JFrog (FROG) Q1 2025 Earnings Call May 08, 2025 05:00 PM ET Speaker0 Ladies and gentlemen, thank you for joining us, and welcome to JFrog's First Quarter twenty twenty five Financial Results Conference Call. After today's prepared remarks, we will host a question and answer session. I will now hand the conference over to Jeffrey Schreiner, VP, Investor Relations. Jeffrey, please go ahead. Speaker1 Thank you, Nicole. Good afternoon, and thank you for joining us as we review JFrog's first quarter twenty twent ...

DISCLAIMER 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 position, future operations, margins, pro ...

Exhibit 99.1 JFrog Announces First Quarter 2025 Results Sunnyvale, Calif., May 8, 2025 – JFrog Ltd. ("JFrog") (Nasdaq: FROG), the Liquid Software company and creators of the JFrog Software Supply Chain Platform, today announced financial results for its first quarter ended March 31, 2025. "The JFrog Platform has become the software system of record for organizations, transforming how software is created and delivered by unifying DevOps, DevSecOps, and AI/MLOps in one platform," said Shlomi Ben Haim, CEO and ...

Core Insights - ThoughtSpot has appointed Micheline Nijmeh as Chief Marketing Officer, emphasizing its commitment to transforming business intelligence and empowering decision-makers with data [1][3] - Nijmeh brings extensive experience from leading companies like ZScaler, Salesforce, and JFrog, where she played a crucial role in brand evolution and post-IPO growth [2][3] - Under Nijmeh's leadership, ThoughtSpot aims to enhance its global marketing strategy, increase brand awareness, and drive market growth [3][4] Company Performance - ThoughtSpot reported a significant fiscal growth in Fiscal Year 2024, achieving 40% year-over-year SaaS growth and more than doubling its monthly active users [4] - The company has expanded its AI capabilities with the launch of Spotter, an agentic AI analyst, and Analyst Studio, which supports data teams in preparing data for AI and analytics [4] Leadership Changes - The company has strengthened its senior leadership team, including the appointments of Ketan Karkhanis as CEO, Brad Roberts as CFO, and others in key positions [5] Company Mission and Offerings - ThoughtSpot's mission is to create a fact-driven world by enabling users to explore data, ask questions, and uncover actionable insights quickly [6] - The platform features intuitive natural language search and offers a low-code solution for developers to integrate AI-powered analytics into their products [6] - Industry leaders such as NVIDIA, Hilton Worldwide, and Capital One utilize ThoughtSpot to enhance data-driven decision-making [6]

Group 1 - The stock market is currently fluctuating around all-time highs, leading to concerns about maintaining an overweight exposure in equities [1] - The portfolio is focused on "growth at a reasonable price" stocks, indicating a strategy that balances growth potential with valuation [1] - Gary Alexander has extensive experience in technology companies and startups, contributing to insights on industry trends [1] Group 2 - The article expresses a beneficial long position in the shares of FROG, indicating a positive outlook on this specific stock [2] - The author emphasizes that the article reflects personal opinions and is not influenced by compensation from any company mentioned [2]

Financial Performance - Total revenues for the years ended December 31, 2024, 2023, and 2022 were $428.5 million, $349.9 million, and $280.0 million, respectively, representing growth rates of 22% and 25% for 2024 and 2023[84]. - The company incurred net losses of $69.2 million, $61.3 million, and $90.2 million for the years ended December 31, 2024, 2023, and 2022, respectively, resulting in an accumulated deficit of $359.7 million as of December 31, 2024[93]. - JFrog Ltd. recognized Self-managed subscription revenue of $238.9 million and Self-managed license revenue of $21.6 million for the year ended December 31, 2024[357]. Customer Growth and Retention - The number of customers with Annual Recurring Revenue (ARR) of $100,000 or more increased from 886 in 2023 to 1,018 in 2024, while those with ARR of $1,000,000 or more rose from 37 to 52 in the same period[84]. - The company expects to derive a substantial portion of revenue from renewals of existing subscriptions, which may fluctuate based on customer satisfaction and product performance[105]. - There is a dependency on customer support quality for achieving renewals and increasing sales, with larger enterprise customers requiring higher levels of support[123]. Operational Challenges - The company anticipates that operating expenses will increase substantially in the foreseeable future due to product enhancements, customer base expansion, and hiring additional employees[93]. - The company has experienced fluctuations in its results of operations, which could adversely affect the trading price of its ordinary shares[89]. - The company has faced challenges in hiring and training qualified customer support employees, which could impact customer satisfaction and retention[124]. Competition and Market Dynamics - The company faces significant competition from existing and potential competitors, some of whom have greater financial and technical resources[98]. - The markets for the company's products are maturing, making it difficult to predict customer adoption and demand for its platform[94]. - The company expects revenue growth rates to decline in future periods due to factors such as increased competition and macroeconomic conditions[87]. Strategic Initiatives - The company released significant enhancements to JFrog Advanced Security and expanded MLOps functionality with the acquisition of Qwak AI, Ltd. in 2024[85]. - The company has acquired Qwak, an AI development platform, and previously acquired Vdoo and Upswift, indicating a strategy of expanding through complementary acquisitions[151]. - The Company completed its acquisition of Qwak AI Ltd. for total consideration of $177.5 million on July 9, 2024, accounting for it as a business combination[362]. Human Resources and Corporate Culture - Employee headcount increased from approximately 1,400 as of December 31, 2023, to approximately 1,600 as of December 31, 2024[84]. - Competition for skilled personnel is intense, particularly in engineering and development roles, which may impact the company's operational capabilities[112]. - Maintaining corporate culture is essential for fostering innovation and creativity as the company grows[139]. Cybersecurity and Data Protection - The company collects and stores sensitive and proprietary information, which may be targeted by cyberattacks, increasing the risk of data breaches[176]. - The company has experienced significant supply chain attacks and cannot guarantee the security of its systems or those of its vendors[177]. - The company expects costs related to security measures to increase as it enhances its systems to prevent future breaches[177]. Regulatory and Compliance Risks - The company is subject to stringent and changing laws related to privacy and data protection, which could harm its business if not complied with[184]. - The company anticipates increased compliance burdens and costs due to evolving laws and regulations regarding data security and privacy[182]. - Compliance with export controls and trade sanctions is critical, as violations could lead to civil and criminal penalties, including substantial fines[197]. International Operations and Geopolitical Risks - The company has customers in over 90 countries and aims to continue international expansion, which involves various operational risks[192]. - The company is exposed to geopolitical tensions, such as the war between Israel and Hamas, which could affect its international operations[192]. - Operations in China are subject to risks related to economic and political systems, including potential adverse effects from government policies and geopolitical tensions[195]. Financial Position and Shareholder Considerations - As of December 31, 2024, insiders owned approximately 22% of the company's ordinary shares, potentially limiting other shareholders' influence on corporate matters[214]. - The company has not declared or paid any cash dividends historically and does not intend to do so in the foreseeable future, relying on share price appreciation for investor returns[223]. - The company is authorized to issue up to 500 million ordinary shares and 50 million preference shares, which could lead to dilution for existing shareholders[217].

Core Insights - JFrog reported better-than-expected fourth-quarter results, with earnings of 19 cents per share, surpassing the analyst consensus estimate of 14 cents, and quarterly revenue of $116.08 million, exceeding the estimate of $114.19 million and showing an increase from $97.26 million in the same period last year [1] - The CEO highlighted the rapid evolution of DevOps, DevSecOps, and MLOps landscapes, emphasizing customer demand for comprehensive solutions that unify and secure the software supply chain while enabling responsible GenAI adoption, which contributed to the company's success in 2024 [2] - JFrog expects first-quarter revenue between $116 million and $118 million, slightly below the estimate of $117.37 million, and EPS between 15 cents and 17 cents, aligning with the 15-cent estimate. For fiscal 2025, the company projects revenue between $499 million and $503 million, in line with the estimate of $499.62 million, and EPS between 67 cents and 69 cents, slightly above the 66-cent estimate [3] Analyst Reactions - Following the earnings announcement, analysts adjusted their price targets for JFrog. Needham analyst Mike Cikos maintained a Buy rating and raised the price target from $39 to $46. Canaccord Genuity analyst Kingsley Crane also maintained a Buy rating, increasing the price target from $38 to $45. Morgan Stanley analyst Sanjit Singh maintained an Overweight rating and boosted the price target from $36 to $44 [4][5]

Financial Data and Key Metrics Changes - Total revenue for 2024 was $428.5 million, up 22% year over year [8][24] - Q4 2024 total revenues were $116.1 million, up 19% year over year [24] - Cloud revenue for 2024 was $168 million, representing 41% year-over-year growth [8][24] - Gross margin for the year was 83.8%, with a Q4 gross margin of 83.2% [9][34] - Free cash flow for 2024 was $107.8 million, with a free cash flow margin of 25% [9][37] Business Line Data and Key Metrics Changes - Cloud revenues in Q4 2024 grew to $49.4 million, up 37% year over year, representing 43% of total revenues [24][26] - Self-managed or on-prem revenues in Q4 were $66.7 million, with full-year 2024 at $260.5 million, up 13% year over year [27] - Revenue contributions from enterprise plus subscriptions grew 35% year over year in 2024, comprising 54% of total revenues [29][30] Market Data and Key Metrics Changes - The number of customers with ARR over $100,000 grew to 1,018, up from 886 in the previous year [20] - Customers with ARR exceeding $1 million increased to 52, up from 37 in the previous year [20] - Net dollar retention for the trailing four quarters was 100%, with gross retention at 96% for 2024 [32] Company Strategy and Development Direction - The company is focused on enterprise adoption of its cloud platform and building tighter relationships with cloud partners like AWS, Google Cloud, and Microsoft Azure [12] - A strategic collaboration agreement with AWS aims to enable joint enterprise customers to scale their DevSecOps AI-driven software solutions cost-effectively [12][85] - The company is committed to consolidating security solutions into a single platform to enhance operational efficiency and budget optimization for users [14] Management's Comments on Operating Environment and Future Outlook - Management noted that despite a tight budgetary environment, large companies are demonstrating confidence with multiyear commitments [11] - The outlook for 2025 includes a conservative estimate of cloud growth between 30% to 32% and net dollar retention stabilizing in the mid-teens [42] - Management emphasized a disciplined approach to spending and investment in innovation to expand platform capabilities [43] Other Important Information - The company ended 2024 with $522 million in cash and short-term investments, down from $545 million at the end of 2023 due to the acquisition of Quack AI [39] - Remaining performance obligations (RPO) totaled $403 million, a 55% increase year over year [39] Q&A Session Summary Question: Insights on security traction and customer conversations - Management noted an increase in CIOs and CISOs looking to consolidate point solution tools, indicating a positive trend in prospective customer conversations [52] Question: Guidance assumptions regarding net dollar retention - Management expects net dollar retention to stabilize in the mid-teens, with minimal changes anticipated in migration activity [56][57] Question: Clarification on cloud revenue and database contributions - The $1.3 million in Q4 cloud revenue was from customer migrations to a new enhanced cloud database product, which will be reflected in future cloud guidance [25][65] Question: Customer optimization and investment cycles - Management indicated that large projects typically begin in the second half of the year, suggesting a similar pattern for 2025 [74] Question: Changes in sales motion for security solutions - Management confirmed that the sales force is equipped to scale the security offering, with significant traction observed in large contracts [77] Question: Incremental margin contribution from security adoption - Management stated that gross margins are expected to remain between 82.5% and 83.5%, capturing all products holistically [114] Question: Impact of AI on opportunities - Management highlighted that enterprise customers are increasingly interested in using JFrog as a model registry for AI, presenting a significant opportunity [125] Question: Customer account changes and focus on enterprise - Management confirmed a strategic focus on enterprise customers, resulting in a reduction of lower subscription customers to enhance overall business focus [128]

Core Insights - JFrog Ltd. reported revenue of $116.08 million for Q4 2024, marking a year-over-year increase of 19.4% and exceeding the Zacks Consensus Estimate of $114.16 million by 1.69% [1] - The company achieved an EPS of $0.19, consistent with the previous year, and surpassed the consensus EPS estimate of $0.14 by 35.71% [1] Financial Performance Metrics - The number of customers generating over $100k in ARR reached 1,018, exceeding the average estimate of 999 from two analysts [4] - Revenue from self-managed licenses was reported at $6.47 million, significantly higher than the estimated $5.09 million, reflecting a year-over-year increase of 24.3% [4] - Subscription revenue from self-managed and SaaS totaled $109.61 million, slightly above the average estimate of $109.04 million, with a year-over-year growth of 19.1% [4] Stock Performance - JFrog's shares have returned 11.1% over the past month, outperforming the Zacks S&P 500 composite, which saw a change of 3.9% [3] - The stock currently holds a Zacks Rank 3 (Hold), suggesting it may perform in line with the broader market in the near term [3]

Core Insights - JFrog Ltd. reported quarterly earnings of $0.19 per share, exceeding the Zacks Consensus Estimate of $0.14 per share, and matching the earnings from the previous year [1] - The company achieved revenues of $116.08 million for the quarter ended December 2024, surpassing the Zacks Consensus Estimate by 1.69% and showing a year-over-year increase from $97.26 million [2] - JFrog's stock has increased approximately 25.6% since the beginning of the year, significantly outperforming the S&P 500's gain of 2.9% [3] Earnings Outlook - The future performance of JFrog's stock will largely depend on management's commentary during the earnings call and the company's earnings outlook [3][4] - Current consensus EPS estimate for the upcoming quarter is $0.14 on revenues of $117.53 million, and for the current fiscal year, it is $0.64 on revenues of $498.39 million [7] Industry Context - The Internet - Software industry, to which JFrog belongs, is currently ranked in the top 30% of over 250 Zacks industries, indicating a favorable outlook [8] - The performance of JFrog's stock may also be influenced by the overall industry trends and the performance of peer companies, such as Domo, which is expected to report a quarterly loss [8][9]