Core Viewpoint - The article discusses the importance of understanding the implications of recent financial performance and market trends for investment decisions [1][2]. Financial Performance - Recent earnings reports indicate a significant increase in revenue for the company, with a year-over-year growth of 15% [1]. - The net profit margin has improved from 10% to 12%, reflecting better cost management and operational efficiency [1]. Market Trends - The industry is experiencing a shift towards digital transformation, with companies investing heavily in technology to enhance customer experience [2]. - There is a growing trend of consolidation within the sector, as companies seek to leverage synergies and expand their market share [2]. Investment Opportunities - Analysts suggest that companies focusing on innovation and sustainability are likely to outperform their peers in the coming years [1]. - Emerging markets present significant growth potential, with an expected increase in demand for products and services [2].

Summary of JFrog Conference Call Company Overview - JFrog is positioned as a leader in the software supply chain management, focusing on binary management and DevSecOps, with a unique platform that integrates these functionalities [2][3][5] - The company aims to enhance developer efficiency by managing the transition from source code to machine language, addressing the rapid pace of software updates [5][7] Key Highlights from Q1 Performance - Q1 results reflect a culmination of efforts over multiple quarters, particularly in enterprise sales and security integration [10][11] - Significant growth in large deals, with one customer achieving an annual contract value (ACV) of over $30 million, indicating a shift from smaller deals to larger enterprise contracts [12][16] - Security revenue has grown from essentially zero to 3% of total revenue, showcasing successful penetration into security budgets [13] - Unexpectedly high cloud usage across diverse customer segments, indicating robust demand despite Q1 typically being a slow quarter [14][15] AI and Large Language Models (LLMs) - JFrog is exploring the integration of AI and LLMs into its offerings, believing that increased binary usage will benefit the company [19][21] - The acquisition of QuocAI aims to position JFrog as a key player in managing LLMs, with plans for both cloud and self-hosted versions of the product [20][48] - Current usage trends suggest experimentation with AI tools among customers, but mass adoption is still pending due to industry uncertainties [49][50] Competitive Landscape - JFrog is the only publicly traded company in the DevOps binary management space, with limited competition from private firms like Sonatype and small startups [34][36] - The company differentiates itself through its comprehensive technology stack and security capabilities, which are critical for managing binaries [36][38] M&A Strategy - JFrog maintains a focus on free cash flow to remain agile for potential acquisitions, particularly in the AI and ML sectors [51][52] - The company is not currently seeking transformational acquisitions but is open to tuck-in acquisitions based on customer feedback and market needs [52] Security as a Growth Vector - JFrog sees significant growth potential in security, with plans to deepen penetration into existing customer bases [54][55] - The integration of security sales into a unified approach involving developers and security teams is a strategic focus [56] Financial Outlook and Guidance - The company has adopted a cautious approach to guidance, excluding large deal migrations and usage upside due to market uncertainties [27][30] - JFrog aims to balance growth with profitability, maintaining a free cash flow margin target of 26% to 29% [59][62] Conclusion - JFrog is strategically positioned to capitalize on the growing demand for software supply chain management and security solutions, with a focus on innovation and profitability while navigating a competitive landscape and evolving market dynamics [60][62]

Core Insights - JFrog (NASDAQ: FROG) is identified as a high growth tech stock that has faced significant volatility in the current year [1] Company Overview - JFrog operates as a DevSecOps software platform, assisting other technology companies in their software development processes [1] Analyst Background - Gary Alexander, with extensive experience in covering technology companies and advising startups, contributes insights on industry trends and has been active on Seeking Alpha since 2017 [1]

Summary of JFrog Conference Call Company Overview - JFrog has over 7,300 customers as of the end of 2024 [3] - The company has penetrated more than 82% of the Fortune 100 across all industries [4] - JFrog employs over 1,600 people and has a Total Addressable Market (TAM) exceeding $40 billion [4] - The company reported $450 million in revenue over the last twelve months, reflecting a 22% year-over-year growth [4] - JFrog generated $119 million in free cash flow and has a net dollar retention rate of 116% [4] Business Model and Financial Metrics - JFrog operates on a subscription-based model, with consistent revenue growth [12][13] - The company has a high gross retention rate of 97%, indicating strong customer loyalty [14] - The revenue growth for Q1 was also 22%, with guidance indicating a 17% growth for the upcoming year [13] Product Offerings - JFrog aims to streamline the DevOps process, integrating DevOps, DevSecOps, and MLOps into a single platform [5][9] - The company manages binaries, which are critical in the software supply chain, and offers advanced security products to protect these binaries [6][7] - JFrogML, a recently launched product, manages large language models and integrates with repositories like Hugging Face [9][10] Market Position and Competitive Landscape - JFrog has a strong position in the market, with significant penetration in various industries and a long runway for growth [12][17] - The company faces competition primarily from Sonatype and Cloudsmith in the Artifactory space, with Sonatype experiencing scalability issues [49][50] - JFrog differentiates itself by focusing on binary management and security, which is increasingly becoming an attack vector in software development [54] Strategic Partnerships - JFrog has established a partnership with GitHub to enhance integration between source code and binaries, improving user experience and security [40][41] - The collaboration aims to consolidate security tools and streamline the management of vulnerabilities [46] Future Outlook - JFrog is confident in its go-to-market strategy, having invested in building a strong enterprise sales team and seeing growth in million-dollar customers [62] - The company anticipates that the migration from self-hosted to cloud solutions will drive additional revenue growth [66] - JFrog expects its net dollar retention rate to remain stable at 116%, with potential for growth as customers increase usage beyond minimum commitments [68] Additional Insights - The shift towards AI and machine-generated code is expected to increase the volume of binaries, benefiting JFrog's business model [71][72] - JFrog's pricing model varies based on deployment type, focusing on data transfer, storage, and the number of contributing developers for advanced security [78]

Financial Data and Key Metrics Changes - JFrog reported a revenue growth rate of 22% in the last quarter, with guidance for the current year set at 18% [12][60] - The company has shifted to a more conservative guidance approach after experiencing unexpected challenges in the past [12][15] Business Line Data and Key Metrics Changes - The company has seen a significant increase in larger deals, with "mega deals" now reaching eight figures in size, driven by cloud migration and security needs [15][20] - Security has become a major driver for deal sizes, with many contracts now incorporating security solutions, leading to larger initial adoptions [20][21] Market Data and Key Metrics Changes - Approximately 80% of JFrog's cloud revenue is derived from annual contracts, providing more visibility into revenue streams compared to pure usage models [17] - The company has a strong presence in the enterprise market, with over 50% of revenue coming from the Enterprise Plus tier, which has grown significantly over the past two years [30][46] Company Strategy and Development Direction - JFrog is focusing on expanding its security offerings and integrating them with its existing products to create a comprehensive platform for customers [26][28] - The partnership with GitHub is seen as a strategic move to enhance integration and drive new customer acquisition, although a joint go-to-market strategy is not yet in place [39][44] Management's Comments on Operating Environment and Future Outlook - Management noted a disconnect between corporate America and Wall Street perceptions, indicating a cautious spending environment among customers [61][62] - The company is optimistic about future growth, particularly in cloud migrations, which are expected to drive higher net retention and better economics [52][55] Other Important Information - JFrog has successfully met or exceeded its long-term targets set in 2023, with a focus on profitable growth and maintaining a "Rule of 40" as a guiding principle [59][60] - The importance of binaries has increased as they have become a central attack vector in cybersecurity, emphasizing the need for robust security measures [66][67] Q&A Session Summary Question: What drove the recent increase in developer activity? - Management attributed the increase to experimentation with AI and MLOps, although they cautioned that it may not be a sustained trend [4][6] Question: How has the guidance philosophy changed? - The company has adopted a more conservative approach to guidance to protect investors after past experiences with unexpected customer behavior [12][15] Question: What is the impact of cloud migrations on revenue? - Cloud migrations have led to significant revenue uplifts, with customers experiencing a 20% to 80% increase in revenue after migrating to the cloud [52][55] Question: How does JFrog's security offering differentiate it from competitors? - JFrog's security solutions are integrated with its core offerings, allowing for the consolidation of multiple point solutions, which is a key competitive advantage [26][28] Question: What is the outlook for new customer acquisition? - Management sees potential for new customer acquisition, particularly in the SMB market, as they consider developing a lighter version of their products [32][39]

JFrog (FROG) FY Conference Summary Company Overview - JFrog is a platform that provides DevOps, DevSecOps, and MLOps capabilities to manage software supply chains, emphasizing a cloud-first approach and hybrid solutions [4][7][8]. Key Industry Insights - **Market Trends**: - There is a significant shift towards cloud adoption, even among companies previously resistant to public cloud solutions [8]. - Multi-cloud strategies are becoming popular to avoid vendor lock-in [9]. - CIOs are focusing on tool consolidation to streamline their software supply chains [10]. - **Customer Base**: - JFrog serves approximately 7,000 customers, with 83% of the Fortune 100 and around 50% of the Fortune 500 using its services [9][10]. Financial Performance - **Consumption Growth**: - Recent quarters have shown explosive growth in data consumption, particularly from Docker, Hugging Face, and Python packages [15]. - However, the company remains cautious about the sustainability of this growth due to macroeconomic headwinds and budget misalignments [16]. - **Revenue Composition**: - Security currently accounts for 3% of revenue, with expectations for growth as the security portfolio expands [30][36]. Product Development and Strategy - **Core Product**: - Artifactory is the flagship product, serving as a system of record for software packages, supporting over 32 different technologies [22][24]. - The platform is evolving to integrate security and MLOps capabilities, enhancing its value proposition [25][36]. - **Security Expansion**: - The acquisition of Vidoo has strengthened JFrog's security offerings, allowing it to compete effectively in the DevSecOps space [34][36]. - JFrog's security tools are designed to integrate seamlessly with Artifactory, providing comprehensive protection across the software supply chain [35][37]. Partnerships and Collaborations - **GitHub Partnership**: - A strategic partnership with GitHub aims to create a seamless experience for developers, integrating source code and binary management [51][56]. - 70% of JFrog's customers use GitHub, enhancing trust and collaboration opportunities [56]. Future Outlook - **Macro Environment**: - While JFrog has not yet felt significant impacts from macroeconomic conditions, the company is monitoring the situation closely [65]. - The focus remains on executing growth strategies and maintaining customer engagement [66]. - **Developer Trends**: - The company anticipates that the evolution of AI and automation will lead to more sophisticated developers who leverage tools to enhance productivity [74][75]. - MLOps is a recent addition to the platform, with expectations for gradual adoption and revenue contribution [77][78]. Conclusion - JFrog is positioned as a leader in the DevOps and security space, with a strong focus on cloud solutions and customer consolidation. The company is optimistic about future growth driven by its expanding product offerings and strategic partnerships, while remaining cautious about macroeconomic challenges.

Core Insights - JFrog Ltd. reported revenue of $122.41 million for the quarter ended March 2025, marking a year-over-year increase of 22% and exceeding the Zacks Consensus Estimate of $117.19 million by 4.45% [1] - The company achieved an EPS of $0.20, which is an increase from $0.16 a year ago, resulting in an EPS surprise of 25% compared to the consensus estimate of $0.16 [1] Financial Performance Metrics - JFrog has 1,051 customers with over $100k in ARR, surpassing the average estimate of 1,037 based on two analysts [4] - Revenue from self-managed licenses was reported at $5.98 million, exceeding the average estimate of $5.40 million from seven analysts, reflecting a year-over-year change of 22% [4] - Subscription revenue from self-managed and SaaS totaled $116.43 million, compared to the average estimate of $111.71 million from seven analysts, also showing a year-over-year increase of 22% [4] - SaaS subscription revenue reached $52.61 million, exceeding the estimated $49.78 million from six analysts [4] - Revenue from self-managed subscriptions was reported at $69.80 million, surpassing the average estimate of $67.34 million from six analysts [4] Stock Performance - JFrog's shares have returned +16% over the past month, outperforming the Zacks S&P 500 composite's +13.7% change [3] - The stock currently holds a Zacks Rank 4 (Sell), indicating potential underperformance relative to the broader market in the near term [3]

Part I [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) This section presents JFrog Ltd.'s unaudited condensed consolidated financial statements for Q1 2025, reporting **$122.4 million** in revenue and an **$18.5 million** net loss [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets increased to **$1.16 billion** as of March 31, 2025, driven by short-term investments, with stable liabilities and growing equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $44,350 | $49,869 | | Short-term investments | $519,157 | $472,138 | | Total current assets | $682,134 | $649,227 | | Total assets | $1,156,229 | $1,129,906 | | **Liabilities & Equity** | | | | Deferred revenue (current) | $250,145 | $247,187 | | Total liabilities | $356,193 | $356,380 | | Total shareholders' equity | $800,036 | $773,526 | | Total liabilities and shareholders' equity | $1,156,229 | $1,129,906 | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2025 total subscription revenue grew **22%** to **$122.4 million**, but operating and net losses widened due to higher expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Total subscription revenue | $122,407 | $100,311 | | Gross profit | $92,226 | $79,707 | | Total operating expenses | $115,196 | $96,343 | | Operating loss | $(22,970) | $(16,636) | | Net loss | $(18,503) | $(8,790) | | Net loss per share, basic and diluted | $(0.16) | $(0.08) | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations increased to **$28.8 million** in Q1 2025, while investing activities used **$45.8 million** for short-term investments Cash Flow Summary (in thousands) | Activity | Q1 2025 | Q1 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $28,792 | $17,469 | | Net cash used in investing activities | $(45,782) | $(46,921) | | Net cash provided by financing activities | $11,505 | $16,595 | | Net decrease in cash, cash equivalents, and restricted cash | $(5,519) | $(13,380) | [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail accounting policies, revenue disaggregation showing a SaaS shift, **$424.2 million** RPO, and **$36.8 million** share-based compensation Revenue by Category (Q1 2025 vs Q1 2024) | Category | Q1 2025 Revenue | % of Total | Q1 2024 Revenue | % of Total | | :--- | :--- | :--- | :--- | :--- | | Self-managed subscription | $69,797k | 57% | $63,390k | 63% | | SaaS | $52,610k | 43% | $36,921k | 37% | | **Total** | **$122,407k** | **100%** | **$100,311k** | **100%** | * As of March 31, 2025, remaining performance obligations (RPO) totaled **$424.2 million**, with **68%** expected to be recognized as revenue over the next 12 months[37](index=37&type=chunk) * Total share-based compensation expense was **$36.8 million** for Q1 2025, with **$290.6 million** unrecognized cost to be recognized over 2.6 years[66](index=66&type=chunk) [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 2025 financial performance, including **22%** revenue growth to **$122.4 million**, driven by SaaS and Enterprise Plus subscriptions * Revenue from SaaS subscriptions grew to **43%** of total revenue in Q1 2025, indicating a continued shift in business mix[80](index=80&type=chunk) * The net dollar retention rate was **116%** as of March 31, 2025, expected to remain relatively stable[89](index=89&type=chunk) * Customers with **$100,000+ ARR** increased to **1,051**, and those with **$1.0 million+ ARR** increased to **54** as of March 31, 2025[90](index=90&type=chunk) [Results of Operations](index=32&type=section&id=Results%20of%20Operations) Total revenue grew **22%** to **$122.4 million** in Q1 2025, while gross margin decreased to **75%** and operating expenses rose **21-22%** Revenue Change (Q1 2025 vs Q1 2024, in thousands) | Category | Q1 2025 | Q1 2024 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total subscription revenue | $122,407 | $100,311 | $22,096 | 22% | * Cost of revenue increased **46%** year-over-year, driven by **$3.8 million** in third-party hosting costs and **$2.1 million** in intangible amortization[111](index=111&type=chunk) * Operating expenses increased across all categories, with R&D up **$7.5 million (21%)**, Sales & Marketing up **$9.2 million (21%)**, and G&A up **$2.1 million (12%)**[113](index=113&type=chunk)[114](index=114&type=chunk)[115](index=115&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) Principal liquidity sources totaled **$563.5 million** as of March 31, 2025, with **$28.8 million** net cash from operations and **$61.0 million** in contractual obligations * As of March 31, 2025, principal liquidity sources were cash, cash equivalents, and short-term investments totaling **$563.5 million**[121](index=121&type=chunk) * Net cash provided by operating activities was **$28.8 million** for Q1 2025, driven by a net loss adjusted for **$44.0 million** in non-cash charges[124](index=124&type=chunk)[125](index=125&type=chunk) Contractual Obligations as of March 31, 2025 (in thousands) | Obligation Type | Total | 2025 (Remainder) | 2026 and Thereafter | | :--- | :--- | :--- | :--- | | Operating lease obligations | $12,644 | $6,144 | $6,500 | | Purchase obligations | $48,382 | $13,688 | $34,694 | | **Total** | **$61,026** | **$19,832** | **$41,194** | [Quantitative and Qualitative Disclosures About Market Risk](index=41&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces foreign currency exchange risk, primarily USD/NIS, mitigated by hedging, and interest rate risk on investments, with inflation not a material factor * The primary market risk is foreign currency exchange, as Israeli operating costs are in NIS while revenues are primarily in USD[133](index=133&type=chunk) * JFrog uses a hedging program to reduce exchange rate volatility, with a hypothetical **10%** change not materially impacting results[134](index=134&type=chunk) * Interest rate risk on **$563.5 million** in cash and investments is not material, as a hypothetical **1%** rate increase would not significantly impact fair value[137](index=137&type=chunk)[138](index=138&type=chunk)[121](index=121&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective as of March 31, 2025, with no material changes to internal control over financial reporting * The CEO and CFO concluded that disclosure controls and procedures were effective as of March 31, 2025[141](index=141&type=chunk) * No material changes to internal control over financial reporting occurred during the quarter[142](index=142&type=chunk) Part II [Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) The company is not aware of any current legal proceedings that would materially adversely affect its business or financial results * The company is not aware of any current legal proceedings that would have a material adverse effect on its business[59](index=59&type=chunk)[145](index=145&type=chunk) [Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) This section outlines significant business risks, including growth management, intense competition, foreign operations in Israel, cybersecurity, and intellectual property * Inability to effectively manage significant growth and scale systems could adversely affect financial results[148](index=148&type=chunk) * Significant competition comes from DevOps companies, large cloud providers, and security point solution providers[162](index=162&type=chunk)[168](index=168&type=chunk) * Operations in Israel, where a material part of R&D is located, are susceptible to disruptions from ongoing regional conflict[293](index=293&type=chunk)[294](index=294&type=chunk)[296](index=296&type=chunk) * Security breaches could lead to customer loss, liability, and reputational damage, heightened by geopolitical tensions and sophisticated cyberattacks[241](index=241&type=chunk)[244](index=244&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=65&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the period covered by this report * None[318](index=318&type=chunk) [Default Upon Senior Securities](index=65&type=section&id=Item%203.%20Default%20Upon%20Senior%20Securities) This item is not applicable to the company * Not applicable[319](index=319&type=chunk) [Mine Safety Disclosures](index=65&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company * Not applicable[320](index=320&type=chunk) [Other Information](index=66&type=section&id=Item%205.%20Other%20Information) CEO Shlomi Ben Haim adopted a Rule 10b5-1 trading plan on March 3, 2025, for the potential sale of up to **822,565** ordinary shares * On March 3, 2025, CEO Shlomi Ben Haim adopted a Rule 10b5-1 trading arrangement for the sale of up to **822,565** ordinary shares[322](index=322&type=chunk) [Exhibits](index=67&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including SOX certifications from the CEO and CFO, and Inline XBRL documents * The report includes required certifications from the CEO and CFO under SOX Sections 302 and 906, along with interactive data files (XBRL)[327](index=327&type=chunk)

Core Insights - JFrog Ltd. held its Q1 2025 earnings conference call on May 8, 2025, to discuss financial results and future outlook [1][2][3] Company Overview - The call was led by CEO and Co-Founder Shlomi Ben Haim and CFO Ed Grabscheid, with Jeffrey Schreiner serving as the VP of Investor Relations [3] Financial Performance - The financial results for Q1 2025 were announced after market close on the same day, indicating a structured approach to investor communication [2][3] Forward-Looking Statements - The company provided forward-looking statements regarding its future financial performance and outlook for Q2 and the full year of 2025, emphasizing the importance of not placing undue reliance on these projections [4]

Core Insights - JFrog Ltd. reported quarterly earnings of $0.20 per share, exceeding the Zacks Consensus Estimate of $0.16 per share, marking a 25% earnings surprise [1] - The company achieved revenues of $122.41 million for the quarter, surpassing the Zacks Consensus Estimate by 4.45% and showing a year-over-year increase from $100.31 million [2] - JFrog has consistently outperformed consensus EPS estimates over the last four quarters, achieving this four times [2] Earnings Performance - The earnings surprise of 25% for the recent quarter follows a previous surprise of 35.71% when the company reported $0.19 per share against an expectation of $0.14 [1] - The current consensus EPS estimate for the upcoming quarter is $0.16, with projected revenues of $120.85 million, and for the current fiscal year, the estimate is $0.68 on revenues of $500.25 million [7] Stock Performance - JFrog shares have increased approximately 17.5% since the beginning of the year, contrasting with a decline of 4.3% in the S&P 500 [3] - The stock currently holds a Zacks Rank of 4 (Sell), indicating expectations of underperformance in the near future due to unfavorable estimate revisions [6] Industry Context - The Internet - Software industry, to which JFrog belongs, is currently ranked in the top 37% of over 250 Zacks industries, suggesting a favorable outlook compared to lower-ranked industries [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]