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JFrog(FROG) - 2024 Q4 - Annual Report
FROGJFrog(FROG)2025-02-14 21:43
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Financial Performance - Total revenues for the years ended December 31, 2024, 2023, and 2022 were 428.5million,428.5 million, 349.9 million, and 280.0million,respectively,representinggrowthratesof22280.0 million, respectively, representing growth rates of 22% and 25% for 2024 and 2023[84]. - The company incurred net losses of 69.2 million, 61.3million,and61.3 million, and 90.2 million for the years ended December 31, 2024, 2023, and 2022, respectively, resulting in an accumulated deficit of 359.7millionasofDecember31,2024[93].−JFrogLtd.recognizedSelf−managedsubscriptionrevenueof359.7 million as of December 31, 2024[93]. - JFrog Ltd. recognized Self-managed subscription revenue of 238.9 million and Self-managed license revenue of 21.6millionfortheyearendedDecember31,2024[357].CustomerGrowthandRetention−ThenumberofcustomerswithAnnualRecurringRevenue(ARR)of21.6 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 1,000,000ormorerosefrom37to52inthesameperiod[84].−Thecompanyexpectstoderiveasubstantialportionofrevenuefromrenewalsofexistingsubscriptions,whichmayfluctuatebasedoncustomersatisfactionandproductperformance[105].−Thereisadependencyoncustomersupportqualityforachievingrenewalsandincreasingsales,withlargerenterprisecustomersrequiringhigherlevelsofsupport[123].OperationalChallenges−Thecompanyanticipatesthatoperatingexpenseswillincreasesubstantiallyintheforeseeablefutureduetoproductenhancements,customerbaseexpansion,andhiringadditionalemployees[93].−Thecompanyhasexperiencedfluctuationsinitsresultsofoperations,whichcouldadverselyaffectthetradingpriceofitsordinaryshares[89].−Thecompanyhasfacedchallengesinhiringandtrainingqualifiedcustomersupportemployees,whichcouldimpactcustomersatisfactionandretention[124].CompetitionandMarketDynamics−Thecompanyfacessignificantcompetitionfromexistingandpotentialcompetitors,someofwhomhavegreaterfinancialandtechnicalresources[98].−Themarketsforthecompany′sproductsarematuring,makingitdifficulttopredictcustomeradoptionanddemandforitsplatform[94].−Thecompanyexpectsrevenuegrowthratestodeclineinfutureperiodsduetofactorssuchasincreasedcompetitionandmacroeconomicconditions[87].StrategicInitiatives−ThecompanyreleasedsignificantenhancementstoJFrogAdvancedSecurityandexpandedMLOpsfunctionalitywiththeacquisitionofQwakAI,Ltd.in2024[85].−ThecompanyhasacquiredQwak,anAIdevelopmentplatform,andpreviouslyacquiredVdooandUpswift,indicatingastrategyofexpandingthroughcomplementaryacquisitions[151].−TheCompanycompleteditsacquisitionofQwakAILtd.fortotalconsiderationof1,000,000 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].