ForgeRock, Inc. (FORG) Q1 2022 Earnings Call Transcript

ForgeRock, Inc. (FORG)
Q1 2022 Earnings Call
May 11, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day, ladies and gentlemen. Welcome to ForgeRock's first quarter earnings conference call. As a reminder, this call is being recorded. I would now like to turn the call over to Mark Kang, ForgeRock's head of investor relations.

Please go ahead.

Mark Kang -- Head of Investor Relations

Hello, everyone. Welcome to ForgeRock's Q1 2022 earnings 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 Q2 and full year 2022, our future offerings and enhancements to our current offerings, the 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 included in our SEC filings including our annual report on Form 10-K filed with the SEC on March 9, 2022, 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 in slides available on our investor relations website.

With that, I'll hand the call over to Fran.

Fran Rosch -- Chief Executive Officer

Thanks, Mark, and thanks to everyone for joining us to discuss our first quarter 2022 results. We had a fantastic start to 2022 and once again outperformed our guidance across all metrics highlighted by ARR growth of 35% year over year for the second consecutive quarter. Our ARR growth accelerated year over year by five percentage points and we delivered $10.1 million in sequential net new ARR in Q1 versus $7.2 million in the same quarter last year, representing a 41% growth year over year. We continue to see strong demand across our portfolio, particularly for our SaaS offering, which continues to beat our expectations.

The strength of our customer demand gives us confidence to raise our full year 2022 guidance for ARR and our expected SaaS adoption. John will discuss this further in his remarks. Recent cybersecurity events have reminded us again that identity is critical to both securing the enterprise and enhancing customer experience. The threat landscape remains as challenging as ever and security spending in general, which includes identity, remains a top priority for CIOs and CISOs.

But it's not just about security. Digital transformation initiatives are driving enterprises to enhance customer and employee experience and modernize their IT infrastructure, therefore, heightening demand for both our CIAM and workforce solutions. We differentiate ourselves by approaching the market with an integrated platform across identity, access and governance for CIAM workforce and IoT use cases that supports all identity types. We empower our customers to choose how they want to deploy our software in their heterogeneous environments, such as self-managed, public and private cloud environments through our SaaS offering, the ForgeRock Identity Cloud, or hybrid deployments.

Adoption of our SaaS offering among our customers is strengthening, representing 65% of ARR from new customers in Q1, a new record for us. In the past, you've heard us talk about our multi-tenant SaaS architecture, with tenant isolation, which is unique in the identity market. Our differentiated SaaS architecture has a few distinct advantages: first, we believe our performance is unmatched. It's important to note that we designed our SaaS offering from the ground up to support the largest enterprises during their busiest times like Black Friday or Cyber Monday.

Unlike a typical multi-tenant approach, our tenant isolation means we don't throttle traffic to guard against noisy neighbor issues, which is a de facto approach among other identity providers. ForgeRock has delivered an average of four nines of availability since the inception of our SaaS offering. We are now committing to the solo service in our agreements, but not everyone delivers four nines the same way. And four nines doesn't matter if it comes with heavy throttling caveats, which are so common in the industry.

Often, SaaS architectures put a large number of enterprise customers in a single shared pod. Meaning, that if one enterprise is a massive scale event, all other enterprises in the pod they get throttled to ensure the resilience of shared resources. Technically, that's still considered four nines. But it doesn't feel like it because the throttling activity causes service disruptions, creates latency and hinders the experience of their end users.

Second, we provide our SaaS customers with data isolation that meets the regulatory requirements. We enable our customers to choose where their data resides in the cloud. For example, for some customers, it's critical for the data to reside on a server located in their country or region. We don't share end points.

Something that's very important from the security and availability standpoint. Third, we believe we have the most modern SaaS platform among major identity providers today. We leverage technologies such as Kubernetes and Elasticity that wasn't available 10 years ago to build our tenant isolation approach. Our approach enables us to offer our customers massive scale without the typical noise in neighbor or throttling issues, and it's also cost-effective for us.

We believe we are extremely well positioned for the road ahead due to our SaaS offering, which has been purpose built for the enterprise market. And we continue to evolve our platform with cutting-edge technologies. Our market opportunity is massive and continues to expand driven by our culture of product innovation and the passion of our ForgeRock Identity experts. Today, we are excited to announce ForgeRock Autonomous Access, another AI-driven solution that helps organizations prevent cyber-attacks and fraud in real time.

Many of us have had our identity stolen or worse, we've had cyber criminals actually accessing our accounts. Attacks involving user names and passwords increased a staggering 450% in the last year, translating into more than 1 billion compromise records in the U.S. alone. As companies digitally transform and expand their online presence, their attack surface also increases and bad actors will attempt to take advantage of it.

Autonomous Access is a new threat protection solution that helps enterprises illuminate account takeovers and prevent fraud in real time using a powerful combination of artificial intelligence, machine learning and advanced pattern recognition. It continuously evaluates access behavior and assigned risk scores to prevent known attacks and detect new threats. For today's announcement, ForgeRock continues to deliver on its AI strategy with a new solution that enables smarter access decisions, delivering better protection along with seamless experiences for trusted users. Delivered from the ForgeRock Identity Cloud, Autonomous Access empowers teams to create any number of personalized user access journeys with a simple drag and drop, no-code interface.

Autonomous Access is applicable to both CIAM and workforce use cases, and our sales team will begin selling the solution by the end of this month. We have a great pipeline of product innovation and we will share updates with you in future quarters. The momentum we are seeing across our business is being driven by broader adoption of our platform across both CIAM and workforce use cases for self-managed SaaS or hybrid deployments. We continue to see a diverse mix of customer wins across industry verticals.

I'd like to take a few minutes to highlight five customer wins from the first quarter. All five of these wins are with the ForgeRock Identity Cloud and three of them are Fortune 100 companies. Our first customer win example is an Asia-based multinational insurance and finance corporation with over 30 million customers. This customer is revamping their customer loyalty platform in Australia and selected the ForgeRock Identity Cloud because unlike ForgeRock, their existing identity provider could not provide full data residency in Australia.

ForgeRock was also selected because of our ability to easily integrate with a large number of existing applications, and we can deliver customizable MFA through our identity trees. Our next customer win is a Fortune 100 leader in shipping. This customer is migrating 40 million users from CA Siteminder to the ForgeRock Identity Cloud to streamline the log-in and authentication process. ForgeRock was selected because of our ability to deliver more than a dozen ways to improve the customer experience while also reducing cost and fraud to the company.

Moving on. We had another Fortune 100 customer win, but in the energy sector. This customer has numerous brands and wants to ensure a consistent user experience across brands globally. To meet these requirements on a global scale, the customer is implementing the ForgeRock Identity Cloud to support multiple brands and languages on one platform, an important differentiator for us.

For our next Fortune 100 win, like many global investment banks and financial institutions, this customer is numerous IAM systems throughout the world. They are consolidating many of these systems in order to better understand customers and improve the user experience. They selected ForgeRock Identity Cloud to achieve its customer goals, as well as realize potentially hundreds of millions in cost savings. For our final customer win example, we have an existing customer who expanded on their existing ForgeRock Identity Cloud deployment.

This global manufacturing conglomerate experienced rapid success with our SaaS offering for one of its leading brands and is expanding to support another mass consumer application. They are expanding with the ForgeRock Identity Cloud because our identity trees enable numerous authentication journeys such as social media log-ins and they're also looking at the strength in security and reduce costs. Our demand continues to be strong across both CIAM and workforce. We tend to land on the CIAM side.

And as of the end of Q1, 43% of our customers use us for both CIAM and workforce. 7% for CIAM-only and 20% for workforce only. Our customers expand with us through more identities, more use cases, more product modules and more deployments. This has resulted in our ability to drive sales productivity by double-digit increases year over year, grow ARR by 35% in 2021, but our non-GAAP sales and marketing expense grew only 15% in 2021, and deepen relationships and increased sales leverage with our alliances and partners.

Before I conclude, I'm very excited about our upcoming user conference ID Live. It kicks off on May 23 in Austin before heading to London and Melbourne this summer. I love this event because it's a chance to exchange ideas with our customers and partners. We will welcome hundreds of attendees from a variety of industries.

They will get a sneak peek at our new products and learn from identity leaders from customers like U.S. Bank, Toyota, Humana, Navy Federal Credit Union and Alliance Partners, Accenture, PwC and Deloitte. Finally, we remain deeply concerned about the war in Ukraine. While ForgeRock doesn't operate in Ukraine or Russia and our business is unaffected, it is a terrible situation and we are hoping for a peaceful resolution soon.

With that, I'll turn the call over to John to walk through our financial results in more detail. John?

John Fernandez -- Chief Financial Officer and Executive Vice President of Global Operations

Thank you, Fran. I am pleased to announce our first quarter results exceeded our guidance across all metrics. As we look back over the past nine quarters, the first seven were consistent at 29% to 30% growth. And we saw acceleration to 35% for the last two quarters.

We ended Q1 ARR at $193.2 million. We continue to see strong demand across our regions globally. As it pertains to seasonality, Q2 and Q4 were our strongest quarters last year for net new ARR. We currently expect Q2 and Q4 of this year to experience similar seasonality.

Q1 was a record SaaS quarter for us, 47% of our new customers in Q1 purchased our SaaS offering and 65% of ARR from new customers with SaaS ARR. As a reminder, 25% and 40% of our new customers purchased SaaS in Q3 and Q4 of last year, respectively. And our SaaS ARR represented 50% and 38% of ARR from new customers in those respective periods. Average SaaS ARR from new customers who purchased SaaS in Q1 was greater than $350,000.

Moving on to customers. We are extremely proud of the customer base we have built that includes many of the world's leading brands. We continue to experience very high retention and are seeing great results from our investments and customer success. We ended Q1 with 404 large customers, defined as customers with $100,000 of ARR or greater.

Our large customer base grew 20% year over year, and they represented 91% of our ARR as of the end of Q1. Our net retention rate for Q1 was 111%. Over the last few quarters, the majority of our ARR acceleration has been driven by new logos. While we expect new product uptake from solutions such as Autonomous Access and existing customers adopting SaaS to increase our net retention rate over time, we believe it will stay in the 110% to 112% range for the remainder of this year.

Moving to revenue. Revenue recognition for self-managed deals is significantly different than ratable revenue recognition for SaaS deals under ASC 606. This is best to explain to an example. Let's take a 3-year $200,000 ARR self-managed deal.

So that's $600,000 of total contract value. If the start date was on the last day of the quarter, we would recognize approximately $297,000 in that quarter. If we take the same 3-year $200,000 ARR deal SaaS, we would recognize approximately $550 in the quarter or one 366 of the ARR. This example shows why ARR best reflects our growth while GAAP revenue is reflecting a temporary deceleration due to SaaS increasing as a percentage of the new ARR mix over time.

Total revenue for Q1 was $48.1 million, an increase of 18% year over year. We ran a like-for-like comparison. And if we did the same dollars of new SaaS ARR in Q1 2022 that we did in Q1 2021 with the difference made up with self-managed ARR, we estimate our total revenue growth would have been approximately 30% year over year or approximately $5 million of impact. Professional services revenue grew from $850,000 in Q1 2021 to $2.2 million in Q1 of this year.

Before turning to profitability and expense items, I'd like to point out that I will only be discussing non-GAAP results going forward. Non-GAAP results exclude stock-based compensation for all periods discussed. Our press release contains our GAAP results and reconciliations to our non-GAAP results. Q1 gross profit was $39.9 million and gross margin was 83%, as we continue to scale our SaaS offering, we expect to see increasing investment in cloud infrastructure and incur higher hosting costs.

Our professional services margin significantly improved year over year, driven by higher utilization and higher professional services revenue. Turning now to operating expenses. We remain focused on investing strategically for growth while achieving our operating margin goals and our path to profitability. Sales and marketing expense for Q1 was $24.7 million compared to $19.8 million in Q1 last year.

This represents 51% of total revenue for Q1 compared to 49% in Q1 of last year. R&D expense in Q1 was $13.1 million compared to $10.2 million in Q1 last year. This represents 27% of total revenue for Q1 versus 25% in Q1 of last year. G&A expense in Q1 was $11.3 million compared to $7.5 million in Q1 last year.

G&A was 23% of revenue versus 18% of revenue last year. Operating loss was $9.2 million versus a loss of $3.1 million in Q1 last year representing an operating margin of negative 19% versus negative 8% a year ago. It's important to note that the biggest impact to our operating margin year over year is our rapidly growing SaaS business, and the resulting impact to revenue under ASC 606. Using the same analysis that I described earlier, if we did the same dollars of new SaaS ARR in Q1 2022 that we did in Q1 2021 with the difference made up with self-managed ARR, we estimate the impact to revenue would be approximately a positive $5 million delta, resulting in an operating margin that would have been approximately negative 8%.

Please refer to the Q1 2022 investor presentation on our investor relations website for more information. Turning to the balance sheet. We ended the quarter with $364 million in cash, cash equivalents and marketable securities. We have a rock solid balance sheet that is many multiples of what we need until we achieve a sustained positive non-GAAP operating margin.

Before we turn to guidance, I'd like to provide some comments that should provide additional context for the remainder of this year. First, we continue to see strong demand from our pipeline, and we are raising our annual ARR guidance. SaaS is significantly exceeding our expectations, and this is hugely positive for the future growth trajectory of our company. Accordingly, we are raising our expected end SaaS ARR range from 20% to 25% to 22% to 27% of total ARR for this year.

Because SaaS revenue is ratable and upfront revenue recognition for self-managed deals is materially different for the example I previously gave and thus contribute significantly less revenue in the near term, we are maintaining our full year revenue guidance and revising our operating income slightly. Our full year revenue guidance now has less upside due to our rapid SaaS adoption, and our P&L also contains some additional expenses with that higher SaaS adoption. Therefore, as you have heard us say previously, we run our business and focus its growth on ARR. It's the best metric by which to measure our business performance, especially as our SaaS offering experiences rapid growth.

We expect Q2 to be the trough in terms of revenue growth in 2022. We expect revenue growth to begin meaningful reacceleration in Q3, with Q4 being our strongest seasonal quarter for growth. We remain confident in our ability to achieve non-GAAP operating margin profitability in the second half of 2023. Though our progress between now and then may not be linear primarily due to seasonality.

And lastly, we've considered FX impact to ARR and revenue. Using April's FX rates, the impact is relatively small, and we have factored it into our quarterly and annual guidance. Now, turning to guidance. For the second quarter of 2022, we expect total ARR of $203 million to $204 million, representing 31% year-over-year growth at the midpoint.

Total revenue of $46.5 million to $47.5 million, non-GAAP operating loss of $17.5 million to $16.5 million, and non-GAAP net loss per share of $0.23 to $0.21 assuming weighted average shares outstanding of approximately 84.3 million. For the full year 2022, we expect total ARR of $240 million to $243 million, representing 32% year-over-year growth at the midpoint. Total revenue of $212 million to $215 million, representing 21% year-over-year growth at the midpoint. Non-GAAP operating loss of $32 million to $28 million, representing an operating margin range of negative 15% to negative 13%.

And non-GAAP net loss per share of $0.45 to $0.41, assuming weighted average shares outstanding of approximately $84.8 million. Q1 was a great start to the year, and I'll turn the call back to Fran for closing remarks. Fran?

Fran Rosch -- Chief Executive Officer

Thank you, John. Before we open for questions, I'd like to close with the fact that our business is firing on all cylinders, give confidence in our ability to execute to our plan and to meet our growth targets. Our SaaS offering continues to exceed our expectations. We continue to deliver world-class innovation to the market, highlighted by today's announcement of Autonomous Access.

We continue to help the world's largest enterprises with the most strategic identity initiatives. We had a fantastic first quarter, and we look forward to reporting on our continued success. And thanks to all the ForgeRockers who helped us deliver a fantastic quarter and we look forward to welcoming new ForgeRockers into the family to help us keep the momentum going. Operator, you may now open the call for questions.

Questions & Answers:

Operator

[Operator instructions] We'll take our first question from Rob Owens with Piper Sandler. Please go ahead.

Rob Owens -- Piper Sandler -- Analyst

Great. Good afternoon. Thanks for taking my questions. Just one for me today.

If you were to decompose the strength you saw in ARR this quarter between CIAM and the workforce. Can you give us a sense of how much of the base is CIAM in the aggregate ARR? And in the net new ARR, what kind of trends are you seeing? Thanks.

Fran Rosch -- Chief Executive Officer

Hey, Rob, yes, so we saw really strong demand for both CIAM and workforce. That's evidenced by that we continue to have 43% of our customers leverage our platform for both consumer and workforce. 30% consumer only and 20% for workforce. So we see strong demand across both.

Now, we do continue to land with CIAM most often. We think the CIAM is the largest part of the identity market, the kind of the most exciting one. The one that's growing the fastest. So again, this quarter, most of our lands, most of our new customers came in the CIAM, and we have now our opportunity to cross-sell the workforce portfolio into those customers.

Now, of course, we still have some good workforce lands. But generally, we're seeing the strongest market demand in the CIAM space, but with good general market demand for all of it.

Rob Owens -- Piper Sandler -- Analyst

And relative to competition and pricing, anything changing on that front as you look between the two discrete markets?

Fran Rosch -- Chief Executive Officer

Yes. No, I think we haven't seen any big dramatic changes in competition, and we continue to hold pricing and don't see a lot of pricing pressure at this time. And when we really think about this market demand, whether it's driven by increasing cyber threats and everything that's going on in the world, or the continued digital transformation with more and more companies looking to develop better identity relationships, even in these challenging times digital identity is really going to the top of the queue for investments in these companies. And from a competitive position, seeing the investments that we've made, especially in that cloud product, the Project Identity Cloud, that's really continuing to help us improve our traction and accelerate that growth in the market.

Mean 65% of that new ARR from new logos came in on SaaS. That's a new record for us. So that's really helping us to improve our competitive position in the market. I think the new innovation we launched today whether Autonomous Access will contribute to that.

So no big changes in dynamics, no big changes in pricing, just responding to really strong market demand.

Rob Owens -- Piper Sandler -- Analyst

Great. Thanks for the color.

Operator

We'll take our next question from Hamza Fodderwala with Morgan Stanley. Please go ahead.

Hamza Fodderwala -- Morgan Stanley -- Analyst

Hey, guys. Thank you for taking my question. I will try to keep it to one question, too. John, I wanted to ask about the mechanics around the revenue acceleration later this year.

So you're obviously seeing a higher mix of SaaS, which is what you want. And I believe that's generally a two to three x uplift versus your self-managed offering. So eventually, that upside gets reflected in your revenue. At the same time, I don't think you want to stop at just 27% of your ARR being from SaaS.

I imagine you actually want to get to the majority. So how do you think about the puts and takes there between yes, you'll recognize that upside on the revenue eventually, but then maybe that's also offset by the fact that you have a growing mix of SaaS ARR for net new deals?

John Fernandez -- Chief Financial Officer and Executive Vice President of Global Operations

Yes. It's a great question. I think a couple of things every quarter, obviously, we get a lot better visibility. We saw really strong SaaS, obviously, as we were standing at this point last quarter and guided accordingly.

And where we sit today, we see that strength to guide to 22% to 27%. There is variability. And if you look to our IR website and we've trended out the last three quarters of the dollars of SaaS in every period, you can see this quite variable period-to-period. That said, as we look out over the next several quarters, it is growing quite substantially and quite fast.

And so, we know that all the variable will continue to grow quite fast. And so, we have raised those percentages of SaaS in the mix for each of the quarters Q2, Q3 and Q4 for this year and thus the guidance. As we continue to get closer quarter-to-quarter, if we see that variable -- variability reducing and in fact, that growing even faster, we'll continue to raise that range as appropriate at a future period in time. I think where we sit today, as it relates to the reacceleration.

And importantly, we have the visibility into the fact that this is the trough for us, we believe here in Q2 in revenue because we can see that revenue waterfall. All the SaaS we've been doing and all of the support and maintenance from our existing business that falls into Q3 and Q4 for the rest of this year, give us a very high level of confidence in that revenue reacceleration. And again, when we think about driving and what mix, I just want to say really importantly, and especially for those that have joined the call maybe for the first time for ForgeRock, why is SaaS so great? Well, first of all, it gives our customers another option. We go to them with choice.

So they can go self-manage or SaaS. That's powerful. Remembering though that also SaaS, there are companies out there who mandated cloud only. So that's opening up our TAM.

We have shorter sales cycles on average for SaaS, strong close rates. As you mentioned, two to three x on converting customers but two to five x increase in price per user for identities on new customers. So higher ASPs, it's just a great business for us. We want to give customers choice.

We're not going to try and steer it in that direction. But our sales reps and our customers, they're coming first in many circumstances with the cloud for strategy. So that's how we're looking at the reacceleration for the year, the linearity, and our mix of SaaS.

Fran Rosch -- Chief Executive Officer

And, again. I'll just add to that. As we raise this guidance of ending year ARR to 27%. I mean, just remember, this is only our second year of having our SaaS offering in the market.

And it's really a very rapid adoption, really driven by that differentiation in that architecture. That ability to give our enterprise customers the confidence in scale and performance and no throttling and performance due to noisy neighbors, the ability to be able to ensure that their data resides in their country. These are real differentiators than other cloud products in the market, and that's why we're really seeing that rapid growth. And we're -- as you said, over the long term, that is the right thing.

That's why we continue to focus on ARR as a key growth metric for the company. Thank you, Hamza.

Operator

We'll take our next question from Gray Powell with BTIG. Please go ahead.

Gray Powell -- BTIG -- Analyst

OK. Great. Thank you very much. And congratulations on the strong results.

It's really good to see the improved or the accelerated mix shift to the SaaS side of things. So yes, on that point, it was really helpful how you disclosed the impact of the mix shift to Q1 operating income. Can you just help us think through how that's impacting the full year operating loss guidance or just any directional color there would be really helpful.

John Fernandez -- Chief Financial Officer and Executive Vice President of Global Operations

Yes. Yes. So yes, thank you. Q1 was a great quarter.

Again, really exciting on all levels, and I think indicative of the trends of the business. As it relates to the operating loss on the year, I think, first and foremost, we look at the fact we raised the ARR guidance, right? So now on the year, as we think about it, $2.40 to $2.43 and at 32%, the best metric by which we measure the growth of the business. Obviously, this transition to SaaS, 65% in Q1, and we're raising it in each of the periods, Q2 through Q4 is going to obviously have a level of more ratable rev rec. And so, then putting that pressure on revenue and yet we feel incredibly confident in our revenue guide for the year.

So I think that's just that top line narrative looking at ARR, raising that and then noting more SaaS in our top line revenue. As it relates to the rest of the P&L, I think importantly, with more SaaS, we have incorporated a level of higher hosting costs. So as we think about that, as that flows through, also importantly, and as you look at Q1 gross margins, as well as we're doing more SaaS. We've really got a hold on those cost per tenant, cost per customer in SaaS.

So we've added more hosting costs. We've also realized reduce costs on a per customer basis for our SaaS business. I'd say a little bit earlier than we probably thought. We think there's still a lot of opportunity in the year for that.

At the end of the day, we're going to manage our P&L to that negative 15% to negative 13% operating margin on the year, and really focused on delivering that top line ARR and that result in revenue as a result of what we're predicting much higher SaaS mix.

Gray Powell -- BTIG -- Analyst

OK. I think that makes sense. And then, I guess, this might be a tough one, but is it safe to say that if your SaaS mix were unchanged relative to the prior guidance that your operating loss guidance would have been also unchanged or maybe even slightly better?

John Fernandez -- Chief Financial Officer and Executive Vice President of Global Operations

Yes. I think that's very fair because we have raised that mix considerably. And so, yes, that is a very, very stable. Another way I put that statement is effectively across our business, things have remained the same outside of the one very large change but SaaS is much, much more successful, much earlier and much stronger than our pipeline than we had thought originally.

Gray Powell -- BTIG -- Analyst

Understood. OK, great. Thank you very much.

Operator

We'll take our next question from Patrick Colville with Deutsche Bank. Please go ahead.

Patrick Colville -- Deutsche Bank -- Analyst

Thank you so much for taking my question. My question is about ARR. I mean, the print this quarter is very impressive. And if I'm not mistaken, you guys beat the midpoint of your guidance by $6 million, which is very impressive.

And you also lifted the fiscal '22 guidance. If I calculate it correctly, you lifted the midpoint by about $2 million just, I guess, help me understand why by that amount, given the kind of $6 million beat, you're very encouraging that you listed fiscal '22 guide. But how come it was that level that was chosen.

Fran Rosch -- Chief Executive Officer

I think what we look at it is we printed, as you said, a very strong Q1. And when we look at our annual plan, we raised that guidance based on what we think the full year will deliver. Now, that's a modestly conservative guidance. And obviously, as we look at our pipeline and our sales capacity, we're going to look to overachieve, that is continue to execute on the plan.

But we felt at this time, it's early in the year. We're still doing in pipeline. We're still releasing new technology that we felt this was the prudent raise to do at this time. We'll continue to evaluate the business as we go forward.

Patrick Colville -- Deutsche Bank -- Analyst

Great. Thank you. And, I guess, my follow-up is just about fiscal first quarter. The prints out, were there any large deals that closed this quarter were the kind of dynamics that we should be aware of, just so we got a whole picture about the 1Q ARR number? Thank you so much.

Fran Rosch -- Chief Executive Officer

It's a great question. And really, we looked a lot into all the data, into all the results through our QBRs and it's really consistent performance across all areas versus any one thing. We had great strong in the Americas, Europe, APJ. The one thing that obviously really stands out is a SaaS adoption came even stronger than we thought.

But we saw good growth in financial services, some great public sector wins, some strong healthcare growth continues. So it's very vertical spread. We continue to see strong ASPs that continue to grow and stay strong, healthy growth in our large customer count. So it was really a very balanced quarter that really executed across all elements of the business without any one thing shifting it.

And that's what I think has given us confidence to raise that guide in ARR this year, both in total and SaaS. And as we said to the first part of your question, that is a modest increase. We have modestly conservative guidance, and we're going to look to overachieve throughout the year. So it was really a well-balanced quarter all around.

Patrick Colville -- Deutsche Bank -- Analyst

Nice. Thank you so much.

Operator

We'll take our next question from Jonathan Ho with William Blair. Please go ahead.

Jonathan Ho -- William Blair -- Analyst

Hi. Good afternoon. Just wanted to, I guess, understand a little bit more about the new AI-driven autonomous access capability. And can you maybe give us a sense of how much this could maybe help your differentiation, as well as potentially what that upsell opportunity looks like?

Fran Rosch -- Chief Executive Officer

Absolutely. And I think we did this really to continue to drive customer value and differentiation. And many of you have heard me talk about the importance of bringing AI to the entire identity journey, so we can have more intelligent identity system that can help recognize the legitimate user and give them easy access while using signals to block potential malicious actors. We launched ForgeRock's identity a couple of years ago and now Autonomous Access continues to build on that foundation across the full identity life cycle.

The Autonomous Access is targeted bringing that intelligence sort of the authentication part of the identity journey. Many companies are dealing with identity theft, with account takeover, with fraud that really happens through user impersonation at that authentication process. So the value that we're focused on delivering for our customers here is to really reduce that account takeover, reduce that authentication-related fraud. Now, the product is three ways that it really differentiates from what other things out in the market.

First, as a really powerful heuristics or rules-based engine where we can help our customers protect in real time from known fraud capabilities like credential stuffing or IP reputation, all of that helps really block those known threats. The AI part of the component really helps with unknown threats, things you can't predict. So by looking at signals of user and device behavior, we can bring intelligence to say, wait, this is like a strange transaction or strange user behavior. Let's go ahead and put up a higher level of authentication or block that access.

So it's really a unique combination of both rules based or heuristics and this AI-driven model. But I think the other really important thing about this is all of this technology, of course, was homegrown here in ForgeRock's engineering department. So it's already fully integrated as an add-on module to the ForgeRock Identity Cloud. So it's part of our identity trees.

Customers can turn on very easily and start taking advantage of this right in line as part of that developer interface are identity trees. So it's different as it's more powerful across both Heuristics and AI, and it's different because it's already integrating to those identity journeys. So we've been talking to a lot of our customers, they're really struggling with this account takeover due to the weakness of usernames and pass-throughs, obviously. This brings that intelligence to really solve a big problem for our customers right in line with the platform.

So a lot of excitement, a lot of great pipeline building. And so, we think this can really help continue to drive that acceleration in ARR growth for the rest of the year.

Jonathan Ho -- William Blair -- Analyst

Got it. And then, just relative to the 11% net retention and the revised sort of range or current range around net retention. How should we think about this trending over time, especially as your SaaS customers start to come up for renewal, when do we maybe start to see that tick up a bit? Thank you.

John Fernandez -- Chief Financial Officer and Executive Vice President of Global Operations

Yes. Yes, I think importantly, and just for the context of why we are where we are when we talk about the future is -- in this period, we look at the 111%. Our customer retention is really strong and remains at record highs. So that's just a continuous result of this customer success investment we've made.

We're incredibly pleased with that level of customer retention. We don't see that changing. We are seeing this skewing of our new ARR toward new logo acquisition. And that's really been this function of SaaS.

So we've seen that opportunity. We're taking that market share. And I think over time, that balance is out more as we look toward the future, Jonathan. But I think there's some things that are in the wings right now.

So we talk about autonomous access, right? That product coming out is going to help us get to the future state I'll talk about in a moment. I think as it relates to governance, continuing to upsell that. One of the big things we've talked about in the past was the software to SaaS opportunity, which is that conversion of our installed base on self-management over to SaaS, which is we've experienced is about a 2x to 3x of ARR. We think that's a multi-hundred million dollar opportunity.

We are still in the early days. We've developed the tooling, we've developed all the paths and journeys that they go through and all the things we need to do, and we've gotten out there, and we've seen a great interest from our customers. We are building that pipeline quite quickly. Enterprises take time though.

This level of decision at the level we play out enterprises, it can be a multi-quarter decision and then a multi-quarter launch process to figure out how to get there. So I think in the end, for this year, we still think through the end of this year, we'll be in that 110 to 112 range. Obviously, we have goals and targets to get that expansion of those items, really the software to SaaS initiative, more governance, more autonomous access that just launched, get that out there really through our customer success mechanism and drive that north of 112 in the future, likely outside of this fiscal year.

Jonathan Ho -- William Blair -- Analyst

Thank you.

Operator

[Operator instructions] We'll take our next question from Shaul Eyal with Cowen. Please go ahead.

Shaul Eyal -- Cowen and Company -- Analyst

Thank you. Good afternoon, Fran, John, Mark. Great progress with the SaaS offering, indeed. How would you characterize the sales cycle associated with this product? And I have a follow-up.

Fran Rosch -- Chief Executive Officer

Sure. So I think what I would say is that, first, our sales cycle doesn't start with cloud or self-managed. It starts with understanding the customer needs related to identity. What challenges they're trying to solve around whether it's consumer or workforce, IoT.

And that's the way we start the conversation with our customers. And then, as we go through understanding what they want to try to accomplish, then we talk about how they want to do it, and we give them choice on whether they want to go self-managed or SaaS. So typically that ends up later in the sales cycle But overall, we do see that the sales cycles with SaaS are shorter. And that goes down to when we deliver SaaS, for dot takes on a lot of the work, right? The run, they operate, the security.

So customers don't have to deal with like planning about building all of that infrastructure because they can just take advantage of ForgeRock's rich functionality as a service. So we are seeing shorter sales cycle with our SaaS. We are seeing higher ASPs, significantly higher ASPs as we really deliver more value. So we're seeing not only strong demand from our customers, but internally, our sales team really sees the benefits of positioning SaaS and the benefits of that to the customer.

So shorter sales cycle, higher ASPs, more differentiation. I think that's what's driving that accelerated adoption of the SaaS. And you had a follow-up?

Shaul Eyal -- Cowen and Company -- Analyst

Sure. So here we are sitting, we're getting really close to midway through the quarter. Have you detected any changing demand patterns? Are we tracking to similar levels like 2Q '21? And I know last year, you're preparing to go public on the one hand and then quarter was left. So just maybe some color along these lines.

Fran Rosch -- Chief Executive Officer

Yes. We see -- if I were back a year ago, we're seeing increasing demand at ForgeRock for sure. I think some of that's driven externally the market as cyber threats and identities become more important. Even in challenging times, these are the things that CISOs and CIOs are prioritizing their business because it protects the company, it reduces costs and improves the top line of their business.

So externally, we've seen increasing demand from this time last year. And second, we changed a lot as a company. We've gone public, obviously, which gives us good additional market recognition. We will maintain top grades from the analysts like Gartner, Forrester and cover your cold, and we're doing more to kind of hone our go-to-market engine around creating awareness and demand for our offering.

So we're seeing increasing pipeline at this time, obviously, much bigger than it was last year, to help conduct support our scaling and growing business. So overall, feeling in a good position here to achieve the growth targets for the company.

Shaul Eyal -- Cowen and Company -- Analyst

Thank you, guys.

Fran Rosch -- Chief Executive Officer

Thank you.

Operator

Our last question will be from Eric Heath with KeyBanc. Please go ahead.

Eric Heath -- KeyBanc Capital Markets -- Analyst

Great. Thank you for taking the question and Congrats on the strong results and continued acceleration in ARR. So Fran, I guess just to start with you, usually land with Sam and most of the ARR acceleration rate coming from net new customers. So I'm just curious what's happening in the market that might be tip in these large companies to adopt CIAM.

And are those mostly replacements of homegrown solutions?

Fran Rosch -- Chief Executive Officer

Yes. I think the CIAM space is really hot right now. Workforces as well, but I do think there's a lot of energy in the CIAM space. And it is driven by these demands.

I think that these technology professionals are under from the business line to create these better, more efficientless experience without putting security or fraud or compliance at risk. So there's really strong demand in that area. Many CIAM deals that we win are companies who have a homegrown identity platform. That's not able to scale, not able to have the functionality to create a self-service or easy experience or have customer dashboards for them to manage their own privacy settings.

So these homegrown solutions are really right for replacement. So that's like where we see a lot of our growth. But see definitely see some of the legacy platforms. I talked about in the script in one of the transportation companies that we're looking to replace a legacy CA Siteminder identity solution for 40 million identities.

Talked about in Q4, one of the largest global banks replace the CA Siteminder solution. So we see that as a lot of opportunity. But definitely, we see -- when we focus at this enterprise, large enterprise level, many of our customers just haven't prioritized identity like they should have over the past several years. So they find themselves with like dozens of point solutions, maybe for different divisions or different parts of the identity life cycle.

And we talk about one of our financial services customers that went to ForgeRock Identity Cloud in Q1. They're going to consolidate literally dozens of different identity point solutions, all on this comprehensive platform. So it's really about the homegrown, the legacy platforms, but a lot of these point solution players who really prefer a single solution across all the identity life cycle. A single platform for all their identities, consumer workforce, partners, supply chain, physical things and services and really that enterprise grade of the platform.

So that's kind of what we see is really -- not driving, but there's definitely consumer -- the consumer space is hot, as you point out.

Eric Heath -- KeyBanc Capital Markets -- Analyst

Great. Yes, that's helpful. And then, just given the strong momentum in SaaS, I'm just curious if there's any update on the competitive standpoint, side of things are on the win rates, so if you've seen any change there?

Fran Rosch -- Chief Executive Officer

I think generally, we consider -- there's not been a dramatic change in the competitive environment at this point. We're going to continue to make some exciting investments across ForgeRock this year. We're going to continue to invest in our cloud maturity. We announced this past quarter, the four nine liability.

We'll be scaling the service to go to 50 million to 100 million identities. We're continuing to focus on the authentication throughput from a performance standpoint. So as we continue to focus on the enterprise grade nature of the cloud, that's going to continue to help our win rates. So we win more.

We're focusing more on some vertical-specific solutions. Health care has been a really growing part of our portfolio as a lot of people have gone to telemedicine and they have some unique requirements around patient privacy and data. We launched our HIPAA certification last year. We're now working on bringing out some unique capabilities to help healthcare keeps information private.

But we're also making good investments on the workforce side as we continue to bring that full offering to the ForgeRock Identity Cloud because I think most customers today want this convergence. ForgeRock was really a pioneer and this converged model of having identity access to MSASSO governance in a single platform for all identity. So we've got a lot of cool things coming out this year. I think will continue to help us position competitively and continue to accelerate that growth, which is why we want to raise that guidance on ARR this year.

Eric Heath -- KeyBanc Capital Markets -- Analyst

Great. Appreciate that and congrats on the quarter.

Fran Rosch -- Chief Executive Officer

Thank you.

Operator

Ladies and gentlemen, this concludes today's question-and-answer session. At this time, for closing remarks, I'd like to turn the conference back to Fran Rosch.

Fran Rosch -- Chief Executive Officer

Great. Thanks, everybody, again, for joining the call. Thanks for helping us talk about our fantastic Q1. Our business is really firing on all cylinders.

We have strong confidence in our ability to execute on our plan to meet these growth targets even with our accelerated ARR guidance. We continue to exceed our expectations on SaaS. And that's not by accident. We've got the toughest enterprise customers in the world, are taking a deep look at our architecture compared to what other things are on the market and they're choosing ForgeRock.

We continue to deliver world-class innovation to the market, highlighted again today by Autonomous Access, which we think is going to be a great accelerator of our business in the latter half of the year. So again, congratulations to all the ForgeRockers who help make this a great quarter, and we look forward to continued dialogue in the weeks and months ahead. So thanks so much.

Operator

[Operator signoff]

Duration: 54 minutes

Call participants:

Mark Kang -- Head of Investor Relations

Fran Rosch -- Chief Executive Officer

John Fernandez -- Chief Financial Officer and Executive Vice President of Global Operations

Rob Owens -- Piper Sandler -- Analyst

Hamza Fodderwala -- Morgan Stanley -- Analyst

Gray Powell -- BTIG -- Analyst

Patrick Colville -- Deutsche Bank -- Analyst

Jonathan Ho -- William Blair -- Analyst

Shaul Eyal -- Cowen and Company -- Analyst

Eric Heath -- KeyBanc Capital Markets -- Analyst

More FORG analysis

All earnings call transcripts