PART I [Item 1. Business](index=5&type=section&id=Item%201.%20Business) JFrog offers a universal, hybrid, end-to-end DevOps platform for "Liquid Software," managing software packages as the system of record for over 6,650 organizations Key Financial and Operational Metrics (FY 2021 vs. FY 2020) | Metric | FY 2021 | FY 2020 | | :--- | :--- | :--- | | **Revenue (million USD)** | 206.7 | 150.8 | | **Revenue Growth (%)** | 37 | 44 (vs 2019) | | **Net Loss (million USD)** | (64.2) | (9.4) | | **Operating Cash Flow (million USD)** | 27.9 | 29.5 | | **Free Cash Flow (million USD)** | 23.7 | 25.9 | | **Total Customers** | ~6,650 | ~6,050 | | **Customers with ARR > $100k** | 537 | 352 | | **Customers with ARR > $1M** | 15 | 10 | - JFrog's core product is **JFrog Artifactory**, a universal package repository that serves as the "single source of truth" for an organization's software packages[33](index=33&type=chunk) - The platform includes integrated products for the entire software release cycle: JFrog Pipelines (CI/CD), JFrog Xray (security scanning), JFrog Distribution (package distribution), and others[34](index=34&type=chunk)[35](index=35&type=chunk)[37](index=37&type=chunk) - The company's go-to-market strategy is a bottom-up, community-focused approach, utilizing freemium offerings, free trials, and open-source software to drive adoption before converting users to paid subscriptions[40](index=40&type=chunk)[41](index=41&type=chunk)[45](index=45&type=chunk) - Key competitors include diversified software companies like IBM (Red Hat) and VMware, developer-focused companies like GitLab and Sonatype, and major cloud providers such as AWS, GCP, and Microsoft Azure[62](index=62&type=chunk) [Item 1A. Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks including operational challenges, intense competition, cybersecurity threats, data privacy regulations, and international political and economic instability - **Business & Operational Risks:** The company has a history of losses, with a net loss of **$64.2 million in 2021**, and may not achieve consistent profitability as operating expenses are expected to increase[86](index=86&type=chunk) - **Competition:** The market is highly fragmented with competition from large software companies (IBM, VMware), developer-focused firms (GitLab, Sonatype), and major cloud providers (AWS, GCP, Microsoft), many of whom have greater resources[100](index=100&type=chunk)[102](index=102&type=chunk) - **Cybersecurity & Data Privacy:** The company is subject to stringent and evolving laws like GDPR and CCPA; a breach or non-compliance could result in significant liabilities and reputational harm[165](index=165&type=chunk)[180](index=180&type=chunk) - **International Operations:** A significant portion of R&D is in Israel, exposing the company to regional instability, while expansion into China carries regulatory and IP protection risks[190](index=190&type=chunk)[229](index=229&type=chunk) - **COVID-19 Impact:** The pandemic has caused slowed growth, longer sales cycles, and project delays, with its full impact on future results remaining uncertain[247](index=247&type=chunk)[250](index=250&type=chunk)[251](index=251&type=chunk) [Item 1B. Unresolved Staff Comments](index=50&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - None[258](index=258&type=chunk) [Item 2. Properties](index=50&type=section&id=Item%202.%20Properties) JFrog is co-headquartered in Sunnyvale, California, and Netanya, Israel, leasing all its office facilities which are deemed adequate - The company leases approximately **49,000 square feet in Sunnyvale, CA**, and **55,000 square feet in Netanya, Israel**, with leases expiring in 2026[259](index=259&type=chunk) [Item 3. Legal Proceedings](index=50&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is incorporated by reference from Note 11 of the consolidated financial statements - The company refers to Note 11 for details on legal proceedings, disclosing a dispute with former sales employees resolved for approximately **$2.6 million**[261](index=261&type=chunk)[492](index=492&type=chunk) [Item 4. Mine Safety Disclosures](index=50&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[262](index=262&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities](index=51&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Shareholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) JFrog's ordinary shares trade on Nasdaq under 'FROG' since its 2020 IPO; the company has never paid cash dividends and retains earnings for operations - The company's ordinary shares are listed on Nasdaq under the ticker symbol **FROG**[264](index=264&type=chunk) - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future[266](index=266&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) JFrog's FY2021 revenue grew, driven by customer expansion, but net loss widened significantly due to increased share-based compensation and personnel costs, while maintaining strong liquidity Revenue Performance (FY 2021 vs. FY 2020) | Revenue Category | 2021 (thousand USD) | 2020 (thousand USD) | % Change | | :--- | :--- | :--- | :--- | | Subscription—self-managed and SaaS | 190,046 | 137,978 | 38 | | License—self-managed | 16,637 | 12,849 | 29 | | **Total Subscription Revenue** | **206,683** | **150,827** | **37** | Operating Expenses (FY 2021 vs. FY 2020) | Expense Category | 2021 (thousand USD) | 2020 (thousand USD) | % Change | | :--- | :--- | :--- | :--- | | Research and development | 79,604 | 41,113 | 94 | | Sales and marketing | 96,962 | 60,936 | 59 | | General and administrative | 56,663 | 34,519 | 64 | - The increase in R&D expense was primarily driven by a **$19.3 million** increase in personnel costs from headcount growth (including acquisitions) and a **$10.7 million** increase in share-based compensation[320](index=320&type=chunk) - Share-based compensation expense increased by **139% to $56.9 million in 2021** from **$23.9 million in 2020**, attributable to new grants and expenses related to the Vdoo acquisition[323](index=323&type=chunk)[324](index=324&type=chunk) - The company's net dollar retention rate was **130%** as of December 31, 2021, compared to **133%** as of December 31, 2020[295](index=295&type=chunk) - In 2021, the company acquired Vdoo Connected Trust Ltd. for **$299.3 million** and Upswift Ltd. to expand its security and device management capabilities[286](index=286&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures about Market Risk](index=64&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company faces market risks primarily from foreign currency exchange rates, particularly USD/NIS, mitigated by hedging, and low interest rate risk due to short-term investments - The company's primary foreign currency exposure is from operating costs in Israel denominated in NIS; a hypothetical **10% change** would impact 2021 results by **$2.8 million** after hedging[347](index=347&type=chunk)[348](index=348&type=chunk) - Interest rate risk is low due to short-term investments; a hypothetical **1% increase** in rates would not materially impact fair value as of December 31, 2021[351](index=351&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=65&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents audited consolidated financial statements for fiscal years 2021, 2020, and 2019, including balance sheets, statements of operations, cash flows, and the auditor's report Consolidated Balance Sheet Data (as of Dec 31) | Account | 2021 (thousand USD) | 2020 (thousand USD) | | :--- | :--- | :--- | | **Total Current Assets** | 499,022 | 652,561 | | Goodwill | 247,776 | 17,320 | | **Total Assets** | **852,528** | **689,231** | | **Total Current Liabilities** | 175,264 | 122,700 | | **Total Liabilities** | **213,947** | **135,337** | | **Total Shareholders' Equity** | **638,581** | **553,894** | Consolidated Statement of Operations Data (Year Ended Dec 31) | Account | 2021 (thousand USD) | 2020 (thousand USD) | | :--- | :--- | :--- | | **Total Subscription Revenue** | 206,683 | 150,827 | | **Gross Profit** | 164,860 | 122,376 | | **Total Operating Expenses** | 233,229 | 136,568 | | **Operating Loss** | (68,369) | (14,192) | | **Net Loss** | **(64,203)** | **(9,405)** | Consolidated Statement of Cash Flows Data (Year Ended Dec 31) | Account | 2021 (thousand USD) | 2020 (thousand USD) | | :--- | :--- | :--- | | Net cash provided by operating activities | 27,902 | 29,458 | | Net cash used in investing activities | (125,545) | (311,796) | | Net cash provided by financing activities | 1,444 | 406,134 | - The auditor's report identified two critical audit matters: revenue recognition (SSP evaluation) and the valuation of assets/liabilities from the Vdoo acquisition[361](index=361&type=chunk)[363](index=363&type=chunk) [Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=101&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[532](index=532&type=chunk) [Item 9A. Controls and Procedures](index=101&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2021, with no material changes identified - Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[534](index=534&type=chunk) - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[536](index=536&type=chunk) [Item 9B. Other Information](index=101&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[539](index=539&type=chunk) [Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections](index=102&type=section&id=Item%209C.%20Disclosure%20Regarding%20Foreign%20Jurisdictions%20that%20Prevent%20Inspections) This item is not applicable to the company - Not applicable[540](index=540&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=102&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the Proxy Statement to be filed within 120 days of the fiscal year-end[542](index=542&type=chunk) - The company has adopted a Code of Business Conduct and Ethics, which is available on its investor relations website[543](index=543&type=chunk) [Item 11. Executive Compensation](index=102&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the Proxy Statement[544](index=544&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Shareholder Matters](index=102&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Shareholder%20Matters) Information on security ownership of beneficial owners and management is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the Proxy Statement[545](index=545&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=102&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information on related party transactions and director independence is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the Proxy Statement[546](index=546&type=chunk) [Item 14. Principal Accountant Fees and Services](index=102&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information on principal accountant fees and services is incorporated by reference from the company's 2022 proxy statement - Information is incorporated by reference from the Proxy Statement[547](index=547&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=103&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Annual Report on Form 10-K - This section provides an index of all documents filed with or incorporated by reference into the Form 10-K[549](index=549&type=chunk)[550](index=550&type=chunk) [Item 16. Form 10-K Summary](index=104&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company has not provided a summary for its Form 10-K - None[554](index=554&type=chunk)

JFrog Ltd. (NASDAQ:FROG) Q3 2021 Earnings Conference Call November 4, 2021 5:00 PM ET Company Participants JoAnn Horne - IR Shlomi Haim - Co-Founder and Chief Executive Officer Jacob Shulman - Chief Financial Officer Conference Call Participants Jason Ader - William Blair Jack Andrews - Needham Ittai Kidron - Oppenheimer Koji Ikeda - Bank of America Kingsley Crane - Berenberg Operator Good day, and thank you for joining us. Welcome to JFrog's Third Quarter Fiscal 2021 Financial Results Conference Call. [Ope ...

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 ...

Table of Contents ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (I.R.S. Employer Identification Number) For the quarterly period ended September 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) Israel 98-0680649 (State or ...

Financial Performance & Growth - JFrog's LTM (Last Twelve Months) revenue is $175 million[6] - The LTM YoY (Year-over-Year) revenue growth is 37%[6] - The company's 2Q'21 LTM Net Dollar Retention Rate is 129%[6] - 2Q'21 Free Cash Flow is $18 million[35] - The company's revenue grew 44% from FY'19 to FY'20, reaching $150.8 million in FY'20[36] Market & Customer Base - JFrog has over 6,000 ending customers as of December 31, 2020[6] - The Total Addressable Market (TAM) is estimated at $22 billion[6] - Enterprise Plus subscriptions accounted for 68% of revenue in 2Q'21[33] - 78% of Fortune 100 companies are customers[30] - 27% of Global 2000 companies are customers[30] Financial Metrics & Targets - The company targets a long-term Non-GAAP gross margin of 80%[55] - The company targets a long-term Non-GAAP operating margin of 23%[59] - The company targets a long-term Free Cash Flow Margin of 30%[60]

Financial Data and Key Metrics Changes - JFrog's revenue for Q2 2021 reached $48.7 million, representing a 34% year-over-year growth [16][42] - Cloud revenue grew by 47% year-over-year, accounting for 24% of total revenue compared to 21% in the previous year [17][42] - The company achieved a record quarterly free cash flow of $18 million [17] - Non-GAAP net income for the quarter was $900,000, or $0.01 per diluted share [49] Business Line Data and Key Metrics Changes - Self-managed revenues (on-prem) were $37.2 million, up 30% year-over-year [42] - 32% of total revenue came from enterprise class customers, up from 17% in Q2 2020 [46] - The number of customers with ARR over $100,000 increased to 415, with 12 customers having ARR greater than $1 million [44] Market Data and Key Metrics Changes - The company noted a solid growth in customers moving up the subscription stack to gain full access to the JFrog platform [45] - The net dollar retention rate for the trailing four quarters was 129% [42] Company Strategy and Development Direction - JFrog aims to become the company behind all software updates, focusing on making software "liquid" [13] - The acquisition of Vdoo is expected to enhance JFrog's security offerings and drive growth in SecOps [23][28] - The company is expanding its strategic sales team and investing in product innovation to support growth [38][84] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in gaining momentum in the second half of the year through partnerships with major cloud providers [30] - The business environment is improving, with expectations of accelerated growth in the second half of the year [45] - Management acknowledged the need for ongoing education and adoption of their solutions in the market [94] Other Important Information - JFrog's gross profit for the quarter was $40.6 million, representing a gross margin of 83.4% [47] - The company ended the quarter with $615 million in cash and short-term investments [49] - The total consideration for the Vdoo acquisition was approximately $287 million [51] Q&A Session Summary Question: What are the cloud platforms doing to get JFrog in front of prospective customers? - Management highlighted collaboration on co-selling and co-marketing with AWS, Google Cloud, and Microsoft Azure to enhance customer offerings [57] Question: What impact does customer consolidation have on JFrog's business? - Management noted that customers are optimizing subscriptions and hosting costs, which may affect cloud usage but not significantly impact JFrog's retention [60][74] Question: How should we think about the monetization potential from recent innovations? - Management indicated that innovations like Federated repositories and JFrog distribution will drive ARR growth through increased usage and subscription upgrades [62][65] Question: What is the expected timeline for Vdoo's integration and revenue contribution? - Management expects to see initial impacts from Vdoo's technology by the end of the year, with full integration anticipated in 2022 [80] Question: What challenges does the company foresee in the next 12 months? - Management identified the need for continued investment in deployment and distribution as a challenge, along with educating the market on their solutions [93]

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 ...

JFrog Ltd. (NASDAQ:FROG) Q1 2021 Earnings Conference Call May 6, 2021 5:00 PM ET Company Participants JoAnn Horne - IR Shlomi Ben Haim - Co-Founder and CEO Jacob Shulman - CFO Conference Call Participants Sterling Auty - JPMorgan Jack Andrews - Needham Brad Reback - Stifel Jason Ader - William Blair Ittai Kidron - Oppenheimer Ben Schmitt - Piper Sandler Peggy Yu - Morgan Stanley Kingsley Crane - Berenberg JoAnn Horne Good afternoon and thank you for joining us as we review JFrog's First Quarter Financial Re ...

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