; ForgeRock, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

Segment and Revenue Disclosures

v3.22.2.2
Segment and Revenue Disclosures
 9 Months Ended
Sep. 30, 2022
Revenue from Contract with Customer [Abstract]  
Segment and Revenue Disclosures Segment and Revenue Disclosures
Segment Reporting:

The Company operates in a single operating segment. An operating segment is defined as a component of an enterprise for which discrete financial information is available and is regularly reviewed by the chief operating decision maker (CODM). The Company’s CODM is its Chief Executive Officer as he is responsible for making decisions regarding resource allocation and assessing the Company’s performance.

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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Americas $ 34,102  $ 21,123  $ 84,970  $ 66,689 
EMEA 17,053  16,194  50,842  45,084 
APAC 7,065  6,909  18,177  17,256 
Total Revenue $ 58,220  $ 44,226  $ 153,989  $ 129,029 

The Company’s revenue from the United States was $29.0 million and $74.6 million for the three and nine months ended September 30, 2022, respectively. The Company’s revenue from the United States was $18.8 million and $61.1 million for the three and nine months ended September 30, 2021, respectively. The Company’s revenue from the United Kingdom did not exceed 10% of the Company’s total revenue for the three and nine months ended September 30, 2022; the Company’s revenue from the United Kingdom was $5.0 million for the three months ended September 30, 2021. The Company’s revenue from the United Kingdom did not exceed 10% of the Company’s total revenue for the nine months ended September 30, 2021. No other individual country exceeded 10% of the Company’s total quarterly revenue during the periods presented.

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 September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Revenue:
Multi-year term licenses $ 16,569  $ 10,222  $ 34,083  $ 37,834 
1-year term licenses
 7,335  9,142  25,006  25,115 
Total subscription term licenses 23,904  19,364  59,089  62,949 
Subscription SaaS, support and maintenance 31,282  22,940  87,029  61,543 
Perpetual licenses 91  183  197  885 
Total subscriptions and perpetual licenses 55,277  42,487  146,315  125,377 
Professional services 2,943  1,739  7,674  3,652 
Total Revenue $ 58,220  $ 44,226  $ 153,989  $ 129,029 
Contract Assets and Deferred Revenue
Contract assets and deferred revenue from contracts with customers were as follows (in thousands):
September 30,
2022		 December 31,
2021
Contract assets $ 23,212  $ 20,508 
Deferred revenue 59,300  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 $3.1 million and $3.1 million for the three months ended September 30, 2022 and 2021, respectively and $16.2 million and $8.0 million for the nine months ended September 30, 2022 and 2021, respectively.

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 $30.2 million and $24.2 million for the three months ended September 30, 2022 and 2021, respectively and $59.9 million and $45.5 million for the nine months ended September 30, 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 and support and maintenance contracts for which the associated deferred revenue has not yet been recorded.

As of September 30, 2022, total remaining non-cancellable performance obligations under the Company’s subscriptions and perpetual license contracts with customers was approximately $176.9 million. Of this amount, the Company expects to recognize revenue of approximately $103.0 million, or 58%, 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 and nine months ended September 30, 2022 and 2021:
Three Months Ended September 30, Nine Months Ended September 30,
2022 2021 2022 2021
Beginning balance $ 24,784  $ 17,055  $ 24,058  $ 14,748 
Additions to deferred commissions 5,254  4,656  13,182  14,197 
Amortization of deferred commissions (3,450) (3,202) (10,652) (10,436)
Ending balance $ 26,588  $ 18,509  $ 26,588  $ 18,509 
September 30,
2022		 December 31,
2021
Deferred commissions, current $ 8,697  $ 8,457 
Deferred commissions, non-current 17,891  15,601 
Total deferred commissions $ 26,588  $ 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 two financial institutions and, at times, may exceed federally insured limits.
Major Customers

As of September 30, 2022 and 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 and nine months ended September 30, 2022 and 2021, no single customer represented greater than 10% of revenue.

Third Party Hosted Services
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.