathan Ho with William Blair.

Jonathan Ho: Hi, good afternoon and let me echo my congratulations. I just wanted to start out with a little bit more color on some of the sales productivity gains that you referenced. I just want to understand maybe what’s driving that productivity? What inning are we in, in terms of seeing that productivity to expand? Any color would be helpful. Thanks.

Fran Rosch: Sure. And we are really proud of the sales productivity improvements we are seeing. And inning, I would say the inning we are in is, maybe the fourth or fifth inning, lots of progress behind us, but more to go. And we see there are really a handful of things driving those sales productivity. One is just the advancement of our technology, right. Our products are getting better. We have got more features, more things to sell. So, that’s opening up more opportunity for us. Second is, I think the market awareness of ForgeRock is growing. We are just getting more at that here. And I think certainly, to Joel’s question, the IPO is going to help in that as well. So, our marketing team has continued to execute on a digital-first approach, creating more leads and more opportunities. So, that’s great. That’s leading to increased pipeline. And my goal is to have one of our sales reps to be able to wake up in the morning and have these leads and these opportunities coming to them that they can continue to work to be efficient. Now we have got work to do. It’s always a work in progress, but we are seeing improvements there. So, that’s resulting in sales acceleration, especially with SaaS. We are seeing shorter sales cycles for SaaS versus self-managed, which is helping with that. We talked a little bit about partner leverage, right. These GSIs as well as dozens of regional identity partners around the world recognize that we are kind of uniquely positioned to help their customers be successful. So, they are really bringing us into these opportunities. So again, it’s like a lot of things. There is many things that are driving it. We have made great progress and we are going to continue to focus on that in the months and years ahead.

Jonathan Ho: Got it. And then in terms of the role-based capabilities that you talked about replacing the traditional RBAC capabilities. Can you talk a little bit about sort of the customer reception for that? And maybe just a little bit more detail on understanding why this is important, why this is a differentiator and potentially a game-changer? Thank you.

Fran Rosch: Sure. I think that identity, governance, administration is critically important to company for the reasons that we talked about, right, this ability to understand who has access to what, have great workflow to keep people productive, but also manage risk for the business. And – but companies have challenges because the organizations are very dynamic. People are always coming and going, changing jobs and to be able to really have a fluid system, it can be really difficult. So, we have this role-based structure. We can leverage our algorithms to kind of develop a role-based structure not based on an organizational chart, which is always going to change and not necessary a reflection of what you do, but really by understanding and looking at the history of what these groups of people get access to. So, it really helps us very accurately and automatically do the true access needs for a particular employee base, so they can do their jobs without over-provisioning access and driving off risk for the company. So, I think this is kind of a holy grail of challenges that companies have been dealing with for years. They have dealt, some of them maybe rules-based or manual approvals, and we are just bringing kind of a new way of doing it. So, we think that we are getting a lot of positive reception. And that really opens up opportunity for us to really have that full workforce identity platform across identity management, access, governance, powered by this AI platform. So, it’s a big deal. And we are going to continue to make investments on that and continue to see as a driver of growth into ‘22.

Jonathan Ho: Great. Thank you.

Fran Rosch: Thank you.

Operator: Our last question will come from Shaul Eyal with Cowen & Company.

Fran Rosch: Hello Shaul.

Shaul Eyal: Thank you. Hey guys. How is everybody? Congrats on the first quarter as a public company. I was a little late to the call. So apologies, if anything was already addressed. But maybe, Fran and John, how is the hiring plan coming along versus your internal plan so far?

Fran Rosch: Yes. What I would say, Shaul, it’s never been a better time to recruit for talent at ForgeRock. We are doing a great job attracting great new talent across engineering, sales, marketing, support or professional services, really the whole group, we announced our new Chief People Officer and did great by bringing Tschudy Smith on board. So, we are on track to meet our hiring plans that we need to continue to power our business. And there is clearly a war for talent out there, and we hear about that. But we are doing a great job bringing in that new talent. And it’s important to stay focused on. And we kind of look at talent as attracting great talent, but it can’t stop there. It’s all about development and how we are investing and developing our teams, so that we can retain because we know there is a big cost of attrition. At the same time, managing out some people who might – we might have outgrown. So, we are really looking at an end-to-end talent management approach as a company.

Shaul Eyal: Understood. And my…

Fran Rosch: And certainly helps that. The visibility that we got, I would also say just identity, I mean, everybody kind of recognized the importance of identity in digital transformation. So, it’s a great time to attract new talent at ForgeRock.

Shaul Eyal: Got it. Thank you for that. And then maybe my follow-up question, Fran, or John, on pricing. So, we have seen a number of companies taking pricing up to account for either supply chain, looming issues or just overall healthy demand trends. Have you increased pricing as of late or planned to do so near-term?

John Fernandez: Yes. I think there is two different elements going on. One is we continue to be able to effectuate annual price increases with our customers. And I think that’s been reasonable and not met with resistance. But I think there is more strategic things to do than just to raise the prices as they are. And we really looked at how we bundle. And I think there are mechanisms there that we have looked at, we have been able to find significant value through some of the re-bundling techniques that we have done and some that are still to come that are giving us some real uptick and really, I think helping to lift that pricing and improve margins. So, we are going to continue to put additional focus on that with some of the things that we will do in ‘22.

Shaul Eyal: Understood. Thank you so much. I am sorry.

John Fernandez: Thank you, Shaul. No. It’s okay. Just wanted to say thank you, Shaul.

Shaul Eyal: Got it. Thank you everybody.

Fran Rosch: Thank you. And really thanks to all of you for attending our earnings call today and for the great questions. We really look forward to engaging with all of you in the days and weeks ahead to talk about ForgeRock, which we love to do. Before we conclude the call, I would just like to make a few final remarks. Our ForgeRock team is focusing on four key business dynamics that are bolstering our confidence that were well positioned to capitalize on the large and growing market opportunity for enterprise-grade identity, and that will target a durable and sustainable ARR growth rate for our company. And those four dynamics are really this enterprise demand for a unified full-suite identity platform across CIAM, workforce and IoT. Our unique position really is a leader in science, where we are seeing the fastest growth in the company. The fact that we have choice, we can either have self-manage or SaaS, makes that full market available to ForgeRock and then our unique approach to SaaS, that architecture that gives our customers confidence in performance and security. So, we are very excited about the future. So, thanks again for your time today. And we look forward to further dialogue in the days and months ahead. So, back to you, operator.

Operator: Thank you. This concludes today’s call. Thank you for your participation. You may now disconnect.