Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION 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 June 30, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-39492 JFrog Ltd. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Washington, D.C. 20549 Indicate ...

0 3 The Liquid Software Company DISCLAIMER 2 This presentation contains forward-looking statements that reflect our current views with respect to, among other things, the operations and financial performance of JFrog Ltd. and its subsidiaries (collectively, "JFrog," "we," "us," or "our"). All statements other than statements of historical facts contained in this presentation, including statements regarding matters such as our industry, business strategy, goals, and expectations concerning our market positio ...

Financial Data and Key Metrics Changes - JFrog's revenue for Q1 2021 reached $45.1 million, representing a 37% year-over-year growth [11][46] - Cloud revenues grew by 62% year-over-year, amounting to $10.3 million, which is 23% of total revenues compared to 19% in Q1 of the previous year [11][47] - Gross profit was $37.6 million, with a gross margin of 83.4%, up from 81.6% in the same period last year [50] - Non-GAAP operating income was $1.9 million, reflecting a 4.1% operating margin compared to 2.2% in the prior year [53] - Net dollar retention rate for the trailing four quarters was 130% [47] Business Line Data and Key Metrics Changes - Self-managed revenues (on-prem) were $34.8 million, up 32% year-over-year [46] - The number of customers with over $100,000 in ARR increased to 395, up from 352 at the end of 2020 [12][47] - 29% of total revenue came from Enterprise+ customers, up from 16% in Q1 2020 [48] Market Data and Key Metrics Changes - JFrog added significant customers in the APAC region, including the largest stock exchange in Mainland China and a large state-owned financial company [19] - The company is focusing on expanding its footprint in China with dedicated sales, marketing, and support staff [19] Company Strategy and Development Direction - JFrog aims to enhance its hybrid universal end-to-end DevOps platform, focusing on security and software distribution as key drivers for growth [21][25] - The company is investing in partnerships with major cloud providers like AWS, Microsoft, and Google to drive cloud sales growth [17] - JFrog is committed to innovating its product offerings, with significant enhancements released in Q1 [30][34] Management's Comments on Operating Environment and Future Outlook - Management acknowledges ongoing challenges from the pandemic but remains optimistic about growth in the second half of 2021 as teams return to in-person work [88] - The company expects Q2 revenue guidance of $47.6 million to $48.6 million, with a full-year revenue outlook of $198 million to $204 million [56][57] Other Important Information - JFrog's subscription model has been updated to include Xray as a mandatory security product in its Enterprise solution [40] - The company is preparing for its annual user conference, swampUP, which will showcase its roadmap and industry use cases [42] Q&A Session Summary Question: Can you focus a little bit more on the new logo additions in the quarter? - Management noted a focus on increasing new logos, with positive results from the free tier offering leading to growth in new users and logos [62][64] Question: Why did the price increases not have a more material impact on revenue? - Price increases primarily affected on-prem subscriptions, which represent about 40% of revenue, thus not significantly impacting overall revenue in Q1 [65][66] Question: Can you talk about Xray's capabilities and market awareness? - Xray is designed to secure software packages throughout the lifecycle, and demand for its capabilities is growing as customers seek integrated security solutions [70][72] Question: How much of your market is considered Greenfield versus displacement opportunities? - The market is increasingly recognizing the importance of binary management and automation in DevOps, creating opportunities for JFrog's solutions [76][78] Question: Can you review the commentary around the billings impact from the price increase? - A record quarter in bookings was noted, with many customers renewing at higher subscription tiers before the price changes [82] Question: Is there any lingering impact from COVID on the business? - Management indicated that while challenges remain, they expect a stronger second half of the year as teams return to normal operations [88] Question: Can you discuss the productivity of your sales organization? - The sales and marketing organization is expanding globally, with significant investments in APAC to support growing demand [100][102] Question: How do you expect the price increase to affect Enterprise+ subscriptions in the long run? - The Enterprise+ pricing did not change, and the adoption of this subscription is expected to continue growing as value is added to the portfolio [117] Question: Have you seen any incremental competitive pressure in the DevOps space? - The competitive landscape is evolving, with more vendors entering the market, but JFrog's focus on security and software packages remains a differentiator [119] Question: How do you view the relationship with Atlassian? - The partnership with Atlassian is strong, with complementary solutions that enhance the overall DevOps lifecycle for customers [124]

PART I [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents JFrog Ltd.'s unaudited condensed consolidated financial statements for Q1 2021, showing revenue growth and increased net loss [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet as of March 31, 2021, shows increased total assets and liabilities, driven by investments and deferred revenue Condensed Consolidated Balance Sheets | Balance Sheet Items | March 31, 2021 ($ in thousands) | December 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | **Total Current Assets** | 675,161 | 652,561 | | Cash and cash equivalents | 146,676 | 164,461 | | Short-term investments | 458,977 | 433,595 | | **Total Assets** | **735,011** | **689,231** | | **Total Current Liabilities** | 140,042 | 122,700 | | Deferred revenue (current) | 102,432 | 91,750 | | **Total Liabilities** | **175,613** | **135,337** | | **Total Shareholders' Equity** | **559,398** | **553,894** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2021 saw 37% revenue growth, but operating loss widened significantly due to increased expenses, leading to a higher net loss Condensed Consolidated Statements of Operations | Income Statement Items | Three Months Ended Mar 31, 2021 ($ in thousands) | Three Months Ended Mar 31, 2020 ($ in thousands) | YoY Change | | :--- | :--- | :--- | :--- | | **Total subscription revenue** | **45,087** | **32,821** | **+37%** | | Gross profit | 36,660 | 26,417 | +39% | | Total operating expenses | 47,272 | 28,516 | +66% | | Operating loss | (10,612) | (2,099) | +406% | | **Net loss** | **(7,895)** | **(2,125)** | **+272%** | | Net loss per share | (0.09) | (0.08) | +12.5% | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Q1 2021 operating cash flow improved significantly, while investing activities increased due to short-term investments Condensed Consolidated Statements of Cash Flows | Cash Flow Items | Three Months Ended Mar 31, 2021 ($ in thousands) | Three Months Ended Mar 31, 2020 ($ in thousands) | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | 8,811 | (1,249) | | Net cash used in investing activities | (27,890) | (7,887) | | Net cash provided by (used in) financing activities | 1,282 | (466) | | **Net decrease in cash, cash equivalents, and restricted cash** | **(17,797)** | **(9,602)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue recognition, and financial instruments, highlighting lease standard adoption and revenue composition - The company adopted the new lease accounting standard, Topic 842, on January 1, 2021, resulting in the recognition of operating lease right-of-use (ROU) assets of **$21.9 million** and operating lease liabilities of **$22.1 million** on the balance sheet[34](index=34&type=chunk) Revenue by Category (Q1 2021) | Revenue by Category (Q1 2021) | Amount ($ in thousands) | Percentage of Revenue | | :--- | :--- | :--- | | Self-managed subscription | 34,823 | 77% | | SaaS | 10,264 | 23% | | **Total** | **45,087** | **100%** | - As of March 31, 2021, the company had **$129.2 million** in remaining performance obligations, with **82%** expected to be recognized as revenue over the next 12 months[40](index=40&type=chunk) - Total share-based compensation expense for Q1 2021 was **$11.75 million**, a substantial increase from **$1.96 million** in Q1 2020. As of March 31, 2021, unrecognized share-based compensation cost was **$121.7 million**, expected to be recognized over a weighted-average period of 3.2 years[74](index=74&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q1 2021 performance, highlighting 37% revenue growth driven by customer expansion, but notes increased operating expenses and net loss [Overview and Key Metrics](index=25&type=section&id=Overview%20and%20Key%20Metrics) JFrog's Q1 2021 revenue grew 37% to **$45.1 million**, driven by strong customer expansion and increased high-value customers - For Q1 2021, **23%** of revenue came from SaaS subscriptions, up from **19%** in Q1 2020[85](index=85&type=chunk) - Revenue from the comprehensive Enterprise Plus subscription grew to approximately **29%** of total revenue in Q1 2021, up from **16%** in Q1 2020[86](index=86&type=chunk) - The net dollar retention rate was **130%** as of March 31, 2021, compared to **142%** as of March 31, 2020[98](index=98&type=chunk) - The number of customers with Annual Recurring Revenue (ARR) of **$100,000** or more increased to **395** as of March 31, 2021, up from **352** as of December 31, 2020[99](index=99&type=chunk) [Results of Operations Comparison (Q1 2021 vs Q1 2020)](index=32&type=section&id=Results%20of%20Operations%20Comparison) Total subscription revenue increased by **37%**, while operating expenses, particularly share-based compensation, surged across all categories - Total subscription revenue increased by **$12.3 million (37%)** YoY, with approximately **$10.0 million** of the increase attributable to growth from existing customers[122](index=122&type=chunk) - General and administrative expense increased by **$8.5 million (163%)** YoY, primarily due to a **$6.1 million** increase in share-based compensation expense[127](index=127&type=chunk) - Total share-based compensation expense increased by **$9.8 million (501%)** YoY, driven by a **$5.1 million** expense related to the CEO's RSU grant and **$4.7 million** from grants to other employees[128](index=128&type=chunk) [Liquidity and Capital Resources](index=34&type=section&id=Liquidity%20and%20Capital%20Resources) JFrog maintains strong liquidity with **$605.7 million** in cash and investments, generating **$8.8 million** in operating cash flow for the quarter - Principal sources of liquidity as of March 31, 2021, were cash, cash equivalents, and short-term investments totaling **$605.7 million**[132](index=132&type=chunk) Cash Flow Summary | Cash Flow Summary | Three Months Ended Mar 31, 2021 ($ in thousands) | | :--- | :--- | | Net cash provided by operating activities | 8,811 | | Less: purchases of property and equipment | (1,135) | | **Free cash flow (Non-GAAP)** | **7,676** | [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces market risks from foreign currency fluctuations, particularly NIS-denominated costs, and minimal interest rate risk on short-term investments - A significant portion of operating costs in Israel are denominated in NIS, creating foreign currency exposure, which the company mitigates through a hedging program[146](index=146&type=chunk)[147](index=147&type=chunk) - A hypothetical **10%** change in foreign currency exchange rates would have impacted results of operations by **$0.9 million** for the quarter, after considering hedges[147](index=147&type=chunk) - Interest rate risk on the **$605.7 million** of cash, cash equivalents, and short-term investments is not considered material due to the short-term nature of the holdings[150](index=150&type=chunk)[132](index=132&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of March 31, 2021, with no material changes to internal controls - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2021[152](index=152&type=chunk) - No material changes occurred during the quarter that affected the company's internal control over financial reporting[153](index=153&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=38&type=section&id=Item%201.%20Legal%20Proceedings) The company is not aware of any legal proceedings that would materially adversely affect its business or financial position - The company is not currently aware of any legal claims that would be materially adverse to its business in the ordinary course of operations[157](index=157&type=chunk) [Item 1A. Risk Factors](index=38&type=section&id=Item%201A.%20Risk%20Factors) Updated risk factors include evolving labor laws, complex global data privacy regulations, security breaches, and challenges of expanding into China - The company highlights risks from evolving U.S. labor laws, specifically concerning employee classification, which could increase wage obligations[159](index=159&type=chunk) - Significant risk exists from complex and changing global data privacy laws, including CCPA/CPRA and GDPR, with the 'Schrems II' ruling creating uncertainty for cross-border data transfers[160](index=160&type=chunk)[164](index=164&type=chunk)[166](index=166&type=chunk) - Increased risk of security breaches and supply chain attacks, citing recent high-profile incidents, could lead to reputational damage, litigation, and significant costs[174](index=174&type=chunk)[175](index=175&type=chunk) - Expansion into China exposes the company to risks including government regulation, an uncertain legal system, and potential intellectual property protection issues[183](index=183&type=chunk)[186](index=186&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=44&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) In February 2021, the company issued **49,823** ordinary shares in an unregistered private placement for an acquisition - The company issued **49,823** ordinary shares in February 2021 for an acquisition, exempt from registration under Section 4(a)(2) of the Securities Act[187](index=187&type=chunk)[188](index=188&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Quarterly Report on Form 10-Q, including certifications and XBRL data

Financial Performance - The company experienced a total revenue of $150.8 million for the year ended December 31, 2020, representing a growth rate of 44% compared to $104.7 million in 2019[89]. - The company incurred a net loss of $9.4 million for the year ended December 31, 2020, with an accumulated deficit of $74.8 million as of the same date[92]. - The company's total assets reached $689.2 million in 2020, compared to $238.0 million in 2019, indicating robust asset growth[418]. - The company reported a total shareholders' equity of $553.9 million in 2020, a significant improvement from a deficit of $33.4 million in 2019[418]. - Deferred revenue increased to $91.8 million in 2020, up from $72.7 million in 2019, indicating a growing customer base and future revenue potential[418]. Customer Growth and Retention - The total number of customers grew to approximately 6,050 organizations as of December 31, 2020, up from approximately 5,600 organizations as of December 31, 2019[86]. - The company relies on subscription renewals for a significant portion of its revenue, and customer satisfaction is critical for maintaining these renewals[119]. - Seasonality affects customer bookings, with a higher percentage of subscription agreements typically occurring in the fourth quarter[117]. Market and Competition - The markets for the company's products are new and evolving, which may develop more slowly than expected, impacting future success[93]. - The market for JFrog's products is nascent and highly fragmented, with competition from companies with greater financial and technical resources[108]. - The AGPL license allows competitors to use the open source version of JFrog Artifactory for free, potentially increasing competition and pricing pressure on subscriptions[106]. - The company faces intense competition for skilled personnel, particularly in engineering and sales, which may hinder its ability to attract and retain qualified employees[135]. Operational Challenges - The company anticipates substantial increases in operating expenses as it continues to enhance products and expand its customer base[92]. - The company has faced challenges in maintaining consistent revenue growth, with expectations of a decline in growth rate in future periods[89]. - The company's results of operations are likely to fluctuate significantly from quarter to quarter, affecting the trading price of its ordinary shares[94]. - Performance issues or security vulnerabilities in the software could lead to revenue loss and damage to the company's reputation[122]. Regulatory and Compliance Risks - The company faces potential penalties for noncompliance with the GDPR, which could be up to €20 million or 4% of global annual turnover for serious violations[181]. - The company is subject to various governmental export control and trade sanctions that could impair its ability to compete internationally[194]. - The company is currently enhancing its compliance procedures with Trade Controls to avoid civil and criminal penalties, including substantial fines and possible incarceration for willful violations[195]. - The company is subject to various anti-bribery and anti-corruption laws, which, if violated, could result in significant penalties and harm to its reputation and financial condition[198]. Financial Management and Risks - The company has net operating loss carryforwards of $18.0 million in Israel, $8.0 million in U.S. federal, and $22.5 million in U.S. state, which may be limited by jurisdictional regulations[213]. - The company may face increased tax liabilities due to unanticipated changes in effective tax rates or challenges from tax authorities regarding its revenue recognition policies[205]. - The company is exposed to fluctuations in currency exchange rates, which could negatively affect its financial condition and results of operations[204]. - The company utilizes foreign currency contracts to hedge against exchange rate risks, particularly with expenses denominated in NIS, which could impact financial results[203]. Strategic Initiatives - The company has invested in acquiring complementary businesses and technologies to enhance its product offerings[101]. - The company has previously acquired businesses, such as Shippable Inc. in February 2019, to complement its existing operations[156]. - The company launched the FrogCare program to provide free software development and DevOps tools to support research organizations in combating COVID-19[257]. Impact of COVID-19 - The impact of the COVID-19 pandemic has contributed to slowed growth and uncertainty in future performance[90]. - The COVID-19 pandemic has led to temporary office closures and a shift to remote work, which may negatively impact business operations and sales cycles[255]. - The company has experienced delays in new projects and requests for extensions of payment obligations from customers due to COVID-19, adversely affecting financial conditions[257]. Governance and Shareholder Matters - As of December 31, 2020, insiders owned approximately 64% of the company's ordinary shares, potentially limiting the influence of other shareholders on corporate matters[216]. - The company does not intend to pay dividends in the foreseeable future, relying on share price appreciation for investor returns[231]. - The exclusive forum provision in the company's articles of association may limit shareholders' ability to choose the judicial forum for disputes[225].

JFrog Ltd. (NASDAQ:FROG) Q3 2020 Results Earnings Conference Call November 4, 2020 5:00 PM ET Company Participants JoAnn Horne - IR Shlomi Ben Haim - Co-founder and CEO Jacob Shulman - Chief Financial Officer Conference Call Participants Sterling Auty - JPMorgan Sanjit Singh - Morgan Stanley Alex Kurtz - KeyBanc Capital Markets Rob Owens - Piper Sandler Brad Reback - Stifel Jason Ader - William Blair Ittai Kidron - Oppenheimer Nikolay Beliov - Bank of America Jack Andrews - Needham Operator Ladies and gentl ...

Financial Performance - Q3'20 LTM Revenue was $139 million[7] - 2020 YTD YoY Revenue Growth was 46%[7] - Q3'20 LTM Net Dollar Retention Rate was 136%[7] - Non-GAAP Gross Profit Margin for 2020 YTD was 82.4% compared to 82.6% for 2019 YTD[39, 49] - Non-GAAP Operating Income Margin increased to 13.2% in Q3'20 from 8.8% in Q3'19[52, 54] - Free Cash Flow Margin increased to 24.9% in Q3'20 from 16.8% in Q3'19[60] Market and Business Model - The company estimates a $22 billion Total Addressable Market[7, 24] - The company has penetrated less than 1% of its addressable market[24] - Over 75% of Fortune 100 companies are customers[26] - Approximately 27% of Global 2000 companies are customers[26] - 87% of revenue comes from Enterprise, Pro X and Pro Tiers, while 13% comes from Single Product[29]

Table of Contents 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 September 30, 2020 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-39492 JFrog Ltd. (Exact name of Registrant as specified in its charter) (State or other jurisdiction of incorporation or organization) Isra ...