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

Quarterly report pursuant to Section 13 or 15(d)

Stock-based Compensation

Stock-based Compensation

3 Months Ended

Mar. 31, 2023

Share-Based Payment Arrangement [Abstract]

A summary of the Company’s stock-based compensation expense as recognized on the condensed consolidated statements of operations is presented below (in thousands):


	Three months ended March 31,
	2023		2022
Cost of revenue	$	1,005	$	517
Research and development	2,010		1,400
Sales and marketing	3,940		2,258
General and administrative	3,228		2,285
Total stock-based compensation	$	10,183	$	6,460

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 will also 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 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, 2023, there were 5,919,969 stock-based awards issued and outstanding and 9,404,214 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, 2023, 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 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. No shares were purchased in the three months ended March 31, 2023 and 2022 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 ended 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. If such fair market value decreases from the offering date to the applicable purchase date, the offering period will terminate after the purchase of shares and all participants will be automatically enrolled in the next offering period (a “rollover event”). The first purchase period of the initial offering period began on October 1, 2021 and ended on May 15, 2022 after the first purchase was completed as a result of a rollover event.

As per the Merger Agreement, the last purchase under the 2021 ESPP occurred on November 15, 2022.

Restricted Stock Units

The Company grants RSUs that generally vest over one to four years. The total grant-date fair value of RSUs granted was $7.9 million and $23.0 million during the three months ended March 31, 2023 and 2022, respectively.

A summary of the Company’s unvested RSUs and activity for the three months ended March 31, 2023 is as follows:


	Shares	Weighted Average Grant Date Fair Value
Outstanding as of December 31, 2022	6,100,343	$	20.16
Granted	393,537	20.15
Released	(485,737)	16.07
Canceled	(88,174)	20.61
Outstanding at March 31, 2023	5,919,969	20.48

As of March 31, 2023, there was $110.5 million of total unrecognized compensation, which will be recognized over the remaining weighted-average vesting period of 3.2 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, 2023 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, 2022	10,194,694	$	5.81	6.2	$	173,953
Options granted	—	—
Options exercised	(644,012)	3.80
Options forfeited	(45,253)	11.60
Balance at March 31, 2023	9,505,429	5.92		6.0	141,618
As of March 31, 2023:

Vested and exercisable	7,630,838	4.75		5.6	121,683

As of March 31, 2023, there was $11.7 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 1.7 years. No stock options were granted during the three months ended March 31, 2023.