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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________________
FORM 10-Q
______________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
OR
o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 001-40787
______________________________
ForgeRock, Inc.
______________________________
(Exact name of registrant as specified in its charter)
Delaware
33-1223363
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
201 Mission Street Suite 2900 San Francisco CA
94105
(Address of Principal Executive Offices)
(Zip Code)
(415) 599-1100
Registrant's telephone number, including area code
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol(s)
Name of each exchange on which registered
Class A common stock
FORG
New York Stock Exchange


Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
o
Accelerated filer
o
Non-accelerated filer
Smaller reporting company
o
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No
As of April 30, 2022, there were 33,538,463 shares of the registrant's Class A common stock outstanding and 50,742,586 shares of the registrant's Class B common stock outstanding.


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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds from Initial Public Offering
Signatures
2

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which statements involve substantial risk and uncertainties. Forward-looking statements generally relate to future events or ForgeRock’s future financial or operating performance. In some cases, you can identify forward looking statements because they contain words such as "may," "will," "should," "expects," "plans," "anticipates,” “going to,” "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these words or other similar terms or expressions that concern ForgeRock’s expectations, strategy, priorities, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

our future financial performance, including our expectations regarding our revenue, cost of revenue, operating expenses, our ability to determine reserves and our ability to achieve and maintain future profitability;
our future operational performance, including our expectations regarding ARR, dollar-based net retention rate, and the number of large customers;
the sufficiency of our cash, cash equivalents and investments to meet our liquidity needs;
the demand for our products and services or for security solutions in general, including our recently introduced SaaS offering, the ForgeRock Identity Cloud;
our ability to attract and retain customers and partners;
our ability to cross-sell to our existing customers;
our ability to develop new products and features and bring them to market in a timely manner and make enhancements to our offerings;
our ability to compete with existing and new competitors in existing and new markets and offerings;
our expectations regarding the effects of existing and developing laws and regulations, including with respect to privacy, data protection and information security, as well as taxation;
the impact of the ongoing geopolitical tensions related to Russia’s actions in Ukraine on our business, including inflationary pressures and interest rate risks;
our ability to manage and insure risk associated with our business;
our expectations regarding new and evolving markets;
our ability to develop and protect our brand;
our ability to maintain the security and availability of our platform and protect against data breaches and other security incidents;
our expectations and management of future growth;
our ability to continue to expand internationally and our exposure to fluctuations in foreign currencies;
our expectations concerning relationships with third parties, including channel, system integrator and technology partners;
our ability to obtain, maintain, protect, enhance, defend or enforce our intellectual property;
our ability to utilize open source software in our platform and offerings;
our ability to successfully acquire and integrate companies and assets;
the attraction and retention of qualified employees and key personnel, including our direct sales force;
our estimated total addressable market; and
the increased expenses associated with being a public company.

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

3

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You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, and prospects. The outcomes of the events described in these forward-looking statements are subject to risks, uncertainties, and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events, and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events, or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
4

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PART I – FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

FORGEROCK, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
(Unaudited)
March 31,
2022
December 31,
2021
Assets
Current assets:
Cash and cash equivalents$91,580 $128,381 
Short-term investments272,785 241,411 
Accounts receivable, net of allowance for credit losses of $29 and $34, respectively
37,628 55,999 
Contract assets18,932 19,670 
Deferred commissions7,783 8,457 
Prepaid expenses and other assets10,563 9,787 
Total current assets439,271 463,705 
Deferred commissions16,369 15,601 
Property and equipment, net2,694 2,463 
Operating lease right-of-use assets11,417 12,626 
Contract and other assets3,199 2,783 
Total assets$472,950 $497,178 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$1,584 $2,039 
Accrued expenses4,551 5,016 
Accrued compensation18,152 22,359 
Current portion of operating lease liability1,112 1,820 
Deferred revenue64,910 67,222 
Other liabilities1,637 2,258 
Total current liabilities91,946 100,714 
Long-term debt39,515 39,483 
Long-term operating lease liability10,569 11,037 
Deferred revenue2,879 8,172 
Other liabilities1,724 1,646 
Total liabilities146,633 161,052 
Commitments and contingencies (Note 8)
Stockholders’ equity:
Class A common stock; $0.001 par value; 1,000,000 shares authorized as of March 31, 2022 and December 31, 2021, 32,340 and 28,892 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
32 29 
Class B common stock; $0.001 par value; 500,000 shares authorized as of March 31, 2022 and December 31, 2021, 51,916 and 53,761 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively
52 54 
Additional paid-in capital601,834 593,196 
Accumulated other comprehensive income4,694 6,672 
Accumulated deficit(280,295)(263,825)
Total stockholders’ equity326,317 336,126 
Total liabilities and stockholders’ equity$472,950 $497,178 
See accompanying notes to condensed consolidated financial statements
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FORGEROCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended March 31,
20222021
Revenue:
Subscription term licenses$19,659 $21,081 
Subscription SaaS, support & maintenance26,185 18,364 
Perpetual licenses86 555 
Total subscriptions and perpetual licenses45,930 40,000 
Professional services2,163 850 
Total revenue48,093 40,850 
Cost of revenue:
Subscriptions and perpetual licenses5,853 3,647 
Professional services2,850 2,889 
Total cost of revenue8,703 6,536 
Gross profit39,390 34,314 
Operating expenses:
Research and development14,479 10,435 
Sales and marketing26,978 20,242 
General and administrative13,545 8,247 
Total operating expenses55,002 38,924 
Operating loss(15,612)(4,610)
Foreign currency gain (loss)435 (352)
Fair value adjustment on warrants and preferred stock tranche option (3,578)
Interest expense(899)(1,180)
Other, net68 (196)
Interest and other expense, net(396)(5,306)
Loss before income taxes(16,008)(9,916)
Provision for income taxes462 170 
Net loss$(16,470)$(10,086)
Net loss per share attributable to common stockholders:
Basic and diluted$(0.20)$(0.41)
Weighted-average shares used in computing net loss per share attributable to common stockholders:
Basic and diluted83,766 24,419 
See accompanying notes to condensed consolidated financial statements
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FORGEROCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In thousands)
(Unaudited)
Three Months Ended March 31,
20222021
Net loss$(16,470)$(10,086)
Other comprehensive income (loss), net of tax:
Net change in unrealized loss on available-for-sale securities(1,686)(15)
Foreign currency translation adjustment(292)(695)
Total comprehensive loss$(18,448)$(10,796)
See accompanying notes to condensed consolidated financial statements
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FORGEROCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (DEFICIT)
(In thousands, except share data)
(Unaudited)
Three Months Ended March 31, 2022 and 2021
Redeemable convertible
preferred stock
Class A and Class B common stock and Common stockAdditional
paid-in
capital
Accumulated
other
comprehensive
income
Accumulated
deficit
Total
stockholders'
equity (deficit)
SharesAmountSharesAmount
Balances at December 31, 202040,842,619 $231,503 24,185,622 $24 $20,602 $5,253 $(216,057)$(190,178)
Stock-based compensation expense— — — — 1,524 — — 1,524 
Exercise of common stock options— — 591,000 1 1,657 — — 1,658 
Unrealized loss on available-for-sale securities— — — — — (15)— (15)
Foreign currency translation adjustment— — — — — (695)— (695)
Net loss— — — — — — (10,086)(10,086)
Balances at March 31, 202140,842,619 $231,503 24,776,622 $25 $23,783 $4,543 $(226,143)$(197,792)
Balances at December 31, 2021 $ 82,648,825 $83 $593,196 $6,672 $(263,825)$336,126 
Stock-based compensation expense— — — — 6,460 — — 6,460 
Exercise of common stock options— — 1,602,727 1 2,178 — — 2,179 
Unrealized loss on available-for-sale securities— — — — — (1,686)— (1,686)
Foreign currency translation adjustment— — — — — (292)— (292)
Net loss— — — — — — (16,470)(16,470)
Balances at March 31, 2022 $ 84,251,552 $84 $601,834 $4,694 $(280,295)$326,317 
See accompanying notes to condensed consolidated financial statements

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FORGEROCK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended March 31,
20222021
Operating activities:
Net loss$(16,470)$(10,086)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation280 269 
Noncash operating lease expense535 446 
Stock-based compensation expense6,460 1,524 
Amortization of deferred commissions3,991 3,325 
Foreign currency remeasurement gain(620)(337)
Change in fair value of redeemable convertible preferred stock warrant liability 1,198 
Change in fair value of preferred stock tranche option liability 2,346 
Amortization of premium / discount on short-term investments 646  
Other102 139 
Changes in operating assets and liabilities:
Deferred commissions(4,085)(3,614)
Accounts receivable17,321 10,863 
Contract and other non-current assets(122)(3,653)
Prepaid expenses and other current assets(893)(2,777)
Operating lease liabilities(499)(656)
Accounts payable(436)1,125 
Accrued expenses and other liabilities(4,640)(1,917)
Deferred revenue(6,040)(5,292)
Net cash used in operating activities(4,470)(7,097)
Investing activities:
Purchases of property and equipment(488)(154)
Purchases of short-term investments(52,994)(47,413)
Maturities of short-term investments14,452  
Sales of short-term investments4,836  
Net cash used in investing activities(34,194)(47,567)
Financing activities:
Payment of offering costs(141) 
Proceeds from exercises of employee stock options2,179 1,658 
Principal repayments on debt (18)
Net cash provided by financing activities2,038 1,640 
Effect of exchange rates on cash and cash equivalents and restricted cash(200)(437)
Net decrease in cash, cash equivalents and restricted cash(36,826)(53,461)
Cash, cash equivalents and restricted cash, beginning of year128,437 100,042 
Cash, cash equivalents and restricted cash, end of period$91,611 $46,581 
Supplementary cash flow disclosure:
Cash paid for interest$524 $616 
Reconciliation of cash and cash equivalents and restricted cash:
Cash and cash equivalents$91,580 $46,558 
Restricted cash included in prepaids and other current assets31 23 
Total cash and cash equivalents and restricted cash$91,611 $46,581 
Short-term investments, end of period$272,785 $47,311 
See accompanying notes to condensed consolidated financial statements
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NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Overview and Basis of Presentation
Company and Background

ForgeRock, Inc. (“ForgeRock”, the “Company”, “we” or “us”) is a modern digital identity platform transforming the way enterprises secure, manage, and govern the identities of customers, employees and partners, APIs, microservices, devices, and Internet of Things (“IoT”). Organizations adopt the ForgeRock Identity Platform as their digital identity system of record to enhance data security and sovereignty as well as improve performance. ForgeRock’s identity platform provides a full suite of identity management, access management, identity governance, and artificial intelligence (“AI”)-powered autonomous identity solutions. The Company is headquartered in San Francisco, California and has operations in Canada and the United States of America (collectively referred to as Americas), France, Germany, Norway and the United Kingdom (collectively referred to as EMEA), Australia, New Zealand and Singapore (collectively referred to as APAC). The Company was formed in Norway in 2009 and incorporated in Delaware in February 2012.

Basis of Presentation and Principles of Consolidation

The accompanying interim condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. The accompanying interim condensed consolidated financial statements include the accounts of ForgeRock and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated upon consolidation.

Unaudited Interim Condensed Consolidated Financial Information

The accompanying interim condensed consolidated balance sheet as of March 31, 2022, the condensed consolidated statements of operations, comprehensive loss, and redeemable convertible preferred stock and stockholders’ equity (deficit) for the three months ended March 31, 2022 and 2021 and the interim condensed consolidated statements of cash flows for the three months ended March 31, 2022 and 2021 and the related footnote disclosures are unaudited. These interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K on file with the SEC (“Annual Report”).

The interim condensed consolidated financial statements are presented in accordance with the rules and regulations of the SEC and do not include all disclosures normally required in annual consolidated financial statements prepared in accordance with U.S. GAAP. The condensed consolidated balance sheet as of December 31, 2021 included herein was derived from the audited financial statements as of that date. In management’s opinion, the unaudited interim condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and include all adjustments (consisting only of normal recurring adjustments) that are necessary to state fairly the consolidated financial position of the Company as of March 31, 2022, the results of operations for the three months ended March 31, 2022 and 2021 and cash flows for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any future period.

Use of Estimates

The Company’s condensed consolidated financial statements are prepared in accordance with U.S. GAAP as set forth in the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”). These accounting principles require us to make certain estimates and assumptions. The significant estimates and assumptions include but are not limited to (i) standalone selling price (“SSP”) in revenue recognition, (ii) valuation allowance on deferred taxes, (iii) valuation of stock-based compensation and (iv) valuation of the Company’s common stock prior to the Company’s initial public offering of common stock (IPO) in September 2021. Management evaluates these estimates and assumptions on an ongoing basis and makes estimates based on historical experience and various other assumptions that are believed to be reasonable. However, because future events and their effects cannot be determined with certainty, actual results may differ from these assumptions and estimates, and such differences could be material.
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The COVID-19 pandemic has resulted in a sustained global slowdown of economic activity that has decreased demand for certain goods and services, including possibly from the Company’s customers. While we have not experienced significant disruptions from the COVID-19 pandemic during the three months ended March 31, 2022, we are unable to accurately predict the extent to which the ongoing COVID-19 pandemic may impact our business, results of operations and financial condition going forward. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. If the pandemic or its impact changes, the Company’s judgments or estimates will also change, and those changes could materially impact the Company’s condensed consolidated financial statements.

2. Summary of Significant Accounting Policies

Except for the policies updated below, including the accounting policies for credit losses and income taxes that were updated below as a result of the Company adopting the FASB Accounting Standards Updates (“ASU”) Financial Instruments—Credit Losses (“Topic 326”) and Income Taxes (Topic “740”), respectively, on January 1, 2022, there have been no significant changes from the significant accounting policies disclosed in in “Note 2 — Summary of Significant Accounting Policies” to the consolidated financial statements included in Part II, Item 8 of the Annual Report.

Cash Equivalents

Cash consists primarily of cash on deposit with. banks. Cash equivalents include highly liquid investments purchased with an original maturity date of 90 days or less from the date of purchase.

The Company monitors its credit risk by considering factors such as historical experience, credit ratings, current economic conditions, and reasonable and supportable forecasts.

Short-term Investments

Short-term investments consist primarily of money market funds, U.S. treasury bonds, commercial paper, corporate debt and asset-backed securities. The Company’s policy generally requires investments to be investment grade, with the primary objective of minimizing the potential risk of principal loss. The Company classifies its short-term investments as available-for-sale securities at the time of purchase and reevaluates such classification at each balance sheet date. The Company has classified its investments as current based on the nature of the investments and their availability for use in current operations.

Available-for-sale debt securities are recorded at fair value each reporting period. Unrealized gains and losses on these investments are reported as a separate component of accumulated other comprehensive income (loss) in the condensed consolidated balance sheets until realized. Unrealized gains and losses for any short-term investments that management intends to sell or it is more likely than not that management will be required to sell prior to their anticipated recovery are recorded in other income, net. The Company segments its portfolio based on the underlying risk profiles of the securities and has a zero-loss expectation for U.S. treasury and U.S. government agency securities. The Company regularly reviews the securities in an unrealized loss position and evaluates the current expected credit loss by considering factors such as credit ratings, issuer-specific factors, current economic conditions, and reasonable and supportable forecasts. The Company did not record any material credit losses during the three months ended March 31, 2022 and 2021.

Interest income is reported within Other, net in the condensed consolidated statements of operations. Realized gains and losses are determined based on the specific identification method and are reported in Other, net in the consolidated statements of operations.

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Accounts Receivable, Contract Assets and Allowances

Accounts receivable are recorded at the invoiced amount, net of allowances for expected credit losses. Effective January 1, 2022, the Company reports accounts receivable and contract assets net of an allowance for expected credit losses in accordance with Accounting Standards Codification Topic 326, Financial Instruments – Credit Losses (“ASC 326”), while prior period amounts continue to be reported in accordance with previously applicable GAAP. These allowances are based on the Company’s assessment of the collectability of accounts by considering the age of each outstanding invoice, the collection history of each customer, and an evaluation of current expected risk of credit loss based on current conditions and reasonable and supportable forecasts of future economic conditions over the life of the receivable. We assess collectability by reviewing accounts receivable on an aggregated basis where similar characteristics exist and on an individual basis when we identify specific customers with known disputes or collectability issues. Amounts deemed uncollectible are recorded as an allowance for expected credit losses in the condensed consolidated balance sheets with an offsetting decrease in deferred revenue or a charge to general and administrative expense in the condensed consolidated statements of operations.

Collaborative Arrangements

The Company has entered into collaborative arrangements with two partners in order to develop future versions of and enhance the features and functionality of its identity software and SaaS services. These arrangements have been determined to be within the scope of ASC 808, Collaborative Arrangements, as the parties are active participants and exposed to the risks and rewards of the collaborative activity. These arrangements also include research, development and commercial activities. The terms of the Company’s collaborative arrangements include (i) revenue on sales of licensed products, (ii) royalties on net sales of licensed products, (iii) reimbursements for research and development expenses, and (iv) sales-based milestone warrants which expire after ten years. In the quarters ended March 31, 2022 and 2021, the Company had recognized revenue of $1.3 million and $0.7 million and royalty expenses of $0.3 million and $0.3 million related to collaborative arrangements, respectively.

JOBS Act Accounting Election

As an emerging growth company (“EGC”), the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are applicable to private companies (that is, those that have not had a Securities Act registration statement declared effective or do not have a class of securities registered under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). The Company may elect to use this extended transition period under the JOBS Act until such time as the Company is no longer considered to be an EGC. The adoption dates for recently adopted accounting standards discussed below reflect this election, where applicable.

Recently Adopted Accounting Pronouncements

In June 2016, the FASB issued Accounting Standards Update (ASU) 2016-13, Financial Instruments—Credit Losses (Topic 326) (“ASU 2016-13”), which changes the existing incurred loss impairment model for financial assets held at amortized cost. The new model uses a forward-looking expected loss method to calculate credit loss estimates. ASU 2016-13 also modified the concept of other-than-temporary impairment and requires credit losses related to available-for-sale debt securities to be recorded through an allowance for credit losses rather than as a reduction in the amortized cost basis of the securities. These changes will result in earlier recognition of credit losses. In February 2020, the FASB issued ASU No. 2020-02, Financial Instruments – Credit Losses (Topic 326), which amends the effective date of the original pronouncement for smaller reporting companies. ASU 2016-13 and its amendments are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, though early adoption is permitted. The Company adopted the requirements of ASU 2016-13 as of January 1, 2022 on a modified retrospective basis. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements.

In December 2019, the FASB issued ASU No 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 removes certain exceptions to the general principles in Topic 740. As an emerging growth company, ASU 2019-12 is effective for fiscal years beginning January 1, 2022, with early adoption permitted. The Company adopted ASU 2019-12 on January 1, 2022. The adoption of this standard did not have a material impact on the Company's condensed consolidated financial statements.
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3. Segment and Revenue Disclosures
Segment Reporting:
Revenue by geographic region is based on the delivery address of the customer and is summarized in the below table (in thousands):
Three Months Ended March 31,
20222021
Americas$24,751 $21,326 
EMEA17,101 14,804 
APAC6,241 4,720 
Total Revenue $48,093 $40,850 

The Company’s revenue from the United States was $22.4 million for the three months ended March 31, 2022. The Company’s revenue from the United States was $19.4 million for the three months ended March 31, 2021. The Company’s revenue from the United Kingdom was $4.8 million for the three months ended March 31, 2022. The Company’s revenue from the United Kingdom did not exceed 10% of the Company’s total revenue for the three months ended March 31, 2021. No other individual country exceeded 10% of the Company’s total quarterly revenue.

Disaggregation of Revenue

The principal category the Company uses to disaggregate revenues is the nature of the Company’s products and services as presented in the condensed consolidated statements of operations, the total of which is reconciled to the condensed consolidated revenue from the Company’s single reportable segment. In the following table, revenue is presented by software license and service categories (in thousands):
Three Months Ended March 31,
20222021
Revenue:
Multi-year term licenses$8,186 $12,131 
1-year term licenses
11,473 8,950 
Total subscription term licenses19,659 21,081 
Subscription SaaS, support and maintenance26,185 18,364 
45,844 39,445 
Perpetual licenses86 555 
Total subscriptions and perpetual licenses45,930 40,000 
Professional services2,163 850 
Total Revenue$48,093 $40,850 
Contract Assets and Deferred Revenue
Contract assets and deferred revenue from contracts with customers were as follows (in thousands):
March 31,
2022
December 31,
2021
Contract assets$19,982 $20,508 
Deferred revenue67,789 75,394 

Generally, the Company invoices its customers at the time a customer enters into a binding contract. However, the Company may offer invoicing and payment installments for certain multi-year arrangements. In these instances, timing of revenue recognition may differ from the timing of invoicing to customers. Contract assets are recorded when revenue is recognized prior to invoicing. Contract assets are transferred to accounts receivable upon customer invoicing. Beginning of the period contract asset amounts transferred to accounts receivable during the period were $6.4 million and $3.8 million for the three months ended March 31, 2022 and 2021, respectively.
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Deferred revenue is recorded when invoicing occurs before revenue is recognized. Deferred revenue recognized that was included in the deferred revenue balance at the beginning of the period was $28.4 million and $16.0 million for the three months ended March 31, 2022 and 2021, respectively.

Remaining Performance Obligations

Remaining performance obligations (“RPO”) represents transaction price allocated to still unsatisfied or partially satisfied performance obligations. Those obligations are recorded as deferred revenue or contractually stated or committed orders under multi-year billing plans for subscription and perpetual licenses, Software as a Service (“SaaS”) and support and maintenance contracts for which the associated deferred revenue has not yet been recorded.

As of March 31, 2022, total remaining non-cancellable performance obligations under the Company’s subscriptions and perpetual license contracts with customers was approximately $157.1 million. Of this amount, the Company expects to recognize revenue of approximately $93.0 million, or 59%, over the next 12 months, with the balance to be recognized as revenue thereafter.

The Company excludes the transaction price allocated to RPOs that have original expected durations of one year or less such as professional services and training.

Contract Costs
The following table summarizes the account activity of deferred commissions for the three months ended March 31, 2022 and 2021:
Three Months Ended March 31,
20222021
Beginning balance$24,058 $14,748 
Additions to deferred commissions4,085 3,578 
Amortization of deferred commissions(3,991)(3,325)
Ending balance$24,152 $15,001 
March 31,
2022
December 31,
2021
Deferred commissions, current$7,783 $8,457 
Deferred commissions, noncurrent16,369 15,601 
Total deferred commissions$24,152 $24,058 

Concentrations of Credit Risk, Significant Customers and Third Party Hosted Services

Credit Risk

The Company’s financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents, short-term investments and accounts receivable. Cash and cash equivalents and short-term investments are currently held in one financial institution and, at times, may exceed federally insured limits.

Major Customers

As of March 31, 2022 one customer represented 12.8% of accounts receivable. As of December 31, 2021, no single customer represented greater than 10% of accounts receivable. The Company does not require collateral to secure trade receivable balances. For the three months ended March 31, 2022 and 2021, no single customer represented greater than 10% of revenue.

Third Party Hosted Services

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The Company relies on the technology, infrastructure, and software applications, including software-as-a-service offerings, of third parties in order to host or operate certain key products and functions of its business.                                            


4. Fair Value Measurements

ASC 820, Fair Value Measurements (“ASC 820”), defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements. Fair value is defined under ASC 820 as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value under ASC 820 must maximize the use of observable inputs and minimize the use of unobservable inputs.

The standard describes a fair value hierarchy based on the following three levels of inputs that may be used to measure fair value, of which the first two are considered observable and the last unobservable:
Level 1 – Quoted prices in active markets for identical assets or liabilities;

Level 2 – Inputs other than Level 1 that are observable, either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities; and

Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The following table represents the fair value hierarchy for the Company’s financial assets and liabilities held by value on a recurring basis (in thousands):
March 31, 2022
Level 1Level 2Level 3Total
Assets:
Money market funds$58,121 $ $ $58,121 
Total cash equivalents58,121   58,121 
Commercial paper 76,286  76,286 
Asset-backed securities 46,202  46,202 
Corporate debt securities 89,503  89,503 
U.S. treasury bonds 60,794  60,794 
Total short-term investments 272,785  272,785 
     Total cash equivalents and short-term investments $58,121 $272,785 $ $330,906 
December 31, 2021
Level 1Level 2Level 3Total
Assets:
Money market funds$98,333 $ $ $98,333 
Total cash equivalents98,333   98,333 
Commercial paper 78,448  78,448 
Asset-backed securities 51,587  51,587 
Corporate debt securities 85,084  85,084 
U.S. treasury bonds 26,292  26,292 
Total short-term investments 241,411  241,411 
Total cash equivalents and short-term investments$98,333 $241,411 $ $339,744 

All of the Company’s money market funds are classified as Level 1 in the fair value hierarchy as the valuation is based on observable inputs that reflect quoted prices for identical assets or liabilities in active markets. For certain of the Company’s
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financial instruments, including cash held in banks, accounts receivable, accounts payable and accrued expense, the carrying amounts approximate fair value due to their short maturities, and are, therefore, excluded from the fair value tables above.


5. Cash Equivalents and Short-Term Investments

The amortized cost, unrealized loss and estimated fair value of the Company’s cash equivalents and short-term investments as of March 31, 2022 and December 31, 2021 were as follows (in thousands):
March 31, 2022
Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Cash Equivalents:
Money market funds$58,121 $— $— $58,121 
Total cash equivalents58,121 — — 58,121 
Short-term investments
Commercial paper76,286   76,286 
Asset-backed securities46,722  (520)46,202 
Corporate debt securities 90,509  (1,006)89,503 
U.S. Treasury bonds61,545  (751)60,794 
Short-term investments275,062  (2,277)272,785 
Total$333,183 $ $(2,277)$330,906 


December 31, 2021
Amortized CostUnrealized GainUnrealized LossEstimated Fair Value
Cash Equivalents:
Money market funds$98,333 $— $— $98,333 
Total cash equivalents98,333 — — 98,333 
Short-term investments
Commercial paper78,448   78,448 
Asset-backed securities51,745  (158)51,587 
Corporate debt securities85,365  (281)85,084 
U.S. treasury bonds26,444  (152)26,292 
Short-term investments242,002  (591)241,411 
Total$340,335 $ $(591)$339,744 

All short-term investments were designated as available-for-sale securities as of March 31, 2022 and December 31, 2021.

The following table presents the contractual maturities of the Company’s short-term investments as of March 31, 2022 and December 31, 2021 (in thousands):
March 31, 2022
Amortized CostEstimated Fair Value
Due within one year
$186,545 $185,811 
Due between one to five years
88,517 86,974 
Total$275,062 $272,785 

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December 31, 2021
Amortized CostEstimated Fair Value
Due within one year$142,950 $142,868 
Due between one to five years99,052 98,543 
Total$242,002 $241,411 

As of March 31, 2022, the Company did not have any unsettled purchases or unsettled maturities of short-term investments.

The Company had short-term investments with a market value of $194.3 million in unrealized loss positions as of March 31, 2022. The Company has not incurred unrealized losses for greater than 12 months on its short-term investments. Gross unrealized losses from available-for-sale securities were $2.3 million as of March 31, 2022 and no realized gains or losses from available-for-sale securities that were reclassified out of accumulated other comprehensive income for the three months ended March 31, 2022.

For available-for-sale debt securities that have unrealized losses, the Company evaluates whether (i) the Company has the intention to sell any of these investments, (ii) it is not more likely than not that the Company will be required to sell any of these available-for-sale debt securities before recovery of the entire amortized cost basis and (iii) the decline in the fair value of the investment is due to credit or non- credit related factors. The credit ratings associated with the corporate notes and obligations are mostly unchanged, are highly rated and the issuers continue to make timely principal and interest payments. Based on this evaluation, the Company determined that for short-term investments, there were no material credit or non-credit related impairments as of March 31, 2022.

6. Leases

The Company primarily has operating leases for office space. The leases expire on various dates between 2022 and 2029, some of which could include options to extend the lease. Options to extend the lease term are included in the lease term when it is reasonably certain that ForgeRock will exercise the extension option. Leases with a term of one year or less are not recognized on the Company’s condensed consolidated balance sheets, while the associated lease payments are recorded in the condensed consolidated statements of operations on a straight-line basis over the lease term. The Company’s leases do not contain material variable rent payments, residual value guarantees, covenants or other restrictions.
The following table summarizes the components of lease expense, which are included in operating expenses in the Company’s condensed statements of operations and comprehensive loss (in thousands):
Three Months Ended March 31, 2022
Operating lease expense$673 
Variable lease expense175 
Total lease expense$848 

Variable lease payments include amounts relating to common area maintenance, real estate taxes and insurance and are recognized in the condensed consolidated statements of operations and comprehensive loss as incurred.

The following table summarizes supplemental information related to leases:
Three Months Ended March 31, 2022
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows from operating leases (in thousands)$609
Weighted-average remaining lease term (years)
Operating leases6.8
Weighted-average discount rate
Operating leases5.3 %
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The following table summarizes the maturities of lease liabilities as of March 31, 2022 (in thousands):
2022 (9 months remaining)
$1,826 
20232,254 
20242,137 
20251,915 
20261,773 
Thereafter4,872 
Total future minimum lease payments14,777 
Less: Imputed interest(3,096)
Present value of future minimum lease payments11,681 
Less: Current portion of operating lease liability(1,112)
Long-term operating lease liability$10,569 


7. Debt
The following table presents total debt outstanding (in thousands, except interest rates):
March 31, 2022December 31, 2021
AmountInterest RateAmountInterest Rate
$10.0 million March 2019
$10,000 8.00 %$10,000 8.00 %
$10.0 million September 2019
10,000 8.00 %10,000 8.00 %
$10.0 million December 2020
10,000 8.00 %10,000 8.00 %
$10.0 million March 2020
10,000 8.00 %10,000 8.00 %
Less: debt discount(485)(517)
Total debt, net of debt discount39,515 39,483 
Less: current portion  
Total long-term debt$39,515 $39,483 

In September 2021, the Company executed an amendment to the Amended Restated Plain English Growth Capital Loan and Security Agreement with TriplePoint Venture Growth BDC Corp. (“TriplePoint”) and TriplePoint Capital LLC (the “A&R Loan Agreement”), which amends and restates the Loan and Security Agreement entered into in March 2016 with TriplePoint. The payments on all cash advances are interest only. The A&R Loan Agreement became effective once the registration statement in connection with the initial public offering was declared effective on September 16, 2021. The key provisions of the amendment include: (1) a covenant requiring the maintenance of a $20.0 million cash balance when an event of default exits, (2) change in the interest rate for outstanding term loan to be eight percent (8.00%) per annum on the existing loans, (3) extension of the maturity dates by twenty-four months, (4) change in the prepayment penalties and (5) and a change in the prepayment premium. The principal will be due at the end of the term of the respective advance. The A&R Loan Agreement is secured by substantially all the Company’s assets, excluding its intellectual property, which was subject to a negative pledge. The A&R Loan Agreement contains customary representations and warranties and customary affirmative and negative covenants applicable to the Company, including, among other things, restrictions on indebtedness, liens, investments, dividends and other distributions.

The A&R Loan Agreement was accounted for as a modification and not an extinguishment as the terms of the Company’s outstanding debt were not substantially different from the original terms. The Company amortizes the debt issuance costs as interest expense using the effective interest method over the remaining term of the loan.

As of March 31, 2022 and December 31, 2021, accrued interest for the end-of term payments was $1.7 million and $1.6 million, respectively. The annualized effective interest rate on debt was 8.97% and 10.75% for the three months ended March 31, 2022 and year ended December 31, 2021, respectively. As of March 31, 2022, the Company was in compliance with the covenants set forth in the A&R Loan Agreement.
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Future principal payments on outstanding borrowings as of March 31, 2022 are as follows:
Years ending:
2022 (9 months remaining)$ 
2023 
2024 
2025 
202530,000 
202610,000 
Total$40,000 


8. Commitments and Contingencies

Letters of Credit

As of March 31, 2022 and December 31, 2021, the Company had outstanding letters of credit under an office lease agreement that totaled $0.6 million, which primarily guaranteed early termination fees in the event of default. The letters of credit are not collateralized.

Purchase Commitments

In the ordinary course of business, the Company enters into various purchase commitments primarily related to third-party cloud hosting and data services, information technology operations and marketing events. Total noncancellable purchase commitments as of March 31, 2022 were approximately $56.9 million as follows:

2022$9,284
202322,571
202425,000
$56,855 

Employee Benefit Plans

The Company has a 401(k) Savings Plan (“the 401(k) Plan”) which qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. The 401(k) Plan and other pension plans that the Company provides or is mandated to provide are all defined contribution plans. During the three months ended March 31, 2022 and 2021, the Company’s 401(k) and other pension plan contributions were $1.1 million and $0.8 million, respectively.

Warranties and Guarantees

The Company’s software and software-as-a-service (“SaaS”) offerings are generally warrantied to perform materially in accordance with the Company’s documentation under normal use and circumstances. To date, the Company has not incurred significant costs and has not accrued a liability in the accompanying condensed consolidated financial statements as a result of these obligations.

The Company has entered into service-level agreements with a majority of its customers defining levels of support response times and SaaS uptimes, as applicable. In a very small percentage of the Company's arrangements, the Company allows customers to terminate their agreements if the Company fails to meet those levels. In such instances, the customer would be entitled to a refund of prepaid unused subscription or support and maintenance fees. To date, the Company has not experienced any significant failures to meet defined support response times or SaaS uptimes pursuant to those agreements and has not accrued any liabilities related to these agreements in the condensed consolidated financial statements.

The Company has not been obligated to make any payments for contingent indemnification obligations in respect to third-party claims, and no liabilities have been recorded for these obligations as of March 31, 2022.

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Legal Matters

From time to time, the Company may be a party to various legal proceedings and claims that arise in the ordinary course of business. The Company makes a provision for a liability relating to legal matters when it is both probable that a liability has been incurred and the amount of the loss can be reasonably estimated. The Company maintains insurance to cover certain actions and believes that resolution of such claims, charges, or litigation will not have a material impact on the Company’s financial position, results of operations, or liquidity.


9. Income Taxes

For the three months ended March 31, 2022 and 2021, the Company recorded a tax provision of $0.5 million and $0.2 million, respectively. The effective tax rate differs from the U.S. federal statutory income tax rate of 21% primarily as a result of not recognizing deferred tax assets for domestic and certain foreign jurisdictions due to a full valuation allowance against deferred tax assets.

10. Stock-based Compensation

A summary of the Company’s stock-based compensation expense as recognized on the condensed consolidated statements of operations is presented in thousands below:
Three months ended March 31,
20222021
Cost of revenue$517 $74 
Research and development1,400 269 
Sales and marketing2,258 420 
General and administrative2,285 761 
Total stock-based compensation$6,460 $1,524 

2021 Equity Incentive Plan

In September 2021, the Company’s board of directors adopted the Company’s 2021 Equity Incentive Plan (the “2021 Plan”) as a successor to the 2012 Equity Incentive Plan (the “2012 Plan”) with the purpose of granting stock-based awards to employees, directors, officers and consultants such as stock options, restricted stock awards and restricted stock units (“RSUs”). The Company’s compensation committee administers the 2021 Plan. A total of 7,276,000 shares of Class A common stock were initially available for issuance under the 2021 Plan. In addition, the shares reserved for issuance under the 2021 Plan include a number of shares of Class A common stock equal to the number of shares of Class B common stock subject to awards granted under the 2012 Plan that, on or after the termination of the 2012 Plan, expire or otherwise terminate without having been exercised in full or are forfeited to or repurchased by the Company (provided that the maximum number of shares that may be added to the 2021 Plan pursuant to the terms described in this sentence is 14,913,309 shares). The number of shares of the Company’s Class A common stock available for issuance under the 2021 Plan is subject to an annual increase on the first day of each fiscal year beginning on January 1, 2022, equal to the lesser of: (i) 8,085,000 shares; (ii) 5% of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding year; or (iii) such other amount as the Company’s board of directors may determine. As of March 31, 2022, there were 12,519,937. stock-based awards issued and outstanding and 8,162,096 shares available for issuance under the 2021 Plan.

2012 Equity Incentive Plan

The 2012 Plan, which was amended in March 2021, was terminated in September 2021, in connection with the adoption of the 2021 Plan, and stock-based awards are no longer granted under the 2012 Plan. However, the 2012 Plan will continue to govern the terms and conditions of the outstanding awards previously granted thereunder. As of March 31, 2022, the Company has not issued any stock appreciation rights.

2021 Employee Stock Purchase Plan

In September 2021, the Company’s board of directors adopted and the stockholders approved the 2021 Employee Stock Purchase Plan (the “2021 ESPP”), which became effective concurrent with the completion of the IPO, and established an initial reserve of 1,617,000 shares of common stock. The 2021 ESPP provides for annual increases in the number of shares
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available for issuance on the first day of each fiscal year beginning on January 1, 2022, equal to the lesser of: (i) 1,617,000 shares; (ii) 1% of the outstanding shares of all classes of the Company’s common stock as of the last day of the immediately preceding year; or (iii) such other amount determined by the plan administrator. As of March 31, 2022, no shares had been granted under the 2021 ESPP.

Except for the initial offering period, the ESPP provides for a 12-month offering period beginning November 15 and May 15 of each year, and each offering period will consist of two six-month purchase periods. The initial offering period began on October 1, 2021 and will end on November 15, 2022. On each purchase date, eligible employees will purchase the shares at a price per share equal to 85% of the lesser of (1) the fair market value of the Company’s common stock on the offering date, or (2) the fair market value of its common stock on the purchase date.

Restricted Stock Units

The Company grants RSUs that generally vest over four years for our employees and one to three years for our non-employee directors. The total grant date fair value of RSUs granted during the three months ended March 31, 2022 was $23.0 million. There were no RSUs granted during the three months ended March 31, 2021

A summary of the Company’s unvested RSUs and activity for the three months ended March 31, 2022 is as follows:

SharesWeighted Average Grant Date Fair Value
Outstanding as of December 31, 20211,702,724 $27.49 
Granted1,737,772 13.25 
Vested  
Canceled(31,361)24.87 
Outstanding at March 31, 20223,409,135 20.26 

As of March 31, 2022, there was $64.1 million of total unrecognized compensation, which will be recognized over the remaining weighted-average vesting period of 3.7 years using the straight-line method.

Stock Options

A summary of the Company’s stock option activity and related information for the three months ended March 31, 2022 is as follows:
Number of
Awards
Outstanding
Weighted-
Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term (Years)
Aggregate
Intrinsic
Value (in
thousands)
Balance at December 31, 2021
14,219,587 $5.10 6.4$306,981 
Options granted  
Options exercised(1,602,727)1.36 
Options forfeited(96,923)5.83 
Balance at March 31, 2022
12,519,937 5.57 6.8206,124 
As of March 31, 2022:
Vested and exercisable8,243,002 3.53 5.9151,553 

As of March 31, 2022, there was $21.7 million of unrecognized compensation expense related to non-vested stock options granted under the Plan. That expense is expected to be recognized over a weighted-average period of 2.9 years. No stock options were granted during the three months ended March 31, 2022.


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11. Redeemable Convertible Preferred Stock and Related Warrants and Option

Upon the closing of the IPO, all 42,778,408 shares of the Company’s then-outstanding redeemable convertible preferred stock, including the option to purchase 1,935,789 shares which was exercised in April 2021, automatically converted on a one-to-one basis to shares of Class B common stock.

Preferred Stock Warrants

On September 24, 2021, after the closing of the IPO, the warrants to purchase 411,624 shares of preferred stock, all related to the Company’s debt, were exercised in a cashless exercise for a net amount of 344,085 shares of Class B common stock.

12. Stockholders’ Equity

Preferred Stock

In connection with the IPO, the Company amended and restated its certificate of incorporation, which became effective immediately prior to the closing of the Company’s offering, which authorized 100,000,000 shares of undesignated preferred stock, with a par value of $0.001. As of March 31, 2022, there were 100,000,000 shares of preferred stock authorized and zero shares of preferred stock outstanding.

Common Stock

The Company has two classes of common stock: Class A common stock and Class B common stock. In connection with the IPO, the Company amended and restated its certificate of incorporation and authorized 1,000,000,000 shares of Class A common stock and 500,000,000 shares of Class B common stock. The shares of Class A common stock and Class B common stock are identical, except with respect to voting rights. Each share of Class A common stock is entitled to one vote. Each share of Class B common stock is entitled to ten votes. Class A and Class B common stock have a par value of $0.001 per share, and are referred to collectively as the Company’s common stock throughout the notes to the condensed consolidated financial statements, unless otherwise noted. Holders of common stock are entitled to receive any dividends as may be declared from time to time by the board of directors.

Shares of Class B common stock may be converted to Class A common stock at any time at the option of the stockholder. Shares of Class B common stock automatically convert to Class A common stock at the earlier of (i) the 7th anniversary of the filing and effectiveness of the Company’s amended and restated certificate of incorporation in connection with the IPO, (ii) when the outstanding shares of the Company’s Class B common stock represent less than 5% of the combined voting power of the Company’s Class A common stock and Class B common stock, and (iii) the affirmative vote of the holders of 66 2/3% of the voting power of the Company’s outstanding Class B common stock.

Immediately prior to the completion of the IPO, all shares of common stock then outstanding were reclassified into Class B common stock.

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13. Net Loss Per Share

Since the Company was in a loss position for the periods presented, basic net loss per share is the same as diluted net loss per share, as the inclusion of all potential common shares outstanding would have been anti-dilutive.

The following outstanding potentially dilutive ordinary shares were excluded from the computation of diluted net loss per share attributable to ordinary stockholders for the periods presented, as their effect would have been antidilutive:
Three Months Ended March 31,
20222021
(in thousands)
Stock options8,361 9,611 
Restricted stock units174 351 
Convertible preferred stock warrants and option 2,347 
Other awards including contingently issuable shares 78 
Total anti-dilutive shares8,535