JFrog(FROG) - 2025 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $122.4 million, representing a 22% year-over-year increase [6][18] - Operating margin improved to 17.4%, up from 14% in Q1 2024 [21] - 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% in the previous year [20] - Cash flow from operations was $28.8 million, leading to a free cash flow of $28.1 million, or a 23% margin, compared to 17% in the year-ago period [22] 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 [19] Market Data and Key Metrics Changes - The number of customers spending over $1 million annually increased to 54, a 35% growth year-over-year [7] - Customers spending more than $100,000 annually grew to 1,051, a 15% increase year-over-year [7] Company Strategy and Development Direction - JFrog is focusing on capturing momentum in cloud, DevOps, security, and MLOps areas [9] - The company is strategically investing in multi-cloud and hybrid solutions, aiming to migrate self-hosted customers to JFrog SaaS offerings [9] - JFrog aims to unify DevOps, DevSecOps, and MLOps in a single platform, enhancing its position in the market [10] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding macroeconomic uncertainties affecting sales cycles and customer commitments [9][23] - The company anticipates a full-year 2025 cloud growth rate of 31% to 33%, excluding any contributions from usage above minimum commitments [24] - Management remains optimistic about the opportunities ahead, despite the challenging market environment [17] Other Important Information - JFrog announced a partnership with Hugging Face to secure open-source machine learning models, highlighting its commitment to security in the AI space [12] - The company released its annual software supply chain state of the union report, emphasizing the importance of security tools in managing vulnerabilities [12] Q&A Session Summary Question: Clarification on cloud consumption above commitment - Management confirmed that the consumption above commitment was broad-based across various customers and industries, with no significant changes in sales cycles noted [31][34] Question: Details on a significant deal with an AI technology leader - The deal involves JFrog's platform as the system of record for models, with potential future expansions into security and ML models [35][36] Question: Guidance construction and macro impact - Management indicated that guidance was conservative due to market uncertainty, with a focus on derisking large deals [40][41] Question: Customer behavior regarding on-prem expansion - No significant changes in customer behavior were observed, with many waiting to migrate to cloud solutions [44] Question: Emphasis on ML opportunity - Management highlighted the integration of ML capabilities into the JFrog platform, noting early customer interest but acknowledging it is too soon to assess its impact on the pipeline [48][107] Question: RPO growth and deal concentration - RPO growth was broad-based, not concentrated in a few large deals, indicating strong demand across multiple customers [55][56] Question: Security sales cycles and renewals - Sales cycles for security remain consistent, with positive reception to renewals and upselling opportunities [100][101]