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KnowBe4 Announces Second Quarter 2022 Financial Results

Aug 4, 2022
  • Revenues increased 36.1% year-over-year to $80.8 million
  • Annual recurring revenue (ARR) increased 36.5% year-over-year to $328.3 million
  • Number of customers reached more than 52,200
  • Net cash provided by operating activities was $22.3 million and free cash flow was $19.1 million

TAMPA BAY, Fla., Aug. 04, 2022 (GLOBE NEWSWIRE) -- KnowBe4, Inc. (NASDAQ: KNBE), provider of the leading security awareness training and simulated phishing platform, today reported results for the second quarter ended June 30, 2022.

“We are pleased to report that we are continuing on our high-growth trajectory, with ARR reaching $328.3 million for the second quarter of 2022.” said Stu Sjouwerman, founder and Chief Executive Officer of KnowBe4. “As current geopolitical events have indicated, the need for organizations to establish a strong security culture has never been more important. We believe our current product portfolio, coupled with the release of new products planned for later this year, position us very well to take advantage of the market's heightened focus on security."

Bob Reich, KnowBe4’s Chief Financial Officer, added, “Our successful second quarter financial results are driven by our key growth initiatives, including new logo expansion, cross-selling to new and existing customers and international expansion. Revenues for the second quarter grew by 36.1%, year over year, and our GAAP gross margin remained strong at 86.5%. We also finished the quarter with $19.1 million of free cash flow showing our commitment to driving profitability in addition to growth.”

Financial Highlights

 Q2-2022 Q2-2021 Change
 (in thousands, except percentages)
Revenues, net$80,762  $59,350  +36.1%
Annual recurring revenue1$328,325  $240,595  +36.5%
GAAP gross margin 86.5%  85.5% +1.0%
Non-GAAP gross margin1 87.9%  85.9% +2.0%
GAAP operating margin 3.5% (26.6)% +30.1%
Non-GAAP operating margin1 13.6%  7.6% +6.0%
Cash flow provided by operating activities$22,252  $14,094  +57.9%
Free cash flow1$19,129  $12,789  +49.6%

1 A reconciliation of GAAP to non-GAAP financial measures and definitions for our key business metrics, including annualized recurring revenue and free cash flow, is provided under the headings "Explanation of Non-GAAP Financial Measures" and "Explanation of Key Business Metrics".

Business Highlights

  • Both revenues and ARR for the second quarter increased by more than 36%, year-over-year. We attribute our continued growth, despite the challenging macroeconomic environment, to our relentless focus on our key growth initiatives, particularly our focus on international expansion.
  • SecurityCoach, the product we plan to release resulting from our 2021 acquisition of SecurityAdvisor, is currently in a closed beta testing phase. We are thrilled that initial feedback from testing has been positive and we are still on track for a general release during the fourth quarter. This product will allow our customers to identify and remediate unsecure actions in real time through connections with our customers' existing security stack. We remain extremely excited about the additional depth that this product will bring to our platform.
  • We are excited to announce the launch of KnowBe4 Ventures, a fund focused on the human layer of cybersecurity. KnowBe4 Ventures will make early stage investments in organizations that are committed to integrating with our platform and bringing innovation to our customer base.
  • Both our PhishER and KMSAT products were recognized as leaders in the G2 Grid Summer 2022 Report. PhishER was the top ranked Security Orchestration, Automation and Response (“SOAR”) software and KMSAT was ranked as the number one Security Awareness Training (“SAT”) platform. We believe these rankings provide continued recognition of our relentless focus on developing products that are meeting the needs of our customers.

Financial Outlook

For the third quarter, the Company expects:

MetricThird Quarter Range
Revenues, net$85 - $86 million

For the full year 2022, the Company has increased its guidance and now expects:

MetricFull Year Range
Revenues, net$333 - $334 million
Free cash flow margin24%+

Conference Call Information

KnowBe4 will host a conference call for analysts and investors to discuss its earnings results for the second quarter of 2022 and outlook for the third quarter and full year 2022 today at 8:30 AM ET.

Conference Call:

Conference ID: 29358


To attend the conference call or webcast, participants should register online at To avoid a delay, we encourage participants to register for and dial in to the conference call fifteen minutes ahead of the scheduled start time. A recorded webcast of the event will also be available shortly after the call, and will be made available for one year on the KnowBe4 Investor Relations website (

Third Quarter 2022 Investor Conference Participation Schedule:

  • Canaccord Genuity 42nd Annual Growth Conference

August 11, 2022 - Boston, MA

  • Goldman Sachs 2022 Communacopia + Technology Conference

September 12, 2022 - San Fransico, CA

  • Piper Sandler Growth Frontiers Conference

September 14, 2022 - Nashville, TN

Forward-Looking Statements

This press release 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. Forward-looking statements generally involve risks and uncertainties, including statements regarding our future financial and operating performance. In some cases, you can identify forward looking statements because they contain words such as "may," "will," "should," "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 KnowBe4's expectations, strategy, priorities, plans or intentions. Forward-looking statements in this press release include, but are not limited to, statements related to: our financial outlook and guidance; our growth trajectory; the impact of geopolitical events and macroeconomic trends on our business and results; our ability to maintain profitability; our ability to execute on our growth initiatives; expectations regarding our customers; expectations regarding our products’ abilities to remediate unsecure actions in real time; and expectations regarding our plans to make early-stage investments. There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including: our limited operating history; our ability to identify and effectively implement the necessary changes to address execution challenges; risks associated with managing our rapid growth; our limited experience with new product and subscription introductions and the risks associated with new products and subscriptions, including the risk of defects, errors, or vulnerabilities; our ability to attract new and retain existing customers; the integration of companies we have acquired and may acquire in the future; the failure to timely develop and achieve market acceptance of new products as well as existing products; rapidly evolving technological developments in the market; length of sales cycles; the emergence and impact of new COVID-19 variants and related public health measures on our and our customers’ business; and general market, political, economic, and business conditions.

Additional risks and uncertainties that could affect our financial results are included under the captions “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth from time to time in our filings and reports with the Securities and Exchange Commission (“SEC”), including in our most recent Quarterly Report on Form 10-Q and any subsequent filings with the SEC. Copies of these filings are available free of charge at the SEC’s website at or upon request from our investor relations department. You should not rely on these forward-looking statements, as actual outcomes and results may differ materially from those contemplated by these forward-looking statements, including, as a result of such risks and uncertainties. All forward-looking statements in this press release are based on information available to us as of the date hereof, and we do not assume any obligation to update the forward-looking statements provided to reflect events that occur or circumstances that exist after the date on which they were made.

Use of Non-GAAP Financial Information

We believe that the presentation of non-GAAP financial information provides important supplemental information to management and investors regarding financial and business trends relating to our financial condition and results of operations. For further information regarding these non-GAAP measures, including the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures, please refer to the financial tables below, as well as the “Explanation of Non-GAAP Financial Measures" section of this press release.

About KnowBe4

KnowBe4 is the leading provider of “new-school” security awareness training and simulated phishing platform. Our mission is to enable your employees to make smarter security decisions, every day. Through our subscription-based services, your organization will have access to the leading security awareness training platform.

Available Information

KnowBe4 announces material information to the public about KnowBe4, its products and other matters through a variety of means, including filings with the SEC, press releases, public conference calls, webcasts, its Investor Relations website, its Twitter accounts (@KnowBe4) and its blogs (including in order to achieve broad, non-exclusionary distribution of information to the public and for complying with its disclosure obligations under Regulation FD.

Investor Relations Contact:

Ken Talanian

Press Contact:

Kathy Wattman

Explanation of Non-GAAP Financial Measures

To supplement our financial information presented in accordance with generally accepted accounting principles in the United States ("GAAP"), we consider certain financial measures that are not prepared in accordance with GAAP, including non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating income (loss), non-GAAP operating margin, free cash flow and free cash flow margin, as useful in evaluating our operating performance. We believe that non-GAAP financial information, when taken collectively, may be helpful to investors because it assists investors in seeing our operating results through the eyes of management, and because we believe that these measures provide an additional tool for investors to use in comparing our operating results over multiple periods with other companies in our industry. However, non-GAAP financial information is presented for supplemental informational purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Other companies, including companies in our industry, may calculate similarly-titled non-GAAP measures differently or may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison. A reconciliation is provided below for each non-GAAP financial measure to the most directly comparable financial measure stated in accordance with GAAP. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures and not rely on any single financial measure to evaluate our business.

Non-GAAP Gross Profit and Non-GAAP Gross Margin

We define non-GAAP gross profit as GAAP gross profit excluding stock compensation expense, amortization of acquired intangible assets and acquisition and integration related costs. Costs associated with acquisitions and integration include legal, accounting and other professional fees, changes in the fair value of contingent consideration obligations and other costs related to the transition of the acquired business. We believe non-GAAP gross profit and non-GAAP gross margin provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of our results of operations, as this metric generally eliminates the effects of certain variables unrelated to our overall operating performance.

Non-GAAP Operating Income (Loss) and Non-GAAP Operating Margin

We define non-GAAP operating income (loss) as GAAP operating income (loss) excluding stock compensation expense, amortization of acquired intangible assets and acquisition and integration related costs. Costs associated with acquisitions and integration include legal, accounting and other professional fees, changes in the fair value of contingent consideration obligations and other costs related to the transition of the acquired business. We believe non-GAAP operating income (loss) provides our management and investors consistency and comparability with our past financial performance and facilitates period-to-period comparisons of operations, as this metric generally eliminates the effects of certain variables unrelated to our overall operating performance. Non-GAAP operating margin is calculated as non-GAAP operating income (loss) divided by revenues.

Free Cash Flow and Free Cash Flow Margin

We define free cash flow as net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP, less purchases of property, equipment, amounts capitalized for internal-use software and principal payments on finance leases. We believe that free cash flow is a meaningful indicator of liquidity to management and investors about the amount of cash generated from our operations that, after the investments in property, equipment and capitalized internal-use software, can be used for strategic initiatives. Free cash flow margin is calculated by dividing free cash flow by revenues.

Explanation of Key Business Metrics

In addition to GAAP measures of performance, we regularly monitor certain financial and operating metrics, including Number of Customers and Annual Recurring Revenue (ARR), in order to measure our current performance and estimate our future performance. We regularly review and may adjust our processes for calculating our internal metrics to improve their accuracy.

Number of Customers

We define a customer as a separate and distinct buying entity, such as a company, an educational or government institution or a distinct business unit of a large company that has an active contract with us to access our platform. We do not consider our channel partners as separate customers as our contracts are executed with the end user, and we treat MSPs, who may purchase our products on behalf of multiple companies, as a single customer. We believe that our ability to increase and retain the number of customers on our platform is an indicator of our market penetration, the growth of our business and potential future business opportunities.

Annual Recurring Revenue

We define ARR as the annualized value of all contractual subscription agreements as of the end of the period. We perform this calculation on an individual contract basis by dividing the total dollar amount of a contract by the total contract term stated in months and multiplying this amount by twelve to annualize. Calculated ARR for each individual contract is then aggregated to arrive at total ARR. We believe that ARR is a key metric to measure our business performance because it is driven by our ability to acquire new customers and to maintain and expand our relationship with existing customers.

KnowBe4, Inc.
Consolidated Balance Sheets
(in thousands)

 June 30, 2022 December 31, 2021
Current assets:   
Cash and cash equivalents$315,495  $273,723 
Accounts receivable, net 62,486   54,071 
Deferred commissions 19,377   17,842 
Prepaid expenses and other current assets 17,646   10,580 
Total current assets 415,004   356,216 
Deferred commissions, non-current 38,301   33,869 
Capitalized software and content, net 29,903   27,074 
Property and equipment, net 10,056   9,120 
Operating lease right of use assets, net 14,080   12,998 
Intangible assets, net 8,009   7,992 
Goodwill 88,173   89,329 
Other assets 2,884   1,080 
Total assets$606,410  $537,678 
Liabilities and stockholders' equity   
Current liabilities:   
Accounts payable and accrued expenses$39,798  $37,642 
Current portion of deferred revenue 215,631   184,496 
Current portion of operating lease liabilities 3,274   2,938 
Total current liabilities 258,703   225,076 
Non-current liabilities:   
Deferred revenue 95,900   81,278 
Operating lease liabilities, net of current portion 11,275   10,484 
Other non-current liabilities 4,012   3,573 
Total liabilities 369,890   320,411 
Stockholders' equity   
Preferred stock     
Common stock, Class A 1   1 
Common stock, Class B 1   2 
Additional paid-in capital 407,620   391,803 
Accumulated deficit (168,440)  (173,148)
Accumulated other comprehensive loss (2,662)  (1,391)
Total stockholders' equity 236,520   217,267 
Total liabilities and stockholders' equity$606,410  $537,678 

KnowBe4, Inc.
Consolidated Statements of Operations
(in thousands, except per share amounts)

 Three Months Ended June 30, Six Months Ended June 30,
 2022 2021 2022 2021
Revenues, net$80,762  $59,350  $155,795  $112,900 
Cost of revenues 10,909   8,591   21,054   15,934 
Gross profit 69,853   50,759   134,741   96,966 
Operating expenses:       
Sales and marketing 34,684   31,510   65,431   54,581 
Technology and development 8,764   6,760   17,673   12,502 
General and administrative 23,587   28,284   46,227   42,913 
Total operating expenses 67,035   66,554   129,331   109,996 
Operating income (loss) 2,818   (15,795)  5,410   (13,030)
Other income (expense):       
Interest income 503   7   533   25 
Interest expense (65)  (66)  (151)  (262)
Other expense 264   (416)  (274)  (559)
Income (loss) before income tax expense 3,520   (16,270)  5,518   (13,826)
Income tax expense (172)  (593)  (810)  (837)
Net income (loss)$3,348  $(16,863) $4,708  $(14,663)
Net income (loss) per share, basic$0.02  $(0.14) $0.03  $(0.24)
Net income (loss) per share, diluted$0.02  $(0.14) $0.03  $(0.24)
Weighted-average shares used in calculating basic net income (loss) per share 175,293,173   122,273,944   174,909,849   61,136,973 
Weighted-average shares used in calculating diluted net income (loss) per share 182,220,649   122,273,944   182,229,908   61,136,973 

KnowBe4, Inc.
Consolidated Statements of Cash Flows
(in thousands)

 Three Months Ended June 30, Six Months Ended June 30,
 2022 2021 2022 2021
Cash flows from operating activities:       
Net income (loss)$3,348  $(16,863) $4,708  $(14,663)
Adjustments to reconcile net income (loss) to net cash from operating activities:       
Additions to capitalized content (1,118)  (1,401)  (2,817)  (2,619)
Depreciation and amortization expense 3,925   3,353   7,655   6,600 
Deferred commissions amortization 5,448   4,651   10,733   8,735 
Stock compensation expense 6,979   18,810   12,608   20,481 
Other, net (734)  524   (1,002)  400 
Changes in operating assets and liabilities, net of business combinations:       
Accounts receivable (10,324)  (5,515)  (8,740)  (2,741)
Deferred commissions (9,182)  (8,539)  (17,491)  (14,386)
Prepaid and other assets (4,415)  (6,151)  (6,611)  (8,279)
Accounts payable and other liabilities 3,077   7,498   1,983   10,021 
Deferred revenue 25,248   17,727   46,367   32,397 
Net cash provided by operating activities 22,252   14,094   47,393   35,946 
Cash flows from investing activities:       
Business combinations, net of cash acquired    (18)  40   (11,323)
Purchases of investments (2,375)     (2,375)   
Purchases of property and equipment (1,590)  (536)  (2,621)  (1,055)
Capitalized internal-use software costs (1,522)  (759)  (2,260)  (1,121)
Net cash used in investing activities (5,487)  (1,313)  (7,216)  (13,499)
Cash flows from financing activities:       
Proceeds from the exercise of stock options 1,175   605   2,222   952 
Proceeds from issuance of common stock under the employee stock purchase plan 2,932      2,932    
Repurchase of common stock and options          (1,171)
Proceeds from the issuance of common stock    155,958      155,958 
Acquisition-related contingent liability payments    (375)     (375)
Payments for finance lease obligations (11)  (10)  (21)  (20)
Taxes paid for the net share settlement of equity awards (1,818)  (6,782)  (1,985)  (6,782)
Net cash provided by financing activities 2,278   149,396   3,148   148,562 
Effect of exchange rate changes on cash and cash equivalents (1,896)  232   (1,553)  465 
Net change in cash and cash equivalents 17,147   162,409   41,772   171,474 
Cash and cash equivalents, beginning of period 298,348   94,647   273,723   85,582 
Cash and cash equivalents, end of period$315,495  $257,056  $315,495  $257,056 

Non-GAAP Gross Profit and Non-GAAP Gross Margin

 Three Months Ended June 30,
 2022 2021
 (in thousands, except percentages)
Gross profit$69,853  $50,759 
Add: Stock compensation expense 179   76 
Add: Amortization of acquired intangible assets 960   147 
Non-GAAP gross profit$70,992  $50,982 
GAAP gross margin 86.5%  85.5%
Non-GAAP gross margin 87.9%  85.9%

Non-GAAP Operating Income and Non-GAAP Operating Margin

 Three Months Ended June 30,
 2022 2021
 (in thousands, except percentages)
Operating income (loss)$2,818  $(15,795)
Add: Stock compensation expense 6,981   18,869 
Add: Amortization of acquired technology and intangible assets 1,121   294 
Add: Acquisition and integration related costs 34   1,137 
Non-GAAP operating income$10,954  $4,505 
GAAP operating margin 3.5% (26.6)        %
Non-GAAP operating margin 13.6%  7.6%

Non-GAAP Net Income Per Share

 Three Months Ended June 30,
 2022 2021
GAAP net income (loss) per share, diluted$0.02 $(0.14)
Add: Stock compensation expense 0.04  0.15 
Add: Amortization of acquired technology and intangible assets 0.01   
Add: Acquisition and integration related costs   0.01 
Non-GAAP net income per share, diluted$0.07 $0.02 
Weighted-average shares used in the calculation of GAAP and Non-GAAP net income (loss) per share, diluted 182,220,649  122,273,944 

Free Cash Flow

 Three Months Ended June 30,
 2022 2021
 (in thousands, except percentages)
Net cash provided by operating activities$22,252  $14,094 
Less: Purchases of property and equipment (1,590)  (536)
Less: Capitalized internal-use software (1,522)  (759)
Less: Principal payments on finance leases (11)  (10)
Free Cash Flow$19,129  $12,789 
Free Cash Flow margin (1) 23.7%  21.5%

(1) Free Cash Flow Margin is calculated as Free Cash Flow divided by Revenues, net for each period.

Key Business Metrics

 June 30,
 2022 2021
 (dollars in thousands)
Number of customers 52,216  41,601
Annual recurring revenue$328,325 $240,595

Stock Compensation Expense

 Three Months Ended June 30,
 2022 2021
 (in thousands)
Cost of revenues$179 $76
Sales and marketing 1,421  5,662
Technology and development 1,328  148
General and administrative 4,053  12,983
Total stock compensation expense$6,981 $18,869