Earnings call transcript Q4 2022

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Operator

Ladies and gentlemen, thank you for joining us and welcome to JFrog's Fourth Quarter and Fiscal 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 fourth quarter and full year fiscal 2022 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.

provisions may under related are XXXX, Federal to and Safe of we that our made year including call, Securities full our the forward-looking Private outlook our are Securities Harbor performance, statements this related make Act future to statements business pursuant Litigation to During Reform the financial of including of XXXX. laws QX and for

forward-looking are statements continue, believe, expect, will intended estimate, future to expressions identify similar The words anticipate, expectations. or and intend, of indications similar

are undue You views reliance these forward-looking subsequent and cautioned of not any as our reflect on date. not to of as place statements, only today which

revision new subject to not events. materially Please ourselves uncertainties from the expectations. our are to to keep information These cause statements statements of revise differ variety any that release results these light in or could mind in actual forward-looking we future of are and risks obligating public a of that results to

SEC For most actual results, risks a our for to the Form our XXst, filed could refer the with and factors XX-K on that XX-Q, Investor XXXX, discussion other today. ended recent please affect is December and XXXX, Form the important the on our Relations available release report of on website of issued year earlier XXth, which section and February press our earnings material

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

to, as measures. from, of considered which in or measures financial this a are as Additionally, substitute JFrog's, conference GAAP measure not will addition for non-GAAP call. measures, on be discussed should in performance, non-GAAP financial used be isolation These

be most our earnings will Please refer reconciliation of on their Relations of limited website financial for release those time. the comparable a for the this Investor GAAP measures. call to replay available JFrog measures tables A directly a to in

call the Haim, Shlomi to over Ben to JFrog like Shlomi? I'd turn that, With CEO,

Shlomi Ben Haim

call. to our Good with Thank that I'm the and ended happy macro you, the we guidance to thank Jeff. a perspective with and moderated you in from geopolitical growth XXXX with despite year in the range all the or report XXXX line year joining challenging market. afternoon economic annual results for IT you fiscal

Nevertheless, wrapping see DevOps, non-GAAP security the communicated and among range, only EPS our than happy the IT line with performed of our guidance I'm range software, exceeded well to in cloud up not resilient QX. QX growth revenue the remained in JFrog but computing with XX% also to $X.XX, breakeven projects. more year-over-year with commitment we of most double

solutions, growth end-to-end business, full digital included transformation. our growth DevSecOps our of by software customers in advanced higher and who subscribe more landing ASP powered DevOps XXXX the significant cloud with customers and that supply hyper to platform, number chain invested the in in

fiscal revenue as was DevSecOps up the the choosing in X,XXX XXXX, customers over to JFrog year, the prior X,XXX year finished XX% of partner the For with year-over-year. us and year DevOps compared $XXX choice. million,

on more elaborate fourth quarter to now our me results. Allow

XX% fourth XXXX growth. million, Our was quarter reflecting revenue $XX.X year-over-year

delivered revenues continued cloud $XX.X XX% increasing million Our year-over-year. momentum equaling and

multi-cloud in in subscriptions ongoing quarter environments. increases platform as growth continued and was well migration JFrog by Our end-to-end customers the as to driven hybrid

Customers grew up to previous with the Customers XX% and XX increasing increased in year-over-year. to quarter previous XX, XXX ARR with quarter, $XXX,XXX in million compared up over ARR from XXX $X over the to year-over-year. XX%

on we the of calls, result, market market are it, the how to business, security alongside opportunities continue capture the DevOps adjusting cost are pleased our we'll few and of We we we for light massive especially impacting update efficiency how share in growth dynamics weeks and are in last today's how this to ahead. the quarter. changes witnessed with macro-economic the latest On drive an

Let year and QX. the expansion specifically teams that three throughout in the customers acquisition me top start and drove expanding by on

overall by of First, end-to-end enterprise. adoption increasing showing consolidation the tooling our software platform, maturity and supply chain

Second, are platform. workflow the security solutions that integrated available a of as fully part DevOps for into growing demand full and

Third, migration and cloud and multi-cloud adoption.

Let's begin JFrog hybrid fully with our of for scope. end-to-end new by The growing the adoption need showcases scalable and the end-to-end complete existing customers platform integrated platform broad solutions.

platform serve approach to does continue Our momentum QX. in holistic

platform example, of as They world's highly available JFrog supports prior thousands efficiently payment hybrid Sonatype to scales developers. processing of solution of a records. solution the on companies most the recognizable of chose meet their over as needed For that one the completed standardization and environments a system Nexus, needs they JFrog the

In in and efficient DevOps replication system and chose EMEA the of presented large level their JFrog requirements another universality, enterprise lifecycle security, a full of to example, Due binary between management, complexity, scale, as leading for sites. records. they integrated commercial development high bank distribution

advanced JFrog within Already coverage for management this management, their software supply to utilizing chain complete GitLab security. software and supply source chain to for bank binary solution turned code

We a saw platform complete in this and both supply as only for not but XXXX consolidation key a perspective, or us theme telling technology software from standardization DevSecOps, are and DevOps that XXXX throughout management. trend for business chain customers will be

of mid-October, JFrog In DevOps-centric first industry Second, introducing Security to an our the tools launched Advanced set security advanced we as solution. security pillar. disruptive

initial expand subscriptions, and we excited this who customers advantage to these Advanced taking were build quickly see capabilities. to continue JFrog we purchase of While Security offering,

facto believe the in the past beginning JFrog powered over holistic to into solution DevOps, drive adoption the best-of-breed base with We few single management, standard attract bear software years and database install combined our investment security our among strongly platform is by a in meaningful JFrog will Artifactory, fruit. platform users. security new the package that and the de JFrog's of

being it that change reflective to security nearly don't is software discovering embedded we finding are in This security issues. secure chain, and binaries the across they and saw of the assets the their companies in XXXX impossible remediate organization, they supply secure the of if and control sea software

automated, We Security Advanced technology software manages will less as solutions, set with Modern software legacy and remediate this to and package new requires understanding, that JFrog it is policy and intervention, mature. JFrog protect market this build displace human supply we security attracting continues security believe an organization's to dependencies, customers chain.

acquisition JFrog point since over In a that in has year just the security of half currently really our consolidate solutions Vdoo, a dozen market. capabilities can

who tooling DevOps the As some platform. source to comprehensive open single competitors tool looking for cobbled delivers consolidate stack are together a into market demands, DevSecOps the appeal JFrog to enterprises and solutions a to

security teams them why Let remediation them me released. share with fix vulnerabilities, analysis using are point that generate too not allowing prioritize inefficiently you on differentiate our contextual context. insecurity. all results, This Development requiring based to solutions we was to how many capability is

to development hours teams matters. on prioritize With JFrog Security, Advanced and what we safe focus allow

Security to detection Also, is that Advanced in and This in our binaries. and software important, why discovers they keys. into is hard want companies secrets as is no shipped coded where ensure access of code it inadvertent secrets both accidentally so or within secrets solution live included revealing

supply with JFrog helping by workloads, alone. is and source risk, impossible companies these solutions, entire efforts focus the teams covering decreasing holistic scanning code which software is chain, our and teams' alleviating development security

many subscription will approach upgrading this into We alongside that JFrog in incorporates XXXX, higher type, customers help drive existing in management. solution core believe security growth architect

digital investing defensible of end-to-end in surface. growing the most technology Security prioritize budgets as secure enterprises remain areas spend, their solutions to attack of one

For example, software to one turn most incorporate of QX, region's to security in the banks chain. the prominent Nordic across JFrog supply

enhance marketplace and Looking to Cloud with to partnered the streamline legacy bank's and displaced multi-cloud-based JFrog for a via Google on-premise solution their their posture they security operation, solutions.

once run most multiple France's JFrog recognizable they providers. to another build cloud securely for across security one software across luxury now In chain, example, saying the brands visibility of everywhere and complete QX turned supply could and

Looking get long-term, this what tools is and we thousands and They standardize control of the tools costs. are want security fall JFrog consolidate to from their illustrative their company associate to of of customers. hearing DevSecOps

We'll coupled proven JFrog R&D with security management more look cores supply and to keep innovation believe one is in XXXX. threats. antidote chain's binary investing our forward solutions to We supply modern security powerful security and holistic software end-to-end in advancement software chain security solution, in as of

our end be address to to cloud Cloud, business. continues and desired infrastructures want of companies. hybrid I many the state Now, multi-cloud,

tell customers effort often and their the enterprise with pace own that disruption cloud capabilities business. them a multi-year hybrid allow JFrog us to limited migrations time the at of to Our that are over move

we've such, pleased been to cloud growth types. subscription in the As throughout see all the business year across

consolidation the DevOps to cloud XXX chain In due JFrog's solutions. consolidate and multiple container JFrog to software on-premise and QX, class platform. of replaced bill immediate platform a manage across and from full brand tools their registry AWS the on offerings, $XXX,XXX need for Fortune universality, pharmacy and including existing chose supply DevSecOps need Cloud scalability, by software out-of-the-box to This JFrog's driven the ecosystem. was enterprise integrations one supply tools Google chain

our some in specifically us XXXX. tell Recent CIO security that be in may in analysts platforms surveys and validated customers form go while and over short-term multi-cloud annual expected XXXX, tightening, DevOps investment to are budgets by

close Plus ongoing customers' demand the preservation substantial we Enterprise consistent want to for of deals, overall and the with have I remains address enterprise amount solutions. able Next, rate to JFrog's the show challenges. macroeconomic robust, us that been historical win and JFrog trends,

business. pushouts growth sales in macroeconomic significantly the overall the the as elongated fourth However, such cycles increased customer impacting and our headwinds, quarter, of

customers' optimization witnessed a deal efforts in cloud usage. further During increase the month we in of and slowdown closing December,

As our C-level from deals in now customers XXXX we require This and that closed the the This evident saw growth and number our net environment. is in exercise caution impacted QX into fourth retention of uncertain rate this we quarter, sign-offs. the in quarter. budget that pushed

migration their evident strategies are who on-prem budget migration slower considering pending system in cloud their further pace, self-hosted further favor are a approvals. that at is of the customers It that expanding cloud to

solutions sets chain to see need We the supply these and chain and XXXX our value delivers continue Despite and XXXX in beyond, industry challenges, included outlook. in would standards believe DevOps security we unmatched supply this software forward for expect pattern them market. to continuing JFrog's to across platform and edge have software in the growing

we to our we in investments As we our years, while our prior see guidance. step delivering leverage still growth profitability us we share XXXX, within allowing into solutions will expand made in as have to topline opportunities

uncertain built to founded has across recession, solid in remains times. in well we and believe well-positioned equipped deliver decade, a was business and a JFrog a

turn XXXX. I'll that, the outlook results over you fiscal Shulman, year will our and provide QX of who in-depth Jacob an and both CFO, our for recap QX on to Jacob? financial update With call

Jacob Shulman

Thank good you, afternoon everyone. Shlomi and

year the XX% During full year-over-year. $XX.Xmillion, revenues XXXX, $XXX fourth revenues fiscal The were quarter, up XX% were year-over-year. million, total up

representing year-over-year, X% cloud revenues our business XXXX. in of ended customers revenues. continued at the $XX.X an with the million, up Expansion of year over XX% quarter of the X,XXX of customers, during XX% X,XXX with We increase the fourth total end

For fiscal equaled year revenue. XXXX, equaled our year-over-year up of $XXmillion, and XX% revenues XX% total cloud

We are our pleased with XXXX. quarter the year business the cloud fiscal growth during in and

headwinds have customer to which quarter relative seen of and results. optimization both impact we However, macroeconomic impacted expansion from our fourth an expectations,

our minimum annual In of to quarter, higher it the than more expected commitments. cloud business, is annual The was our to and fourth visibility our commitment over impacted beneficial transition customers provide reduces to usage long-term. pay-as-you-go volatility, by transition the

negatively our it volume the short-term, based quarter growth the impacted discounts in due size. to on in revenue commitment However,

Self-managed were during year-over-year quarter. up $XX XX% on-prem the revenues million, fourth

compared For revenues XX% year the full to self-managed year. prior increased XXXX,

trailing quarters retention a points macro of the decline XXX%, four headwinds. two dollar for to due Net was

Plus total be revenue XX%. of retention QX of up XX% continued from subscriptions, gross XX% XXXX. to Our Enterprise In at came in from QX of XXXX,

decrease let relative more Gross year revenues of compared million, to detail. XX.X%, XX.X% total. discuss margin was percentage as representing of profit period ago gross a gross statement in portion in high is the $XX to cloud income to in Now, the quarter of a the The ago year margin the in period. me a related

XX% will future and margins the total trend in over near revenues remain expect revenue. portion greater become a then low-XXs and gross towards We as between the cloud the long-term our XX% of

revenues, $XX.X $XX.X up fourth of the million ago orXX% in Operating was from of quarter expenses or million XX% the year revenues period. for

we as long-term. our million, and $X for around the to enterprise build by out channel relationships sequentially continue grew expenses operating Our sales

year QX in profit operating the million in margin operating period. or or an ago operating operating profit Non-GAAP of compared was $X.X X.X% $XX,XXX to X.X% margin

share to share earnings million million back quarter, prior average this weighted non-GAAP outstanding $X on compared per diluted net the of XXX per based shares turned a year in loss $X.XX $X.XX the to was as We profitability with approximately quarter of income quarter. in

$X.X XXXX. sheet September the to operations million XX, in $XXX from balance and in the Cash cash We year of as flow. cash Turning short-term and $XXX the million investments, from million ended was flow up with quarter.

long-term flow X% accelerating into coming We consideration XX% committed cash free towards CapEx, our remain $X.X years. margin. flow of or flow taking was margin free cash our to After cash the million free over target

performance As million. of totaled remaining $XXX.X obligations December XXXX, XXst, our

to like for quarter for now XXXX I'd outlook and speak full first the year. guidance about and our

Our headwinds ongoing and related in to mid-XXs. implies moving down strong to our of macroeconomic impact, growth expectations we cloud mid-XXs, for continued from optimization growth due XXXX see baseline But efforts the levels business. toward prior customer levels

the We to continue of our cloud as expansion our land more slow trend within new and self-hosted business with through customers expect XXXX, solutions. expand

to our deliver. the XXXX see And an fiscal to pricing roughly forecasted change pricing This therefore, will solutions value upcoming to align continue year, growth. customers. of by during We will increase $X self-hosted revenue in million implement increase usage the contribute our we better we the

a self-hosted JFrog releasing of be soon version supporting will we customers. Security, addition, our Advanced In

to and see our driver cloud-based of with introduction an self-hosted strong an are customers. to happy since engagement offering, as be We our expansion customer this opportunity see launch additional within

does increase of outlook business. any Our a as in seen anticipate have we loss not not churn, customer

an migration our impact will have retention the seen the cloud, net elongation which in of process short-term. We to levels customers'

to expansion a growth. cloud for catalyst term longer be business in Our continues our

cloud dynamics fiscal low-XXXs self-hosted the businesses ratio retention XXXX, for Given year net and of dollar XXXX. now be to we expect in our our in

R&D profitability committed, few to to sales in As made to and begin the XXXX expand returned we now marketing past we investments and as see beyond, we over opportunities have years. XXXX within leverage further in and and

our high-growth optimization efforts, cost to in XXXX, we management continue prior shifting the half resources about headcount being with of we second referenced cost and will efforts, Following opportunities disciplined growth.

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

$XXX operating diluted share For XXX approximately the full $X.XX to million expected and million of share million. million between anticipate be we $X.XX, of count $XXX year XXXX, per Non-GAAP assuming range shares. is $XX a million, $XX earnings to between and income of the non-GAAP to

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

Shlomi Ben Haim

chain digital transformation well-positioned in customers are our believe across headwinds, is we mission-critical you, Thank macroeconomic security base a face leading DevOps. geographies position verticals. customer We Jacob. our our built We in software complement industry we believe to have multiple diversified and supply as enterprise platform and capabilities the of

like we team. nights are As only my and are our on this not customers are to page thank turning and XXXX working transformation a make also innovating, take the we and X,XXX into turning catalysts. frogs leaping into sure digital XXXX, days Over I'd opportunity but to

and through the XXXX. navigate future the reimagine challenges macro We in

IoT. across community, industry the We the and Security, are customers, DevOps, committed to cores transform partners, with working and supply innovators software chain our to three our

take your happy now, Thank you your with all the and Operator? for questions. And to today be you. Frog attendance we'll made

Operator

first JPMorgan. Thank the of from line with you. comes [Operator question Pinjalim Instructions] Bora Your

is now open. Your line

Pinjalim Bora

attach what much the of this you an existing point. of than it general, fair rates you're of traction kind you're start questions. seems kind maybe taking And to motion? Maybe at can so the land to help of it's like Advanced for Is It in the a understand with Security you more seeing? assume expansion customers motion us kind thank there. side. some seeing Shlomi, Hey, initial

Jacob Shulman

could is Pinjalim, please. hard was quality the this hear of line, you to improve really question. your Jacob. It Pinjalim, if the

Pinjalim Bora

is Sorry, this better?

Shlomi Ben Haim

better. much Yes,

Pinjalim Bora

you're and ask the maybe motion? to about any rates labs Advanced if a existing seeing is or land I and that with you're not seeing wanted it customers attach Security Yes,

Shlomi Ben Haim

and in. Shlomi, free start I'll Jacob, chime feel is to Yes, Pinjalim. Hi, this

as last beginning, solution not on customers Advanced comprehensive was the platform you Xray, know Security, that So, and existing October year, our saw from of the early capabilities. from launched that Security we with full Artifactory only demand a but Advanced comes require

the with sense and are the features that some So, we enterprise. supply added chain security aligned to software make

purchased, cloud point spread we now of are and customers our have they the heard need reported Artifactory to and protect run solution solutions different as that that between to we need what Artifactory. a is consolidate comes solution Some the is some can and plan. They from solution. that our a this software is this Advanced and right And that on-prem, Security supply to chain, in. in need where left they And JFrog already

Jacob Shulman

terms half the Pinjalim, our to Advanced and customers, why of that's add-on attach in Xray. the capability, Xray So, Security about would have of customers access to rates be requires

So, the that Security. of Advanced be customers purchase would those can today group

first product. this just this Again, is of the weeks

find to product it it's first product. happy great first we're weeks we from expectations see just -- and in this this customers market. But have of We have the

Pinjalim Bora

Yes. Understood.

understand January? side, so with point that And December, not? guidance what in so derisked macro Just seen more the us or year trying down? and taking what Is you'd have Is time? this entering it to help how is the it you a the this On maybe seen step is at pipeline or you're room understand in in much that far there?

Shlomi Ben Haim

Yes.

macroeconomic did see weeks last accelerate bit of we headwinds So, of a in December. kind the few

Specifically, budgets. trying cloud we any do in meet budget the more optimization. allocations. see initial activity that of usage exceed room They kind customers don't increased to did their to have We see

approvals, which We push also was previously. because required out saw some deals not it additional required

and for first will took that the we we those So, into guidance see year in what quarter. full in continue and -- account XXXX, the dynamics, to believe that's our we

Pinjalim Bora

the I get back in queue. Understood. will Thanks.

Operator

Your Sanjit Stanley. line with next question Singh Morgan the from of comes

now is Your line open.

Sanjit Singh

want Thank bit little for outlook, follow-up taking Jacob. questions. the on more to a you I the

I of on deals? able pushed into understood you the early elongation been out have close wondering, well dynamics any those the of cycles. seeing, of But far January, to terms thus In was you're sales

from you'd of moving the customers in dynamic year. -- before terms monthly of to And mentioned pay-as-you-go, dynamics this this earlier annual, fiscal

the the think arrive for guidance is embedding get more And just year, So, how you we your sense of of how -- just to next where pronounced. about magnitude conservatism XXXX? more of you to for just as so are a you -- shift sort guidance specifically

Jacob Shulman

Yes.

That out, So, they're yet approvals. them require in approvals from customers closed we see through XXXX, waiting on working typically, been before of at the as their of because deals budgets closed, for end a are decisions customers purchasing their that with the kind of reason of haven't them of the and And plans. additional budgets the some going kind and at yet they were they're pushed budget lot their another year, was finalized. looking were

with to a the as pay-as-you-go today the portion represents cloud of commitments of regards Now, percent to overall our much customers transition, annual smaller our of pay-as-you-go portion. first all, business, a

with the entered being year cloud about cloud -- the business year We to pay-as-you-go. of the with business. business of pay-as-you-go about We the a quarter be exited third

better us transition better the us their of annual better roadmap. provides longer-term it's So, visibility, with with customer, the capabilities engagements with engagement customers forecasting helps to to because and kind create typically

pay optimization commitment know, expect go seen our customers from will as you you as that obviously from annual that We've transition We two angles. continue. to is coming

be increased how of weeks the we quarter. we the optimization, conservative -- data that. optimization. in approach have we of more storage done have the tried optimization. full in them do But try optimization, flexibility last of optimizations have we this for customers in transfer and One the quarter we And of, is transfer cautious the data therefore, already guidance will few storage, year. the The be terms last still few level to another to one, to just many And

Sanjit Singh

potential have in you, GitHub, of Understood. And announcing And like, for sort code. Amazon, the has others to of Microsoft, co-pilot question competitors, development least fashion. guess, production respond things I which a and at sort rapidly I of maybe accelerate for like then, Shlomi imagine you the Google, the some Microsoft will

sort And do continue and software know, think hand on of you release to GitHub the things the meaningfully? how like so this impacts sort of were of you of adoption accelerates when this this trend cycle, movement we side think of left co-pilot, AI

with how technologies? impact platform that DevOps if terms it within maybe the impacts us cycle, think JFrog the the on a of for can even onion sort market and you is peel these software of to new as release be of may do of, Artifactory how sort respect AI lifecycle, in evolving some the software What order based overall, you

Shlomi Ben Haim

copilot. code Sanjit, source Obviously, thank I the for into they is led a that GitHub something Yes, by question. think and, did the job good embedded AI is you, that management with

However, the this to source you most management, walked this of everything. once start do, power is of source automate you binaries. And your code, on code is you what for

is do And and to when the and intelligence of management a better a automation binaries, you binary security. of management management required required automate a order binaries, is AI artificial better better in of distribution,

capabilities included are next in distribution, of next our these build Generation how security. Some already generation we

legacy of released with Advanced capabilities automated. JFrog that tools solution that security the we are replacing Security Some in more solution far point are

challenging that it's Artifactory And say code to but easy automate power binaries is want -- source have The language. to impossible, machine don't I automate it's that are binaries. we almost to with

So I into to more and AI more embedded it embedded will question, code with into see that perfectly security will source management. AI go JFrog you your and think

Sanjit Singh

Shlomi. you, Thank Understand.

Operator

line Your Canaccord next comes from with Crane Kingsley the Genuity. question of

now is line open. Your

Kingsley Crane

taking for question. Thanks Hi. the

fiscal revenue then QX, growing guiding around QX around and XXXX believe you're exiting XXX%, growing around XX% and I So NRR. then XX%

I said the a kind the of know what just next little underlying bit guidance lower, curious, you for are but So year?

Jacob Shulman

we the XXX with weeks, expected and course year. XXX%. so of converge gradually year ended So the Natural retention the over we to

Kingsley Crane

and Okay. pricing Thank want on the just changes. also touch then you to

So the and provide any tailwind, of color this sounds more could $X just set like the would million this on it of then nature customers change? affect a

Jacob Shulman

customers. self-hosted our impacting only it's So

monetization based our on model know, you usage. cloud As is

monetization not But more the on and servers. utilize a in number impact does of it see customers on our business We relate solutions based that site. purchases. self-hosted do more self-hosted server is necessarily Our our

self-hosted that the in increase order a percent, they to small getting value And therefore, all in X% to we change better with price types subscription customer price X% across decided pay. the this on with, that make solutions. our to It's align

Kingsley Crane

Okay. Really you. helpful, Jacob, in I’ll hop thank back queue.

Operator

from next Bank question Ikedawith Koji comes of with Your line the of America.

is Your now line open.

Koji Ikedawith

Thanks for what, wanted kind the what up there. find needs the to more Hey, of upside Jacob. questions. taking color follow Shlomi. Hey, on that net revenue And on wanted out I environment, from the to that know, the levels? drive happen, there, you back XXXs, higher the a could low retention, customers out they're or product demand maybe to or that up perspective, way I Hey, revenue the to retention in net historical guys. from consuming maybe

Jacob Shulman

course, of Yes, our environment you as in the the than so, dollar of net know, higher expansion is our cloud customers corporate retention.

see of on-prem trends on for of upside we migration create the customers. also, adoption decelerate, what if customer So or the cloud that optimization could usage, our potential the usage that's of solution in the accelerate security customer cloud trend

we as the Security we're very Again, the happy capabilities. cloud -- Advanced our the with see prepared engagement in side with noted with -- we the remarks, customers for on

on-prem. for launch that to expect We

by our adoption the also will to certain -- for on-prem of capabilities customers these expectations. on-prem So, upside create

haven't of We on-prem, for potentially create Security tell. to that's we kind Advanced us yet launched soon could it's too -- upside. that And an why that's why

Shlomi Ben Haim

was Koji, the weeks customers that are that performing still in very dollar the were And of in you what pipeline cloud But they retention What think it was the if may pending is seen is approvals. few see last part pushed. could I I growth for the this the net on that in cloud the improving, same in to our we not is on process hold hand, on-prem that on-prem. currently we've are more that investing of XXXX high see results. of And obviously, and migrating add, budget the and

that that's move approval customers. to current concept And budget the proof of the the motivation to on obviously already workload already kind waiting still bigger our get volume on-prem an their in-between but of on-prem in So for period base, this successful to moving customers a installed the it's cloud, of final for to a completed express of migration, cloud.

Koji Ikeda

net here in should not and be how just does one question it business so for of follow-up as about of a guide. lot we you business business, a I may Thank the And to it. new kind if Got a retention assumptions imply mean, contribution the the that. thinking growth on new about thinking new XXXX? I revenue

Shlomi Ben Haim

at of the environment are capabilities obviously, new we the not new and customers are cloud are cloud majority looking on-prem, business capabilities, through also and deployment only we but So, are That's and very coming we and first environment. about that the adding companies have and fruit. the few a listen JFrog cloud small, that a enterprise that. development we happy mature already strategy a now set to years provide medium Well, the ago, bear solution more

If you are the with at value need that not a startup few it's developers, scale. necessarily you bring

new now to the So, we joined added new with that platform. and very are logos of and we upgraded pleased with we very are hundreds years The also pleased, customers. previous those that us in

more they cloud as customers one as security is move joining scale need next joining they see new joining and us us platform. the what more So, they us customers, we to capabilities under coming as

Koji Ikeda

for you taking Thank much so guys. Thanks, the questions.

Operator

the from with Cantor. Your next Jonathan comes line question Ruykhaver of

Your now line open. is

Jonathan Ruykhaver

Hey, Yes. guys.

higher fiscal for expected. profitability than much the So XXXX

But I'm see. Are you're expand, macro? business maybe in OpEx the see nice the you the growth headwinds, macro something topline that's headwinds and related sacrificing you achieving the your more the occurring too given given growth asking to confidence I side? topline? on just lower just is much that to to beyond is So guess maybe what what that's

number impacting opportunity just distribution as management I distribution with it around don't competition going different like low the you be repository that the be the to? or would as seems might bullishness, or the is security talk maybe changing, if expansion or approaches articulated you know, of Artifactory,

Jacob Shulman

Yes.

areas security the various in started see industry years, very few in is to have over invested continue the strong facto and in to be we standard last first Artifactory capabilities. the our investments fruit we from course So brand. the of de and obviously

also significant capabilities. our infrastructure around build R&D We go-to-market and

we So, feel bottom-line increase we've we that's and for we revenue comfortable of expect is targets to believe investments the in sufficient that the current level we achieve level done, that our because as why that of can us well, these investments

Shlomi Ben Haim

follow well doing was and I are plan profitability keep may to And we you And recession. performing KPI, before on you Jon, very will but of that this committed add, also pleased that. part exceeded to know JFrog, I'm we not in very our there. happy, see if we're JFrog the just

sacrificing This the But you're A, if asking very profitability, actually platform; we the question and for Continue, past this because is is no. year. invested main in And security. is your what three is B, important, We domains, for cloud; done answer are we've something?

I think the to with the are much also that that after we fruits And market. what and aligned of set from hear of very market the demand company go kind investments now, is this the

will our we take in of going after fruits So alongside XXXX. the the investment challenge profitability

Jonathan Ruykhaver

Okay. helpful. how I seeing be a you the positive, impacted you. artifacts question I those think would this the then Artifactory? for but might That's, does would And size, following have. Thank Code, container that that's Infrastructure -- potentially artifact usage, And be as just trends trends trends

Shlomi Ben Haim

for us invested adopting happy management and this in binary and methodology, in is Jacob as new gravity growing the supply see chain artifact the large enterprise of really and maker when world. And we are is Artifactory, center we mentioned, the to in kind very the of customers showing management. Yes, that standard what Artifactory it's are especially software

as for on you're just and the that then of top build of to Artifactory right ability are supply DevOps, the record became database the part software of control completing customers' Artifactory, and single companies, you adding the left the to Artifactory. full source When all platform capabilities chain, of the

seeing artifacts, So, capabilities. asset companies software demand from are from we is trying think customers in that primary chain same other it we're also the and develop also supply that the seeing to and still the it we're management

Jonathan Ruykhaver

Thank Okay. I you. had. That's all

Operator

line Needham. next Mike of the from question Your comes with Cikos

Your line is now open.

Mike Cikos

Yes, to expected calendar into SaaS thanks in taking as here I it Jacob how lot, is questions in some remarks of guys. of I'm at level on. mid-XXs, of Mike next the Hey, with year. this look is or the get focused what to course Cikos think, and growth has be been much baked out going are where the for a and said wanted circle back I questions derisked? your the And to get really the that over earlier we prepared to to trying conservatism me that is guidance XXXX

just about at the comps strong on that assumptions went that given help you think to feel arrive delivered really guys as a into understanding? from are but the you my to better be But rates, a up anything trying I'm your or growth calendar especially at And in that XXXX would us we mid-XXs, look against, XXXX. get in what can sales you growth beneficial guys sense,

Jacob Shulman

Yes.

to some conversions look came did this assumed for on-prem we the business see that know cloud. that delays, we in we'll experience delays And we that we and late number versus we QX, delays in we to continue as delays XXXX. part of the some of assumptions when from in Two, pipeline will annual is at the the and the some customers assume pay-as-you-go. at A overall to on we'll So look migrations conclusion, following commitments today minimum today

conservatism on some applied we for the pipeline conversion. So

did embed also minimum the significant commitment. top on we upside of usage And not

continue minimal the cloud optimize do usage, therefore upside their and expect potential customers we commitments. annual that So to above will their

Mike Cikos

I the contribution appreciate the That's for question that. another one great. XXXX of it for do And then me I customers? my from calendar was asked guess Koji, what's expected forget had through if I new about if was colleagues it really follow-up you, but here. you walking

I that calendar that probably only is look if at existing I question total think know my little But the bit to customers that annual count, more a on respect with -- the get an I we and versus different customer a growing would here. strip because some grew have customers you out if the been churn year-to-year XX%, calendar XXXX But guys it calendar in X% that XXXX. But set couple I XX% XXXX, products. basis. in of

And if a is customers is in so rate, years? aren't at the those existing base growing how to you're customer continue as or the when that thinking customers, previous ability question at is, rapid been had that forecasting have slower here, if they the you're grow I growing a to clip ability that about impacting

Shlomi Ben Haim

JFrog Yes, all, first in new logos and Well, to question, Mike, we you. three thank added I'll take years, the portfolio. this X,XXX, of past

with later. join more new We strategy, JFrog cloud navigate and fact and customers more that are first our not cloud also migrating the to first the in happy

point. adding are we thing, capabilities, third a the lending see And we and from the growing ASP

There And So customers of as start of you expected. building our more are guys is adoption you a the level since new thousands add growth the capabilities. higher. when watching with prices still, we and entry we I hundreds year platform see it,

need they scale. ready in answer coverage, are chain serious the These supply software solution. meaning remember that not proof-of-concept software adopting that mature the to please to a are And And supply Koji. a are chain they of companies

And that lending ASP comes see scalability. higher a for a to platform build This one one that. of build enable the as we the point. reasons on we also we that is comprehensive So solution

Mike Cikos

guys. you Thank Terrific.

Operator

next of Oppenheimer. Kidron question the with Ittai from comes Your line

Your open. line is now

Ittai Kidron

the there, the couple of Thanks, the first worse the guys. January things all, Shlomi elongation same was if things of for about Couple A you macro that? of than cell cycles. me, December, on of on front talk and can

can related And enterprise any North more to or give customer us of on then there you Europe, Asia, is commercial? second color type America, that, regions

Shlomi Ben Haim

Thank Ittai. you, Yes.

it quarter, early too December in is of speak seeing. we've on week is in January. actively this the it's seen we keep But we consideration previous And tell it we can about a took for the outlook. bought that you pattern So kind last specifically, me what why our I when of that set and to into

just between chain software between but how geopolitical geographies adapt differences not in Europe, how because difference We that of supply adopt geographies situation they the in some cloud. see and they

and legacy pace beginning public start but industry APAC to migration vectors at So the obviously, cloud is we at adopting still the see DevOps. leading cloud, in to platform EMEA big solutions, with America is move they really the a are following, North of the of slower with basics

second saying is The is and chain this why agenda is software CIO should for we on of were the not lounge see more Advanced security, especially House for part JFrog is North year. having every of part XXXX in very regulation specifically, focused that after this and that America, thing later be supply the we Security this White security, that XXXX. And

trend, be that, still in level North But top seeing more of I So, this. alongside will sea see America, And CISOs the signups process keep we this elongated CIO that the in happen. and list. cloud growth assume we security still will will line will

Ittai Kidron

Okay. the you And up before. maybe more following specifically, related on mean, had advanced clarify then to Security changes I pricing and security? Advanced Xray you can Security

buy pricing? Advanced how what to your introduction Security the it? pricing scheme affect So did of that and customers How did

Shlomi Ben Haim

Yes.

remember, as a Xray tool is that protects Artifactory. you Xray, So

to What done Artifactory source have it Xray from repository You truth. you added protected. Advanced JFrog of is we is your that with And of sits single protect to capability you code, how your code how right you analysis, left you how detection environment, right how security, development you and Artifactory. protect means container environment, static your analysis. runtime your your mean, protect then binary Security is sure we have on make top that contextual Left secret protect protect and source your

security the current Artifactory. Xray JFrog Advanced software is protect of pool price on of your basically, current focuses chain. So on subscription, the the that is supply the top for which is, Security part subscription

Artifactory Artifactory, which production the more $X of and Now Artifactory, billion left over is to environments. spend a time to billion right around and we speaking power dollar on of security at and are right developers left on looking

very Security JFrog in are bring excited can addition to what we So Advanced about our business.

Ittai Kidron

Okay.

About prepared of I they're mentioned that remarks don't Jacob, that have you clarify to I think customers already the just slowly So Advanced remember XX% are that. Security.

quarter of in this of or we've paid it just customers extra for half yet. are seems a such almost incremental paying an solution two, a rapid your already, So, adoption

that me the material of to way any into a move deed didn't two? meaningful has impact numbers Your suggest kind helped reconcile

Jacob Shulman

already our Advanced of is what This Xray. said we think that I not Yes, have Security. is that customers XX%

Ittai Kidron

Got it.

Jacob Shulman

on an of superior is upgrade requires Security a more that, subscription. to Advanced and top

Ittai Kidron

it. have how that/ Got percent what of customers And your

Jacob Shulman

We in We few ago. very the Security going are to Advanced early for the launched customers. on-prem in JFrog just next Security JFrog few weeks beginnings. Advanced are introduce weeks, And we

early So to Advanced Security. very the extra we users use we that in beginning. see will are all the JFrog upgrade also hope to And

Ittai Kidron

it. Thank much. so you Appreciate

Operator

Your of Turits line with next question the comes from Michael KeyBanc.

line Your now is open.

Michael Turits

Hey, Thanks. guys.

first. question macro So

already that quarter in the be and optimization other trends and seeing development scalar of cloud in quarter, hyper strong last other these quarters some floor taking and migrations and were what's people in can didn't impact. in place see seem third had But you cloud called numbers So native that places. you to

are we quarter? less or quarter change hired, new So, slowed more last down one so this cancelled, it's be seeing from changed? the development into further projects actually what's It's just software quarter or to optimization, that is that may developers

Shlomi Ben Haim

level to migration optimization some, Yes. What also of the in of migration expansion some already solutions. they the And we're hold stopped additional approvals, sea more pronounced is cloud their spending, delay cloud usage. own hosted put they self cloud, seeing from customers cutover on where investing while somewhat into

Michael Turits

Right. projects from slowing way that's Yes. meaningful at Explain get not last and new is that when if in development are to a whether I'm trying changed or quarter?

Shlomi Ben Haim

you're and chunk you very and see say on-prem that to already the that run that if we the to environment, now public cloud, is big the we pipeline you that's, holding Michael, migration that's of an I'll what move a had. Yes, we have approval strategic process

what we've our data the it's is especially seen of quarter, was The maybe the end, optimize the cloud in of cloud reasons. we've of maybe at end and users storage usage, seen because budget that second year because cloud, last and thing But transfer. go that the both reasons,

approval. for the bite are the levels more users sea are had with conversation on-prem, not funds cloud, And that budget final before we is and in ever are last in there more yet now some than deploying deploying that that less thing the waiting hybrid funds

between the the So is that last of seen around change that. quarter end today main we've

Michael Turits

just I'll one that Okay, at Thanks. of since we're at it keep hour. top the the

Operator

with the line Piper Owens next Sandler. comes of Rob question from Your

Your line is now open.

Ethan Weeks

for the this Ethan out? seeking and IoT know to more now. there's wanted on mention actively just of bit kind prepared I is customers for that on Thanks Are my the question. opportunity. you of coming I of a we're remarks little Rob. you that seeing taking This market at right to kind where the ask some

with the cycle now you're deployment customers type this software? this of education have an part you that right understand you. still you're to provide release of in where able with and helping that Thank capability automated Are of you them kind

Shlomi Ben Haim

for Rob, you, question. this Thank Yes.

projects already Connect. in very one pipe, project the way we extend The As big want other that all JFrog mechanism connected from you remember, devices. to a adopted now that security QX, in and customers usage update few we have coming over-the-air the big reported Artifactory the to IoT

the end about of happening. wanted all and That that. excited end to to it's an that are to solution We device, see way the still part we the

Ethan Weeks

it That's you. for Thank me.

Operator

no to closing remarks. time. I are for back the at this call questions Shlomi further There turn

Shlomi Ben Haim

you touch. for thank looking attendance your I'd like and to Thank in you everyone. staying forward to today all

Operator

you concludes for call. attending. This Thank today's

You may now disconnect.

JFrog (FROG) 8 Feb 232022 Q4 Earnings call transcript