ForgeRock (NYSE:FORG) Surprises With Q2 Sales But Full Year Guidance Underwhelms

Kayode Omotosho /
2022/08/11 4:16 pm EDT

Cybersecurity software provider ForgeRock (NYSE: FORG) announced better-than-expected results in the Q2 FY2022 quarter, with revenue up 8.47% year on year to $47.6 million. However, guidance for the next quarter was less impressive, coming in at $50.5 million at the midpoint, being 9.82% below analyst estimates. ForgeRock made a GAAP loss of $22.3 million, down on its loss of $10 million, in the same quarter last year.

Is now the time to buy ForgeRock? Access our full analysis of the earnings results here, it's free.

ForgeRock (FORG) Q2 FY2022 Highlights:

  • Revenue: $47.6 million vs analyst estimates of $47.1 million (1.05% beat)
  • EPS (non-GAAP): -$0.17 vs analyst estimates of -$0.22
  • Revenue guidance for Q3 2022 is $50.5 million at the midpoint, below analyst estimates of $56 million
  • The company dropped revenue guidance for the full year, from $213.5 million to $209 million at the midpoint, a 2.1% decrease
  • Free cash flow was negative $20.7 million, compared to negative free cash flow of $4.95 million in previous quarter
  • Gross Margin (GAAP): 80.4%, down from 81.9% same quarter last year

“Identity remains a top priority for every modern organization in today’s shifting threat landscape and macroeconomic environment, and we continue to see strong customer demand for our enterprise-grade identity platform,” said Fran Rosch, CEO of ForgeRock.

Founded in Norway by former Sun Microsystems engineers, ForgeRock (NYSE:FORG) offers software as a service that helps companies secure and manage the identity of their customers and employees.

As software penetrates corporate life, employees are using more apps every day, on more devices, in more locations. This drives the need for identity and access management software that help companies efficiently manage who has access to what, and ensure that access privileges are secure from cyber criminals.

Sales Growth

As you can see below, ForgeRock's revenue growth has been solid over the last year, growing from quarterly revenue of $43.9 million, to $47.6 million.

ForgeRock Total Revenue

ForgeRock's quarterly revenue was only up 8.47% year on year, which might disappoint some shareholders. And the revenue actually decreased by $416 thousand in Q2, compared to $189 thousand increase in Q1 2022. We'd like to see revenue increase each quarter, but a one-off fluctuation is usually not concerning and the management is guiding for growth to rebound in the next quarter.

Guidance for the next quarter indicates ForgeRock is expecting revenue to grow 14.1% year on year to $50.5 million, slowing down from the 37.6% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 27.9% over the next twelve months.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.


What makes the software as a service business so attractive is that once the software is developed, it typically shouldn't cost much to provide it as an ongoing service to customers. ForgeRock's gross profit margin, an important metric measuring how much money there is left after paying for servers, licenses, technical support and other necessary running expenses was at 80.4% in Q2.

ForgeRock Gross Margin (GAAP)

That means that for every $1 in revenue the company had $0.80 left to spend on developing new products, marketing & sales and the general administrative overhead. Despite the recent drop that is still a great gross margin, that allows companies like ForgeRock to fund large investments in product and sales during periods of rapid growth and be profitable when they reach maturity.

Key Takeaways from ForgeRock's Q2 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on ForgeRock’s balance sheet, but we note that with a market capitalization of $1.96 billion and more than $347.2 million in cash, the company has the capacity to continue to prioritise growth over profitability.

ForgeRock topped analysts’ revenue expectations this quarter, even if just narrowly. That feature of these results really stood out as a positive. On the other hand, it was unfortunate to see that ForgeRock's revenue guidance for the full year missed analysts' expectations. Overall, this quarter's results were not the best we've seen from ForgeRock. The company is flat on the results and currently trades at $22.25 per share.

ForgeRock may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 70% year on year and best-in-class SaaS metrics it should definitely be on your radar.

The author has no position in any of the stocks mentioned.