- Earnings call transcript Q3 2022

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Operator

Ladies and gentlemen, thank you for joining us, and welcome to JFrog's Third Quarter 2022 Earnings Conference Call. I'll hand the conference over today to Jeff Schreiner, VP of Investor Relations. Jeff, please go ahead.

Jeff Schreiner

Good afternoon, and thank you for joining us as we review JFrog's third quarter financial results, which were announced following market close today via a press release. Leading the call today will be JFrog's CEO and Co-Founder, Shlomi Ben Haim; and Jacob Shulman, JFrog's CFO.

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not obligating these the Please as risks date. cautioned to only are could to These ourselves uncertainties events. of reflect statements of these are or new as of to release statements, views statements not subsequent cause of other expectations. results keep results You differ revise revision place variety forward-looking our in and information undue a on any materially light our in from to future not any forward-looking actual mind reliance that of that and today subject to are public which we

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from time-to-time XX, Form we file reports and the and for Additional SEC. other that be information the quarter in will XXXX, ended September available XX-Q made our may with filings

from be I'd be performance call replay as measures. measures. release which Haim, CEO, used These Please over for earnings JFrog directly to most the considered addition available should will tables as limited for Investor isolation Relations comparable measures measures a the refer Shlomi? GAAP like not financial that, on this discussed measures those of JFrog financial of call. measures, GAAP on JFrog's, website our call a will to this are Ben substitute in reconciliation A to, non-GAAP the With in turn Shlomi for be to in or of their to a time. financial non-GAAP conference Additionally,

Shlomi Ben Haim

our you, Welcome, report fruitful security platform by call. the quarter our DevOps, our earnings Jeff. Thank QX, for across everyone, JFrog our yet metrics to all proud end guidance exceeded third pillars. high JFrog. strong of to the I'm In quarter IoT and across another of strength and driven

year-over-year revenue $XX quarter growth. third million, was XX% reflecting Our

to grow. to XX% Customers compared ARR in Customers continues XX% up million to $XXX,XXX from over expanded the and also up over process environments. a XX% XXX This revenue cloud increased list and adoption XX% Our customers part backbone enterprise to DevSecOps driven their their is of year-over-year. making DevOps platform previous the year-over-year. grew JFrog continued XXX global increased and of with The ARR to with and the move cloud quarter hybrid XX%, quarter, year-over-year. by sequentially previous in migration of of customer $X our increasing

four dollar was trailing Our XXX%. quarters' retention net

for customers' tools for binary only be their and for focused to delivery, proud single our end-to-end which continues system the partners of record the strategic is customers. and JFrog As trust. company source mission-critical platform, the our be to We're solution software of our thankful

some this QX allow out things. played on with key in how elaborate Now to me

maturing First, solutions. platform the demonstrating DevSecOps growth end-to-end adoption in for and DevOps full consolidated needs

including focused our binary growing Advanced security offering. solutions, interest in recently our Security released a Second,

DevOps growing cloud. devices. and Third, cloud with bridge process the And IoT migration the companies connected transformation the ongoing the chain fourth, security DevOps enterprise managing their in to of software need supply and and to

platform. with begin increased the our of adoption Let's

Plus Enterprise very increasing revenue of by The view mature its Enterprise been have and some our needs trend customers of end-to-end contribution more the subscription adoption of our of growing the the Plus the We encouraged number largest supports by enterprises. solutions. world's that ongoing market

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to enterprises and to software full platform are have chain a binary life XXX automate scalable keep demand. Stanley like management Morgan a honored We supply players as to a scale cycle our excited improving as their visionary security. customer today's words

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happy leaders as binary like software are see a security. at looking critical Google industry authentication Cloud, We to for supply aspect chain

binaries positive in that flow. JFrog asset delivery and acknowledge modern to as a are primary will the solutions software follow secure more We security

tell of hybrid Third, and here stay. is leads the customers to us multi-cloud and that and migration our cloud growth, JFrog it philosophy strategy DevOps standardization,

JFrog included on adhering a distribution, approach and automotive of full around with completed customers and look automobile adoption from partnership involves For joined which the SaaS -- gradual dollar IoT groups. a They standards by the effort era solution at while as in enables our time. manufacturers originated opens efforts most and emphasize vehicles. deal a this move during largest infrastructure electric can and world's hybrid workloads global looking was management, to strategic essential migrated package JFrog community binary the is this marketplace manager, for cloud cloud development. JFrog's top QX, X change to In solution. DevOps them and pace Konan. JFrog These the the the need universality, regulations. preferred the on new enterprises, that migration through multimillion perfectly of evolve a that with one scale Clas the They over platform centralize to platform aligned Nexus of and JFrog customer many deep that JFrog notably standardize multiyear Sonopet and was security

Another signing a U.S., cloud X JFrog customers, with the existing from in the $XXX,XXX with to manufacturer shifting of example an over the came equipment deal ARR. DevOps most of recognizable heavy

now software to DevOps migration, of their the addition we In all And emergence to to software remove announced this company across also distribution availability their process early was In time-consuming pipelines. the delivery JXConnect. tasks QX, IoT. for manual, looking standardize and

edge technology Europe's electronics to Connect company Now by the intend large updates as full manage Duverne, the DevOps in first operate we software. equipment this equipment, QX, heavy is advanced modern without international the software platform. them on can't generated An combat such deal the JFrog chose defense military enable edge. of In to JFrog one updated forces flow with to vehicles. Western the defensive software over-the-air JFrog In saw case,

developer's by edge field. Artifactory monitored now Ford yet way intends noted on with JFK on soldier over-the-air his mature of deployed quoting. that deployed we era Company the the will the to device. and at liquid drive The fourth, We manually. transformation JFrog it next that the in to to CEO And edge continuously more Connect. update practices binaries continuous and managed Motor by revolution the The shared by will digital. the are software build Again, customers and secured ago, required and updates weeks lead real-world is the can solutions, of only this another DevOps being distributed a is for next bridge working the the task a forward to be and process allowing that our of each to adoption to auto this few with -- a flash future. edge, clearly land a be security today, asset organization vision, all in with plate revolution. implementation as However, In is software will look automated

into continuous data that will are turning our We generators of updates. receive vehicles

With operations positioned and areas vision are use headwinds. of flow through at facing. impact. point to change looking investments. across platform DevOps and essential the or are and macroeconomic processes and opportunity for the well around infrastructure market DevOps vendor and holistic and that address now of and offerings, to the ongoing Customers we demand to legacy We ways cash proud I communities focused want improve consolidation JFrog are security a continuous more replace and consolidate efficiency and becoming We our to JFrog software Many see to DevSecOps efficiency at will customers geopolitical update business growing macroeconomic globe this and increase and solutions. liquid like customers strategic face are an reality. their challenges leads our

macro-driven these requirements to see to immune additional and delays. cycle, not project sales headwinds, and budget is approval we JFrog However, continue longer

customers As last committed we step that we we as would pioneer of into value during also to note not for year trouble solid success, take business the for plans but the XXXX, only finish at I X,XXX our thousands also DevOps stayed like our times. technology breakeven not quarter but business build our serve shareholders, and to and also a pride being resiliency run and the only We operate that to innovate of market, worldwide. home in over its

Board provide that Yvon go-to-market our I strategies a warm to year rest enterprise member and experience over lipped the security outlook in recap company's over software, With newest cloud want I'll XXXX. CFO, she Jacob you With in-depth IoT Yvon for and advancement Jacob, of expertise QX our the will both extend on cybersecurity the and will JFrog fiscal to QX and of an Before of industry turn drive call to Board, Shulman, of acceleration results into that, in update hand to brings years and a the XX DevOps, Wossner. as Jacob? who call I help markets. welcome our

Jacob Shulman

Thank afternoon, and you, good Shlomi, everyone.

by $XX DevOp new cloud quarter, representing continued third and total XX% solutions. revenues XX% increased million, of $XX were year-over-year, revenues with our in customer Expansion within security of wins revenues, During business usage and the XX% up year-over-year. total driven million, up

million, potential in rapidly grow We continued range as line subscription our and as revenues retention with to rate pleased for adjusting freedom providing are how new on X drivers deployments the for the quarter. solutions in growth large the to by growth have better to security with believe JFrog's coupled on-prem our remains dollar will some as our of pricing be Self-managed well upside a reiterate percent annual in to commitments. PayGo the we even persistent, We from cloud. business on-prem despite mid-XXs the in for our new quarters business from with hybrid third in were we of customers cost commentary. our of of trailing more by that revenues XXXX. patterns of vast self-managed so our our our up saw transition solid XXXX. cloud. our control DevOps on-prem are as experienced cloud continued usage versus over quarter by the as growth deployments. hybrid, was customers get On migrating lands We on savings our customers in in usage continue year-over-year minimum moving toward $XX choice, for some when customer many belief prior support business expansion We first customers and as utilize growth baseline to allows landing momentum the far with We of SaaS Nevertheless, as Net self-managed gradually view and cloud believe well usage that majority growth XX% their continue solution customers are optimization business. the hybrid we SaaS basis, seen XXX%, customer during future

of over XXXX, XX, quarter from ARR end, of QX the at customers up of June and XXX had we of XX% XXXX. XXX as customers up XXX from As with end the of $XXX,XXX,

number customers up million year-over-year. also We XX, to of the grew X over ARR XX%

customers. a In full discussed XX% the key of customers, adoption of came QX from As from QX up size our of our we platform revenue increasing XXXX, the of of in enterprise XX% plus in past, in factor is the XXXX.

Now year more $XX.X discuss of income quarter statement detail. in period. million, a was gross the let ago compared in the me in Gross margin profit to representing XX.X% the XX.X%

margins portion and of XXs in gross from year up long XX% low our will turn near toward in total of as over Operating revenue. greater million become future revenues then expect were million for XX% the XX% cloud revenues revenues, or and period. $XX.X term XX% between ago the quarter third We remain expenses the the a $XX.X of the or

operating as announced operational efficiencies. expenses approximately grew previously we sequentially initiated Our $XXX,XXX

productivity this sales strategically R&D operating operating and for profit a quarter with reduce and We per the within build to in relationship we costs. million to operating we term, invest to for weighted of loss While shares $X.XX $X.X $X.X XXX on of quarter. ago margin average enhance million to compared have or continue non-GAAP based quarter approximately channel the previous million X.X% in share in to enterprise year operating also earnings the in a as Non-GAAP income period. $X.X QX the profit and continued million, margin turned out our outstanding back diluted look of compared was X.X% long an ways was or per to share profitability $X.XX, net

taking and $XXX.X operations million short-term $X.X Turning from of in cash was to June sheet XX, million We margin flow into flow with quarter years. ended up We over in investments, to as cash was remain our target million million. balance $XXX cash Cash long-term CapEx, cash After flow. the free our XXXX. the the consideration XX% accelerating the towards and of from quarter. flow committed coming free $X.X

totaled XXXX, performance As obligations XX, of our September $XXX.X million. remaining

global As macro challenging. Shlomi remains overall the environment noted,

rates biggest and remains renewal them our JFrog companies secure to scalable. proud high that remain more make I'm to of more some to more the say and efficient, world's However, high, turning usage are

the economy role supply do so to consistent see challenges we'll working remain guidance these our We global implemented navigate opportunities faced the initiatives, some by software have methodology, balance and savings times. the as forward we and the with expand uncertain in continue macro to JFrog's already cost we chain. to We

million For to QX, approximately operating $X.XX, million and million, shares. XXX share we of $X.XX million expect non-GAAP non-GAAP $XX.X $X $X million revenue count per earnings between with a assuming to be diluted share and $XX.X profit of to

For a share million. per and expected and million current for with non-GAAP to on assuming and $X.XX, XXX income we shares. fiscal range $XXX and XXXX the $X of anticipate $X.XX this the We Non-GAAP created XXXX, guided by diluted of is operating approximately commitment. we'll continue environment, even to full count and levels between million earnings $X share execute $XXX be a to the breakeven of headwinds between year million million

Now call closing let the Shlomi? take some remarks your me turn back Shlomi to before for we questions.

Shlomi Ben Haim

Thank you, Jacob.

team platform. As walk drive their IoT proud to to innovations. ground security I'm our FROG Thank attendance alongside and this thank your the digital the checking take with we'll customers you now driving adopt may our modern I'm I'd like be and team. We and partnering wrapping forward honored for you. be solution my Operator? transformation your look to up, questions. to with to And DevOps today with a all happy and

Operator

Thank you, from take Cikos, Mike sir. Needham & our [Operator to Company. Instructions] We're going first question

Mike Cikos

taking guys, know of regarding wanted guys you're environment. the Hi hey, questions thanks to immune. you circle on up And I commentary macroeconomic that here. the for the not are saying, I some

they versus seeing delays? ago we be We it we help Any quarter how last where last us and additional caught I about were months that know color what cycles calling worse getting sales out different of extensions, up. called or your helpful? these the still process approvals last would budget three sales, Can are geographies versus we spreading is there factors quarter? think are were to we you out when longer some these had cycles,

Jacob Shulman

will take Hi Mike, this is Jacob. this I question.

comparable So We time, see comparable currency. last by driven overall, Europe this see did slightly to in weakness partially more quarter. cycles pretty we stronger sales also

to strong longer see any don't in think to makes commit we seen significant project. customers But a our overall, of customers the dollars, in before our dollar lag. are that and As changes Europe kind sales cycle bit you U.S. which in they know, we've

Mike Cikos

can two remarks called about most are for the are any guys front? there been in I you that. change was bumping prepared curious, competitive in competitive us had on here, Thank I common the I Has think against? if And those who you when a squeeze seeing just out, just it could you that you and there, know quarter maybe versus the out help Nexus you're Sonatype competitors displacement but believe up

Shlomi Ben Haim

this this Mike, hi question. Shlomi, is take Yes,

of some and So obtained yes, we deal this the large we that mentioned displaced taxes. that quarter

full of holistic In the on terms that binaries. focused platform is

JFrog the But platform competition we of capabilities, sends that world different static break to and in see there. developers if competes think we security. see first, the point on area and you security, less I solutions obviously, the some analysis

are But the that in to and trying see management, we your see and focusing what the is vendor manage support. package it's obviously, edge, secure binaries the the there get to software full some technologies are any your platform emerging a solution some package of that this homegrown that distribution into also more terms market. binary chain, of front the supply the provide solutions they very On on are limited and universality are the and we the we binaries that at replacing don't

Operator

Next up, Reback, we'll from hear Stifel. Brad

Brad Reback

optimization quarter? XQ was to your convert SaaS September confined standpoint very that product here the or into thanks that pretty Great, your Jacob, the much on much. commentary on will from

Jacob Shulman

expansion with and to SaaS introduce rapidly. when initiated customers' growth us. we as those. customers baseline present reiterated business at cloud really in opportunities you use gradually for know, believe It We've upside We potential from We our that kind to our new changes. grow continue still of to those depends capabilities additional for will continue mid-fifties Brad, seen introducing sales

will that grow confident continue cloud to our we're rapidly. So

Brad Reback

XX% still pretty historically? ability And your you've That's growth, talked do to great. feel sustain good as organic about then about you Shlomi,

Shlomi Ben Haim

Yes.

Brad Reback

much. very thanks Perfect,

Operator

today Kingsley Our comes next Canaccord. Crane, question from

Kingsley Crane

my for question. thanks Hi taking

held quite sensitive your So nature how overall, want in nicely. the think platform more makes to to do your have rationalization appears you do defensible? platform And a business of your to I just it you cost take up general? think back, step is

Jacob Shulman

you can repeat Kingsley, Hi question? please the

Kingsley Crane

of sensitive Yes, platform, something think for do you cost to or it the makes your like a nature more platform versus example. so is you your do rationalization? monitoring how defensible think - do you platform think And

Jacob Shulman

Yes, I'll in. Shlomi take to feel free and please chime then

lot First of all, of we a provide to value our customers.

is helps delivery efficiencies it many mission-critical the despite from be may platform tool platform because on our we and still customers is trying improve need our delivery that to streamlining expand some the significant software fact to of process, Therefore, of them to significantly utilize optimization for value effort they significant generate believe there that customers. Our processes. usage for the SaaS, software

Shlomi Ben Haim

platform point from centralized the we that is are consider supply one to regarding around they that solution solution is hear that into think looking well, our Yes, I the what the software chain. customers

fact managed set. migration is is the you very essential Chief and way what you secure solution edge. at is decision plus latest phase, infrastructure Software our solution appealing, and what about release supply Security of as customer every it's what you from being Event speak that this our to the you is so that's find of We asked part the this development provide and the in is the Customers promote, of of region through the almost binaries, the every on cloud an the taken cloud release when what on-prem all this actually with portability essential with JFrog in binaries chain the take to this becoming you an the Connect. deployment the distribute, available that with customers

Kingsley Crane

your want can you, large other deals just process in did really Connect customer you Really going one And learn that that's gauge demand? help helpful. deal. be forward? talk how about overall thank you would to more I And What would follow-up the with

Jacob Shulman

X-ray, using Artifactory all edge. secure take them take very to that binaries after the very, the of defense European to in our Yes well, And in a to Artifactory we binaries, decided project in militaries, X-ray excited the see we Connect all one way the to the large project, to the to JFrog leap the and something is that announced platform. QX addition were to

in the became is as the future, the be developer past, that we the of in task, the part will security over the deployment future. of update developer's said part And over-the-air know edge edge, to the update we Software desk.

able as that that And change. provides platform, part in is this of this market, currently, the is combat vehicle the a is building as big deploy So the to JFrog the over capability. update platform running being big, year only our

Kingsley Crane

thank very you. helpful, Okay

Operator

next from question today Morgan comes Guan, Bob Our Stanley.

Bob Guan

This in Sanjit. is Hi, Bob filling for

Just have for starters, just product go-to-market product or to invest Do to your think do strategy. sales you security security teams have it? about change the teams specialist in to think your way additional or you your adopted motion or that about to to really have is

Shlomi Ben Haim

you, good for Security and released. Advanced also demand the excitement Yes, a that a what from It's we've see supply it really And unique market think your very what way And few that was and that's binary, weeks only question. high JFrog is Thank But around the unique. a the because is of the Bob. to which shows released it's software the have manage is just very with because focused interest we chain. control we technology comes platform. it's why about unique to the is the it on ago.

you on point holistic your a focus with in with and delivery not solution solution So so together process, the on. the full end-to-end software but capability distribution repository that one the that registry, need

see top to you investing our our that's of, that on and line pricing security the our at we terms we introduced new In updated page two will will Advanced in, core. includes and more product the DevOps and as a go-to-market, JFrog packages of on keep top security that capabilities more of evolution new in the of

understand question side, side, security for the embedded and the experts into idea only solution domain, full the is obviously, only in the we play. full have the of are to a that platform but and the what also engineers how a force, solving having Regarding we but the pain and of requires not sales is this solution architect sales on customers, not the people our

to yes the sales So the answer platform the the market. technology, full go-to-market three is aspects, the and the on and

Bob Guan

helpful. That's Okay. really

that Advanced that to a Security, Security on Security. is much $XXX question the $XXX say, adopt let's Advanced pricing. the customer spending follow-up to go they if DevOps of today, Advanced go would much of a Just If, Like were how about current how that? towards would

Shlomi Ben Haim

and the and So the volume our phase Advanced currently, And monthly players, binary. mind more this and the how introductory customers, two customer scan that customers just Therefore $X,XXX it's their subscriptions. we're -- launched weeks to usage-based customers Security you pricing use We is model increased month. a it's platform ago. keep would their in business dependent use methodology saw that that per to on obviously, -- price about in it's patterns. just of learning to and still customized and the

the Security of we our So maybe But to a definitely too Advanced time regarding the impact Advanced the things and A, are go-to-market that way the I soon believe value would for over to tell immediate exactly the be needs with will distribution. mentioned will the of what it's Jacob on technology build Security. emphasize customers' we customers. what we on up be significant driver two follow our the revenues. aligning

So their per artifact scans we scanning. binary are only charging

Security, capabilities security it or call consumption and cloud installation. important, JFrog will installation several whether and Jacob of the in replace features the Advanced B, point the that And earnings As on-prem an this solutions. in be model it's very we mentioned, some a mentioned is

of about you flow. displacements but So spend, just the about security think supply chain across the one you think many software developer can not dollar tool if

Operator

Instructions] We'll now JPMorgan. Bora, to Pinjalim go [Operator

Pinjalim Bora

enterprise the for with used on the kind pricing We the of X. it question. to Security on question questions. Congrats optional Previously, noticed taking staying be Advanced Thanks on I folded the the Great. One that believe, you optional. call. x-ray price,

change for not. some have now? that impact if like be they higher when that helpful. a there pricing existing Maybe would they Is Now would it's choose it customers seems come for customers new a to color how

Jacob Shulman

Yes.

Pinjalim, question. I'll So take this

we self-managed second mandatory made If XXXX, and enterprise ago. ex-subscription subscription Effective extra customers, mandatory. call already time for some you of quarter made eliminated enterprise we

enterprise. every x-ray And the included portion mandatory much pretty Enterprise self-managed in has today subscription. obviously, is extra of So customer also

have Security rise cloud, enterprise x-ray. x-ray business, adjustment Typically, enterprise our -- significant Therefore, base structure we also package. to customers security those And requires would our capabilities. made Advanced it therefore, Security for a X use make has we only who on sale back. who these the utilize And a event and and the our customers to see capabilities. the business. impact On subscription slight Now that Advanced utilizing to have ability be on volumes doesn't that we customers, see exceed our customers customers any therefore, Plus

Pinjalim Bora

see. I Understood.

optimization customers that to cloud impact in quantify that made? that? way you to is the QX? Any Okay. possible quantify was thought And adjustments it What that

Jacob Shulman

who it's on customers happening Again, primarily business model. pay-as-you-go to

you have Overall, know, annual we annual a groups minimum see and continues both grow. commitment that As our to usage pay-go customers commitment.

customers optimization but we it's understand each reason the of customers their and basic really sometimes the volatility for talk can because hard how And us future customers comes period-to-period. see projects because volatility It's QX. the quantify of to -- expand that. better and this that to volatile different some did also be Now we from some quantify noted timing as we to during we result initiatives of to the a doing we know could that, plans hard of them, is exactly that and

Operator

Our next Blair. Jason is Ader, William question

Jason Ader

provide you're guys something you about? on did to that Or Jacob, view XXXX? an initial talk is willing

Jacob Shulman

not No, guidance any currently for XXXX. we providing

We we immune of we see and not said new introduced within opportunities a macroeconomic to capabilities on continue lot and As existing of we're ahead Shlomi filled that for customers. still, on-prem. us earnings. grow noted, But and we environment, cloud

XXXX. So not guide therefore, ready we're to for

Jason Ader

Okay.

So you're wait basically. to till next going quarter,

Jacob Shulman

Yes.

Jason Ader

Shlomi, motions the And an the have how to areas the downside? IPO? you, maybe on you for have these give go-to-market since can that us then upside update your any evolved are or there And surprised Okay. and you

Shlomi Ben Haim

go-to-market scale Yes. follows, Jason, we in the market terms reinforce enterprises, expectations. the consistent more of very the capabilities we've supports have as the to and been adding platform. of to Today, and level biggest JFrog our world's and with

over allow that needed, operational if but IoT the on the the adding some and not on that that see very aligned number million, decision only the support the to this still special adoption $XXX,XXX of the level. Obviously, right And front, acquisition the of the platform we the bring with acquisition. with Vdoo So the on-prem also encourage value see workloads at All technology the taking us enterprise we on the have see together $X migrate customers leads of us methodology market. is and you what that. go-to-market over instances, that the to with in together you front, of the with around in at services what front, cloud services DevOps and hybrid the the also that customers Upswift the enterprise security number the most numbers, comes are number much we really

Jason Ader

channel you? you become cloud significant about that talked a more marketplace, for And does

Shlomi Ben Haim

Yes.

the a clouds. we co-marketing So lot co-sale invest with all in and together

clouds, and great with We to also philosophy that some major we The high the regulation need relationship expand very big and have decisions. follow organizations that. find a demand of multi-cloud strategy from

obviously to cloud, the with higher having marketplace, and new private grow So collaboration at on with offer this having co-selling volume ability customers. increase in to our land customers our this the

Jacob Shulman

that, large largest of to the marketplace. it's just work deals with customer commitment providers, those through when have therefore, in cloud, we may cloud after deals. this and add to we for easier to It's If Jason, to majority our they cloud came marketplace it's close us to much together work

Jason Ader

Got they economics when better cloud you through the direct? the you. for are versus selling go marketplaces unit And

Jacob Shulman

better, is yes, Economics Unit correct.

Operator

KeyBanc will We hear now Turits, Capital from Markets. Michael

Unidentified Analyst

increased last kind cycles called -- for headwinds just is like I of to macro longer about you these quarter, so out deal Billy want and approval This on layers. Michael. ask similar

Just if any deals this selling your increased Thanks. of scrutiny. to now kind how changes approaches sales team or made your see you counter want to motion to

Jacob Shulman

some our proactive, the to Yes, even customers of it knowing many their plans to we're better cloud. projects work the longer deal. -- We customers becoming may partners take earlier. for the that help them obviously to migration more and from them with like We to to -- work with cloud maybe accelerate closely the our sometimes contact close understand alliances

Shlomi Ben Haim

Michael, may add to if I it.

with different a see one. full And that preparing scalable of displace that a comes themselves good other in few that platform, very story, consolidating into is what solution JFrog end a is we part a will that a chance you platform, when it robust, vendors. The side recession of hybrid come also to is the there platform market with a also is

with as are planning, So we proactive mentioned, we are Jacob going that.

that tell a technology from side, also story but the side. solution to great think I from we have just not the end-to-end

Operator

now to Rob go We Owens, Piper Sandler.

Ethan Weeks

quarters. Looks plus quarter-over-quarter a Hi, like I to as thanks on wanted to to up we've period to is in customers broader up couple are the it levels? move strong was revenue. this what curious Thanks. mix past Rob you or of just Weeks tailwinds really Owens. these quarter, guys This of consolidation XX%, seen more for Ethan capabilities compared compared increase historical Advanced taking ask quarter some a are percent my seeing Security questions. some enterprise big if I'm of for the about

Jacob Shulman

question. continued growth, we're to reason solution in I'm adoption class and encouraged that for The this take end-to-end growth happy this platform will growth, very our is see capabilities. I by our enterprise of

flow to not customers side just software the our enough distribution more see platform achieve this many They take efficient capabilities all them the development the the utilize to and be to Therefore, it's from we full developer Specifically, market. the for software. them customers to to on developer the adopting that. that market. - help And side DevOps way more of need to realize

distribution and launched be only, the We we available will in for XXXX. capabilities, available it so self-hosted also primary Advanced adoption become far, for plus will see of continue on Security early that again, to platform customers customers. that enterprise reason cloud the for

Security end-to-end see, by today just just we far is not these practices capabilities. DevOps the that they're with early numbers offered company JFrog launched of And Advanced impacted JFrog. solution so in you because continuous offer QX. only by It the adoption So,

Ethan Weeks

Got it. Thanks. quarter? to did performance going the the the your And That I of see? into Federal makes compared a trend as did lot you curious, of the in U.S. what quarter, it follow-up, how expectations a then sense. And was just

Jacob Shulman

relatively federal are material changes U.S. businesses because Our it's. significant so and just we haven't far, any seen

Operator

We'll Cikos to Instructions] for go Mike next a follow-up. [Operator

Mike Cikos

to of have here, letting would try the some to pay-as-you-go we're of take can me how be Thanks this those better like the to these you about base brush help current versus environment. us their minimum think macro helpful. behavior revenue helpful a pay-as-you-go? want uses broad about percentage the get those your guys. stab. another annual or of thinking customers people customers your customer think are on volatility Hi back I the Maybe just in here. when but did start feel currently spend and strokes that that it to color for customer might really would help just I commitments. for adjust trying Maybe there Any or utilizing percentage be

Jacob Shulman

of our Yes. business. Today, pay-as-you-go, it's one-third SaaS about

SaaS the pay-as-you-go, our to be level a a typical when capabilities majority they continue So a reach small they use of annual, journey would lands business customer and transition use. that's usage when typically the understand platform is of customer certain on some annual they they and to can and would annual commitment because because commitment, already that see of and because get they price minimum value the capabilities what B, the discounts

grow. this could joining new adopting more spent of see despite annual the a pay-as-you-go, to optimizing, group, continue a continue volatile some customers commitment. we to cetera. the Each these grow, customers as et be we're during and again we is overall project, it of this trend the as be the to So them continue transitioned timing of customer as group But capabilities, result group that of see customers that of on the have up, could they minimum more fact to encouraged cloud quarter and to

Shlomi Ben Haim

Jacob natural cloud the Plus mentioned Mike, is what the fact, flow. that

with trend to solution the are to on-prem that, services immediately beginning. contract familiar platform, way and already all will of the end cloud, with the and customers doing they from cloud. a the they technology while see using the the also And an our and to migrating start migrating are are the We these on that annual already usually, familiar not

Operator

Kidron, we'll up, Ittai hear Oppenheimer. Next from

Ittai Kidron

Thanks. questions A of me. from couple

tick gross the on First quarter-over-quarter mix higher. your up margin. did even is cloud It though

walk Jacob, through kind of bit So that that? a maybe behind what's little us

Shlomi Ben Haim

cost-saving of evolving to effort efficiency continued cloud, our initiatives some operating process. improve That's operation which

be to our to We on for business margins during better continue reason to our SaaS that. the cloud quarter. overall that's improved our do for because And be the margins

Ittai Kidron

Good.

should margin not the in we mix. up cloud future as in Good. So any goes assume deterioration gross

Shlomi Ben Haim

long XX% trend immediate our we the portion see Still to the expect this corporate the in go gross of remarks, to low over periods margins bigger SaaS as the margins business areas our and Meanwhile, margins. Therefore, churn time. stay gross we a than SaaS prepared lower for future. XX% between to over in will said business

Ittai Kidron

is comes about think lower higher? about like what it know up renewal to cohort second year. there you talk of though, regarding average know could or that? Are from got and your puts think going on fiscal to base to a And Then question takes, be any we I substantially do or you Is big maybe Maybe you for don't I Jason right. tried about what 'XX. comes as talk 'XX. color All us Okay. and we 'XX. standpoint, could keep to in kind in up. that how how some be about want mind get renewal

Jacob Shulman

Yes.

that is above So SaaS for and contract slightly the on year. about business a is majority one-third annual self-managed XX% our annual of the our of monthly, about annual business SaaS of two-thirds is not business is rest annual, the

see continue significant encouraged continue strong, minimal. to we to So We're every very historical Churn, do renewal be base renewals that again, to levels. to the comparable year. see

We have very sticky products.

continues much than to grow cloud self-managed. Our faster

We will XXXX to introduce capabilities area. self-managed new security in solutions

strong. So we year entering the very

Shlomi Ben Haim

investing when take bet this we looking keep something it. platform or you security infrastructure, infrastructure betting those JFrog, is this the not as will year, I decision. in create I'll infrastructure, This working they Therefore, our on and on that Shlomi those station. on-prem. the cloud the year, are set probably JFrog who infrastructure, something that DevOps, chose here, essential at individual you are who as company machine. on essential up their renewed at This know on long run customers but what an that is a usually, believe add a that company, on you they long we looking developer When they thing one matter not the no to replace

Ittai Kidron

have environment, All made, maybe When negative right, an of I can about probably be do are departments trying on expand your just to in as there's systems on it evaluate little right. risk Shlomi think and as little and another what a current IT distress, I year Well, keep that possible and later. financial this, they of to not then for take bit. argument times side is the the on

to enables On customers and the platform side, consolidate now multiple create flip your savings. points

challenging. net think couple deck neither you on environment more here of push you in it perhaps nor net or there, negative pull this on bit but stacked over get do here, is positive with your we'd quarters next the So love how macro for the situation the or Is the and out a to this. perspective

Shlomi Ben Haim

something And connect software understand -- the aside supply That's much a look there we by to should one putting your only that you Parliament world house way speaking Regulation start how software macro JFrog, instruction security, too what with economy, supply reward advanced in and protect is XXXX coming is articulated the software very of that fully analysis in supply chain white good it's from and is at the is a chain the for you the see about to protecting chain. your security. the it. British when from being binary. without It's of the suffered the not XXXX holes already moment

organization, So will have the will that I at And legacy a JFrog three. don't have think They over all are not think the answers choice. consolidation their security have of look get really will control actually to security upgrade I to enterprise They They that customers what of solutions. have solution. boundaries. to

small security solution the subtle So in are a our any software offering. of other are or vendors the world best data, the more the of platform some XXXX. feature of strong expecting one not released that coming a yes, to the point and solution teams with some and or DevOp here or consolidation zero-day in supply we world in offer than or vendor the very solution having it adoption research updated growth database by chain see venerability, the in We a security there a I'm most

security So with depository what comes we that for very around security, well. we positive are only building, a but are as not

Ittai Kidron

insight are Maybe then that this really one, show if and that in trying to asking great don't you code to in that code, I specific have level up of show will clearly but binaries. I'm will think just a I'm not don't. on security Okay. binaries know may, the specific that to this, because and point the how threats only is repositories Are there threat up I Shlomi vantage answer. last to

picked there is what up are that there be code cannot binaries threats So scanning. with that unique normal about

Shlomi Ben Haim

binaries earnings know the data I you software and world -- where you meta love to no need tell that is comes the there is this flowing and is a package static the question. an no What that There supply if I chain. short can will try protect is also everything call to way. defenses because developer about to. in social your analysis with with and make you will that this security,

it. for the example, also LogXj, in only It's with take, not it's all that all finding the for you all build If deployment environment finding the developers zero patients dependencies LogXj.

of it's control. control, on actually on JFrog with of your top single it, not and Artifactory, are data Advanced vehicle So running with you source Security best you that you the just

impossible different fields, different look the where is And be also the teams, all [indiscernible] ability You that are environment. binaries with have to at the to all different in done in all dependencies all in

Operator

time, remarks. this no I'll there further additional closing are at or for hand any back things questions. to Everyone management

Shlomi Ben Haim

for us call. joining QX everyone, to Thank earnings our you,

the excited very Thank Frog done. has about everyone. you, progress be the company with And the are you. may We

Operator

today's conclude your conference. We to today. does you That participation for would all thank like

disconnect. You may now

JFrog (FROG) 3 Nov 222022 Q3 Earnings call transcript