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 - The company reported revenue of $1,877 million for Q1 FY 2026, representing growth of approximately 2% year-over-year due to the ramp-up of new and existing programs [11] - Adjusted EBITDA for the quarter was $157 million, resulting in an adjusted EBITDA margin of 8.4% [11] - Adjusted diluted earnings per share were flat year-over-year at $1.92, impacted by a higher tax rate and lower adjusted EBITDA [12] - Free cash flow was negative $44 million, affected by the timing of receivables on two programs [12] Business Line Data and Key Metrics Changes - The company secured net bookings of $2,400 million with a book-to-bill ratio of 1.3, including key recompete contracts [10] - The backlog of pending awards remained steady at approximately $20,000 million, providing visibility into future bookings [10] - The company expects to achieve a trailing twelve-month book-to-bill ratio of 1.2 in the coming quarters [11] Market Data and Key Metrics Changes - The Department of Defense (DoD) is expected to see stronger budget support, particularly for the Navy, Air Force, and Space Force, while the Army may face challenges [6] - The company noted over $1 billion in additional budget for the Department of Transportation and over $40 billion for the Department of Homeland Security [9] - The company’s revenue from its top five civilian agency customers represents over 70% of total revenue for the civilian segment [9] Company Strategy and Development Direction - The company is pivoting its portfolio towards mission and enterprise IT, aligning with the new administration's priorities [7] - The strategy includes leveraging proven expertise in mission integration and digital engineering to drive program success [8] - The company is focused on executing its growth strategy while navigating procurement delays and changes in the operating environment [5] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the operating environment stabilizing, despite ongoing procurement delays and turnover among customers [5] - The company anticipates continued growth driven by new business ramping up and modest headwinds from contract transitions [14] - Management reiterated guidance for revenue growth of approximately 2.5% at the midpoint for FY 2026 [14] Other Important Information - The company repurchased approximately $125 million of shares in Q1 and continues to target annual repurchases of $350 million to $400 million [17] - The company is also exploring additional capacity for mergers and acquisitions or incremental share repurchases [17] Q&A Session Summary Question: Update on operating environment and budget priorities - Management noted that the operating environment has stabilized, with significant turnover among acquisition personnel affecting procurement processes [20][22] Question: Competitiveness in procurement environment - Management acknowledged increased competitiveness but expressed confidence in their submission pipeline and win rates [24][25] Question: Known headwinds from recompetes - The only significant known recompete headwind is the NASA program loss, which will conclude in Q3 [28][31] Question: Nature of cost overruns in fixed-price programs - Management explained that cost overruns were due to challenges in the tech development phase, but they expect to recover as the program transitions to the sustainment phase [33][34] Question: Overview of end markets and opportunities - Management provided insights into the civilian and defense markets, highlighting growth opportunities in various sectors, including command and control capabilities [41][44] Question: Impact of continuing resolutions on awards - Management indicated that while there are delays in larger awards, the overall solicitation of proposals remains robust [49][50] Question: Margin trajectory and expectations - Management expects civil margins to improve and defense margins to stabilize, with a focus on executing transitions effectively [82][88]

Core Viewpoint - GitLab's stock has underperformed in 2023, with a year-to-date decline of 14.8%, contrasting with the broader technology sector's slight decline and significant gains from industry peers [1][2] Financial Performance - For fiscal 2026, GitLab anticipates revenues between $936 million and $942 million, reflecting a year-over-year growth rate of 24% [5] - The Zacks Consensus Estimate for fiscal 2026 revenues stands at $936.51 million, indicating a growth of 23.35% year-over-year [5] - Non-GAAP earnings for fiscal 2026 are projected to be between 68 and 72 cents per share, with a consensus estimate of 70 cents, suggesting a year-over-year decline of 5.41% [6] Market Position and Product Development - GitLab's comprehensive DevSecOps platform, supported by a robust product portfolio, is driving enterprise adoption and enhancing developer efficiency [7] - The GitLab Ultimate subscription now constitutes 50% of total annual recurring revenue, driven by its security and compliance features appealing to large enterprises [8] - GitLab Duo offers AI-powered development capabilities, including smart code suggestions and test automation, with the recent launch of GitLab 18 enhancing AI integration [9] Strategic Partnerships - GitLab's partnerships with major companies like Amazon and Alphabet are pivotal for its growth [10] - The collaboration with Amazon Web Services (AWS) includes the integration of GitLab Duo with Amazon Q, enhancing developers' ability to produce secure code efficiently [11] - Expanded integrations with Google Cloud have strengthened GitLab's platform capabilities, positioning the company for continued success in fiscal 2026 [12] Investment Outlook - GitLab's strong enterprise demand, rapid AI-driven innovation, and deepening cloud partnerships highlight its competitive edge and potential for sustained growth [13]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $122.4 million, representing a 22% year-over-year increase [8][18]. - Operating margin improved to 17.4%, up from 14% in Q1 2024 [22]. - Cloud revenue reached $52.6 million, a 42% increase year-over-year, accounting for 43% of total revenue compared to 37% in the prior year [18][19]. - Gross profit was $101 million, with a gross margin of 82.5%, down from 85.1% year-over-year [21]. - Free cash flow for Q1 was $28.1 million, reflecting a 23% margin compared to 17% in the previous year [23]. Business Line Data and Key Metrics Changes - Self-managed or on-premises revenues were $69.8 million, up 10% year-over-year [19]. - Revenue contribution from Enterprise Plus subscriptions grew to 50% of total revenues, up from 49% in the prior year, with a 37% year-over-year growth in this segment [19][20]. Market Data and Key Metrics Changes - The number of customers spending over $1 million annually increased to 54, a 35% growth year-over-year [9]. - Customers spending more than $100,000 annually grew to 1,051, a 15% increase year-over-year [9]. Company Strategy and Development Direction - The company is focusing on capturing momentum in cloud, DevOps, security, and MLOps markets [10][11]. - JFrog aims to unify DevOps, DevSecOps, and MLOps in a single solution, enhancing its position in the market [11][27]. - The partnership with Hugging Face aims to secure open-source machine learning models, indicating a strategic focus on AI and security [12][27]. Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding macroeconomic uncertainties affecting sales cycles and customer commitments [10][24]. - The outlook for Q2 and the full year 2025 reflects a conservative approach due to market volatility, with expected revenue growth of 19% year-over-year for Q2 [24][25]. - The company anticipates a full-year cloud growth rate of 31% to 33% [25]. Other Important Information - The company reported a net dollar retention rate of 116% and a gross retention rate of 97% [21]. - JFrog's cash and short-term investments totaled $563.5 million at the end of Q1 2025, up from $522 million at the end of 2024 [23]. Q&A Session Summary Question: Clarification on cloud consumption above commitment - Management confirmed that the increased consumption was broad-based across various customers and industries, not limited to a narrow set [33]. Question: Details on a significant deal with an AI technology leader - The deal involves using JFrog as the system of record for all models, with potential future expansions into security and ML models [35][36]. Question: Guidance construction and macro impact - The company remains cautious due to market uncertainty and has derisked its guidance by excluding large deals [40][41]. Question: Customer behavior regarding cloud commitments - Customers exceeding their commitments may continue to use services but are in a rigid purchasing environment, making future commitments uncertain [52]. Question: RPO growth and deal concentration - RPO growth was broad-based, not concentrated in a few large deals, indicating strong demand across multiple customers [56]. Question: Security sales cycles and renewals - Sales cycles for security remain consistent, with renewals aligned with projections and some upselling occurring [102].

Core Viewpoint - GitLab's share price has declined significantly due to increasing competition in the AI-driven code generation market, particularly from Microsoft's GitHub, alongside macroeconomic challenges and a shift towards agentic AI capabilities [1][2][3]. Company Performance - GitLab shares have lost 27.1% year to date, underperforming the broader Zacks Computer & Technology sector's 21% decline and the Zacks Internet Software industry's 18.3% drop [1]. Competitive Landscape - The competition in the AI-driven code generation space is intensifying, with GitHub's AI-powered coding assistant, GitHub Copilot, gaining traction and reinforcing Microsoft's dominance in the developer tools market [2]. - Persistent macroeconomic headwinds and the rapid shift towards agentic AI capabilities present growing challenges for GitLab [3]. Product Strengths - GitLab's robust DevSecOps platform, including GitLab Ultimate, GitLab Dedicated, and GitLab Duo, has driven customer adoption and retention, enhancing security, scalability, and AI-driven automation [4]. - GitLab Ultimate, the flagship product, accounted for 50% of the company's Annual Recurring Revenues as of the fourth quarter of fiscal 2025, highlighting its importance in revenue growth [6]. - The introduction of GitLab Duo, an AI-powered assistant, aims to improve software development workflows and developer productivity [7]. Innovation and Development - GitLab's Duo Workflow product, which focuses on AI-driven software development, entered private beta in the fourth quarter of 2024, leveraging Generative AI to enhance the software development lifecycle [8]. Strategic Partnerships - GitLab's partnerships with leading cloud providers, including Amazon Web Services and Zscaler, enhance the platform's scalability and deployment capabilities, strengthening its competitive position in the DevSecOps market [9]. - The integration of GitLab Duo with Amazon Q aims to improve AI-driven DevSecOps on AWS, enhancing security and efficiency [10]. Future Outlook - Despite challenges such as rising competition and cautious enterprise spending, GitLab's strong AI-driven DevSecOps platform, strategic partnerships, and growing enterprise adoption support long-term growth [11].

Financial Data and Key Metrics Changes - Q4 revenue increased by 29% year-over-year to $211 million, exceeding expectations [8][31] - FY 2025 revenue grew by 31% to $759.2 million, driven by land and expand strategy [31] - Non-GAAP operating margin for Q4 reached 17.7%, an increase of over 960 basis points year-over-year [35] - Adjusted free cash flow grew by 259% to $120 million for FY 2025 [31] - Non-GAAP gross margin was 91% for Q4, maintaining best-in-class status [34] Business Line Data and Key Metrics Changes - GitLab Ultimate now accounts for 50% of total ARR, with significant growth in enterprise customers [21][73] - GitLab Dedicated grew approximately 90% year-over-year in Q4 [22] - The number of customers with ARR of at least $100,000 increased by 29% to 1,229 [32] - The dollar-based net retention rate (DB NRR) for Q4 was 123%, driven by seat expansion and tier upgrades [33] Market Data and Key Metrics Changes - SaaS revenue represented 29% of total revenue, growing 36% year-over-year [34] - Total remaining performance obligations (RPO) grew by 40% year-over-year to $945 million [34] - The company closed the largest net ARR deal in its history during Q4 [29] Company Strategy and Development Direction - The company aims to add more new paying customers, especially in mid-market and enterprise segments [14] - Focus on accelerating customer value realization through innovation in core DevOps, security, and AI areas [14][19] - Plans to enhance go-to-market strategies, including expanding customer success and professional service teams [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the AI landscape and its potential to transform software development [61] - The company is prioritizing responsible growth while navigating competitive challenges in the market [62] - Management highlighted strong customer enthusiasm and commitment to GitLab's platform [58] Other Important Information - The company announced the private beta of Duo Workflow, moving towards AI-driven software development [26] - New CRO Ian Steward is expected to drive revenue growth and operational improvements [8][27] Q&A Session Questions and Answers Question: Insights on Duo Enterprise's contribution and market competition - Duo's performance exceeded expectations, with about a third of deals including Duo ARR [46] - Differentiation in a competitive market is based on GitLab's comprehensive platform and context provided for AI models [50] Question: Understanding the gap between optimism and financial guidance - Management emphasized strong customer feedback and ROI from GitLab's platform, which supports their optimistic outlook [59] Question: Driving utilization of the GitLab platform - The company focuses on customer success plans and partnerships to enhance platform utilization and adoption [92] Question: Changes in go-to-market strategy with new CRO - Incremental changes are expected, focusing on customer success and global expansion [80] Question: Balance of growth investments versus margin expansion - The company aims to invest in growth while maintaining a strong margin profile, with a focus on sales capacity and engineering [87]