Earnings call transcript Q1 2023

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Operator

Ladies and gentlemen, thank you for joining us, and welcome to JFrog's First Quarter 2023 Earnings Conference Call.

I'll hand the conference over to Jay -- to Jeff Schreiner, VP of Investor Relations. Jeff, please go ahead.

Jeffrey Schreiner

Good afternoon, and thank you for joining us as we review JFrog's first quarter 2023 financial results, which were announced following market close today via press release. Leading the call today will be JFrog's CEO and Co-Founder, Shlomi Haim; and Jacob Shulman, JFrog's CFO.

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

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

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

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

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

conference this on discussed be will measures financial non-GAAP Additionally, call.

a will addition or measures JFrog for those directly Relations Investor our of not call website to used GAAP to from as measures. in this A as their of tables most Please release for be a measures, limited a available which considered comparable be on of measures non-GAAP financial reconciliation for measures. are JFrog's in to financial time. replay earnings the GAAP refer isolation substitute performance to, the in These

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

Shlomi Haim

to driven you, Thank pleased Jeff. range, first revenue prior mission-critical and by our adoption to our JFrog challenging increased guidance JFrog's even the in and usage for exceeded all, cloud continued quarter joining you call. by Good XXXX thank I'm report economic environment. afternoon customers the that of Platform you

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

year-over-year. the to increasing Our over accelerated cloud the customers Customers ARR in customers usage XX% XX $XX period, quarter, XXXX, customers increased $XXX,XXX to revenue of compared to XX% quarter compared over the first year ago Customers XX% ago million, year-over-year. up with the delivering versus in XX customers in XXX period. of grew million XXX ARR increasing year with to $X

highlighting and strong tough to what of cloud the DevOps, initiatives environment, Our our JFrog specifically in powered first macroeconomic a security QX results quarter quarter demonstrate for I want address strong made JFrog. the by execution resiliency Platform.

supply pushed chain infrastructure continue to expanding as a software piece of with a operate environment, mission-critical JFrog First, management forward have while customers our we their the challenging in process.

they may like are companies some JFrog. on based ultimately we While or be initiatives solutions move projects, rescoping high-value to with seeing forward delaying need

QX we out in reached had pushed did this some of deals stage been see quarter. QX, closing As result, that from the a XXXX

Wix services required, and application services providing for leading agility world reliability, DevOps the customer, development DevOps a order not scalability is powerful team migration speed, initiatives. their based cloud strategic their platform sales In example, workload and an was to pipeline. security in allow to for the simplifying on individuals the to services millions JFrog our collection with strategic of and building of templates to Cloud vast customers embrace domain, would proud on-premise for their their cloud-based worldwide, As realized they migrate website companies. our leader Wix web infrastructure them and Wix to update

customers. cloud a scale, with full transferring end-to-end tolerance production regions amounts our In month, of JFrog at resilient technologies high-scale, mission-critical managing chain system, JFrog partnership and we "Every the environment customer the components for is and container between different saying in massive applications." strategic software packages multiple software of fault team, customer-facing our images and data our Wix are services development with production from defined team, production our of supply redundancy

That the also with team support more development a available innovative Wix. centers supply strategic noted platform by VP by to JFrog and highly DevOps to while to anticipate allows services." Artifactory our the Wix their world's providing migrating "Migrating reliable which market offering to binaries stands manage multi-region, out DevOps demanding solution, chain most at secure hybrid the of our its multi-cloud power and better companies in at Spektor, is and initiatives growth He of software allows and JFrog's the Wix's customers like with software Adam DevSecOps fully our across enterprises. Engineering workload chain supply own We their pace. partnering at their to cloud

partner to QX growth early efforts most. showed Second, indicators ongoing say the in to expand co-sell of and our ecosystem and pleased our I'm partners' channel

a project, our a JFrog, a support deal a another recognizable of reseller new large in of via an Plus for in net In federal federal key full secure was brands most leading win subscription in insurance agency. Asia to platform one example, in States partner able Enterprise a top United to example, channel. partner For the built Japan

robust in in We addition direct our continue XXXX. sales motion sales strategic and expand will to global believe the motion partner to

acceleration efficient despite annual steps QX, and more cloud usage both their in taking pay-as-you-go cloud saw in of to customers. customers be consumption, SaaS in we Third,

ongoing rightfully to in mind, efficiency, As businesses speed delivering solidify look accelerating to and due grow of within position streamline, cloud its migration multi-cloud environment. JFrog more self-managed in or company, its will continue they provide XXXX, from to hybrid mainly JFrog subscriptions With towards efficient. that and continues continue be ways releases increased that secure development competitive confident software to usage advantage. for enabling business We're to

some will expand in broader that themes XXXX fuel continue on to allow Now beyond. and anticipate we to JFrog me

Let and me with cloud hybrid. begin

us, enterprises. Our for and the community migrate they their customers pace, tell believe remain positioned priority migration adoption on-prem own We both most it that cloud a enterprises cloud top hybrid and strategic we as JFrog and in observe support topology simultaneously. is to uniquely at handling

of to are these representative at customers that This help the many our customers multi-year of of influential JFrog's we're was highlighted initiatives drive and a for our Many gathering most efforts, included Event recognizable enterprises. and in new these top multi-quarter success and LEAP customers existing the common theme, proud or of areas. some intimate world's

our of customers' hybrid advanced were solutions available part excited in a hear security and to they journeys, to As that would model workloads. support both be cloud migration historic emerging

them from are illustrate partners security proud strategic customers. a journey Nexus services XX to other and advance payment customers' migrate capabilities to our us their looking DevOps for recently we multi-region previously had this leading for DevSecOps more business Platform. This provider processes vendors, be holistic hybrid on more capable company Sonatype perspective, from as support services and on-prem, and a cloud app-driven scalable, differentiate and and Chain they million their customers journey. JFrog Software as in was the Supply DevOps their a to than their To welcomed manage We're first we but manage solutions. Our relied excited across and to financial

like would and I Next, to highlight tooling security consolidation. DevOps

tooling, remediation managing DevSecOps in there multiple point use of more make and each leave companies developers entire have which is point can increasing where long tool for and a vulnerable. force actions tasks data, of displace to handfuls multiple opportunity difficulty consolidate reporting, in is and try can leading functionality and We believe to As ultimately security left security sets companies. developers to even team, great tools responsibilities sense task. to solution This are and evident of and cycles, shifted solutions to especially incomplete we

We DevSecOps few, capabilities. open Black just Checkmarx, Any one business. more. include to scanning, for This see DevSecOps Synopsys software, Duck, address we chain. Firewall, platform, point the in customers' name protection is positioned well understand software sustainable across container solutions needs is many and or tooling security multiple Nexus holistic tooling addressing scanning, developers at fall the and for By this source JFrog's code and supply believe environment of customers as can areas a security, Snyk, portfolio not curation , to look the

JFrog record for additional As with with as single DevOps. value, power we of Artifactory source of the a combined the Platform

make our are a secure as security chain with is science see JFrog approach Our provide glycoproteomics their as the the a customer, Therefore, a early the platform-driven solution personalized, security bear company control supply developers of indicator JFrog confident and aims customers and entire market device. will to that reality. from comprehensive predictive can QX, to matures. in fruit software new we InterVenn care this preventative example, for to era Biosciences, life Platform We pipeline

binary JFrog the becoming end-to-end in InterVenn After to standardize point market initially Artifactory redundant choosing while positioned security capabilities life JFrog capabilities. with cycle the like JFrog many are management, for to solution companies Platform, security increasingly

industry to across were excited to Conference to we security the comprehensive on security recent listen DevSecOps the to Awards InfoSec and forward to addition commercial that Security RSA needs solution. of success the our building our recognized tools, as Global customers' portfolio. We In adoption our as continue look be we most our by commercial recognition

millions across Third, cycles. the in need focus developers across one by top with welcome of were the rapid and last customers a automotive on very were reliability to firms We global the have federated world the their a We the but LEAP I Platform, architecture, the release companies with global like ever-increasing our players and need with of also decade. delivering software not them were speed some highly They one security release infrastructure. in trust for leading top gaming both hundreds At trust. speed in see and to the fully proud top companies sacrifice IT of the our their software powered JFrog and clear. available, world, would of scale, of global to for providing of cannot keeping by but Conference, the were cycle excited just productive how presentations development one the

Azarzar. Aran we accelerating and an and to efficiently, developing Aran. the cybersecurity infrastructure, allowing proudly more highlight strategies. update. executive new a bottom has JFrog decades in Under systems to over security serve CIO, of while our want even important customers implementing Aran staff to Welcome, forward in and corporate us strategic IT hire our his X March, global leading line. leadership, scaling made experience look welcoming I impacting Next,

operating across like the X-year value flow and expectations from flow generation our JFrog the in reflect cash range implying range core, I'd fiscal we a In which to through a and adoption growth estimated while Platform contributions shareholders XX% Driven $XXX creating our free potential future to long-term platform of to our execution of customers the million $XXX business. on focus XX% model security to while XX%. as we profitable cash CAGR and the both XX% to revenue closing, to of would achieve JFrog's $XXX by believe on commitment in million, strength delivering for million, revenue year million $XXX imply can XXXX, the of margin of for

assumptions more provide the financial Jacob? call for for details turn XXXX guidance update fiscal an results, CFO, our year the our as will our Jacob who provide and I'll that, QX on in-depth on of over recap long-term you QX models. well Shulman, With within as to

Jacob Shulman

Thank afternoon, you, good and everyone. Shlomi,

During $XX.X million, were up quarter, XX% year-over-year. total revenues first the

quarter, Our the our up business driven from business. saw revenue cloud contribution by usage, a our and improvement were In cloud ongoing Platform JFrog adoption of stronger-than-expected $XX in million, higher-than-expected in the first revenues quarter delivering XX% of year-over-year. the sequential customer

to improvement industry helped While rearview believe quarterly usage the in don't high overall related revenues, optimization is the the we mirror. completely in drive trends

need the as efforts forward. a and We adjustments increase optimization be that behind optimization the by trend efficient another remain the the We generate in first customers customer a usage going continues software anticipate recent infrastructure as to and with customer JFrog shift how see customers a likely by that macroeconomic optimistic signal manner software to is our utilized. more grow positive secular in is view challenges, driven short-term in our wave cautiously of us will

club. given Self-managed baseline growth our within fiscal the generated cloud any were with will large $XX.X upside by in year-over-year self-hosted increased the expansion revenues mid-XXs during the prior the dollar a XX% into up We still Security by XXXX results, and our customer quarter a XXX%, shift expansion for X can the during favorite headwinds. potential are usage. year customer due on-prem remain year has growth business during first catalyst the Overall retention slowed for of quarter. macro expansion. JFrog points believe X to which decline We anticipate first relative rate deployments, the within was million, hybrid towards the customers revenue be which release trailing Advanced self-hosted, announced for quarters to occurred Net of

Our of QX subscriptions, gross be total no Enterprise customer to XX% up churn from of XXXX. in XX% QX, retention XX% from change In Plus trends. continued with in revenue came overall

let margin our million sequentially, $XX.X discuss of period. mix Higher equaling expenses or in business quarter quarter of impacted of the the gross for me $XX.X ago a statement period. revenues in up to Gross compared XX% million in the only gross in million, $XX.X XX% Now revenues year-over-year compared million, income the detail. Operating more our first was with ago $X year XX% roughly was of representing profit a XX% margins on cloud year basis.

in per income another year-over-year in million operating million of an year of million of strategic operating security in XXX shares $X.XX X.X% $X.X go-to-market Our margin a ago sales net a profit or compared was X.X% $X.XX ongoing positive equaling and versus on outstanding margin or operating $XXX,XXX QX reflects income quarter operating growth We or our investments Non-GAAP year. share prior per delivered $X.X in expenses profit diluted to share. based diluted or the diluted motion, operating $XXX,XXX team.

consideration $XXX cash with cash flow short-term flow the negative quarter. in and ended Turning million was flow. into operations from Cash cash to as XXXX. We quarter XX, and cash million was March December investments, of up flow $X.X million the negative CapEx, X% $X.X free $XXX from the balance sheet negative margin. After million free in taking or

not to free timing cash low our free in cash during billings flow fiscal margins of margins flow Our the prepayments renewals. does operating change negatively and due for expectations were license for the and impacted cash flow quarter This XXXX. double-digit

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

I guidance, like in our would long-term the discuss assumptions providing underlying model. our Before to more in target detail

our revenue of current for assumes X-year persist XXXX will We quarters XX% primary macroeconomic business estimated cloud fiscal be migrations. and, of new advanced believe tiers driven on annual by conditions to CAGR an customer XX% the driver would will cloud cases, expansion extent, basis, and year primarily through growth contribution implies lesser use Our remain cloud likely of a our subscription several add-on growth. to to and security the

use our end-to-end for of growth by and implies business our Our assumption the self-hosted driven primarily including of expansion part. platform, adoption cases security

anticipate XX%. mix line revenues, our range anticipate prior to would trend percentage the we our revenues, a targets towards higher Given as expected gross our lower SaaS of of on In of we spending XX% XX% margin move XXXX. and by would range R&D to to from should a XX% be Investment marketing in range XX% non-GAAP to a fiscal a of basis XXXX non-GAAP year a of sales XX%. in on with

to reported our the by in from to gross revenue, operating and a XXXX. the operating trend year income XX% in we a forecast down margin on non-GAAP expense, G&A year range X% X.X% XXXX, spending the range of of of Based towards XX.X% to for to XX% fiscal would compared reported XXXX. non-GAAP XX% upon non-GAAP fiscal Overall anticipate margin

software than free and JFrog a years. our embedded Platform company's core margin cash for This flow greater by XX%. of security commitment this fiscal Assuming to XX% a basis, believe cash operating XXXX for a the XXXX. of on DNA potential recent million JFrog's see We secure the free binaries of profitable allowing year chain. cash non-GAAP and free will infrastructure its growth, reaffirms distribute flow an solutions, between addition adoption their the X% $XXX income and long-term as suggest model We dollar additional software to something in to to delta critical the target manage, X% customers supply implies flow across range

speak Finally, like quarter full second XXXX. year and to for guidance about the I'd our

dollar year XXXX. growth. operating expansion our our XX-month year We our in ratio given Our free that estimate for to year We the fiscal reiterate fiscal full cloud will trailing net continue growth expectations XXXX in and our retention forecast belief cash focus margins XXXX, flow continued the our strong continued on business. through low-XXXs be in profitable

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

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

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

Shlomi Haim

you, Jacob. Thank

to base geographies excited implementation and customer side continue see JFrog across are We to see mission-critical. that as our multiple verticals,

As leap JFrog exceeded in success quarter customers The passionately that a drive complex our on team goals across for security ahead support a FROG's to we and the XXXX, IoT. the in to thank delivering market want I we and set. DevOps, work

Thank take we'll may your with and happy FROG you. attendance And the your now questions. all you to be Operator? be for

Operator

Instructions]. [Operator

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

Sanjit Singh

bit start the I to solid the to a wanted quarter. that demand a throughout team the Congrats with trends to little you year. on the start saw

April some and but from of half what a March trends guys companies then reads headlines Bank, the You banks and on of also large early sort the demand perspective off as May? Valley booking tech back well Silicon of as companies, enterprise service were the the coming around in and of some

Shlomi Haim

is Sanjit, Shlomi. question. thank This you for the

was we seen. X the seen that as actually So things demand have described, regarding first in split the quarter, it we've that

pushed pipeline was going it. XXXX after First, from some out direct team our and that fulfilled strategic

Second, Platform both promoted partners with the closely team by and customer existing expansion. that for our new partner JFrog them and opportunities worked

the change year of cloud obviously, was of the between the and this the year, JFrog which of especially the an back, And main cloud cloud, like service. fact third, because previous looks coming consumption this provides infrastructure first last quarter quarter that

back. to limit, numbers the started goes to optimization see you and as climbing understand, So a we

Jacob Shulman

If the the I the started to progressed similar accelerated with regards and Sanjit, the may consumption, through add -- cloud it to quarter as very started trends to quarter. QX we then that,

Sanjit Singh

context. And on very basically Yes, to I a will And said at little you guess targets. helpful to sort Understood. today, I I the view If was sustain those X-year look a surprised I see XX% long-term we're that's model. of then the question growth guess the growth introduce to growing the that mid-XXs. low revenue XX%. X-year

you the go confidence margins? and confidence out environment the about can uncertain to free a have talk there flow highly gives what with view you this in on to X-year So growth cash on to

it into products? be to you of -- a any the could security function marketing context? of other becoming us additional the the if give but unpack growth business? are of some walked of And going a sort think Are is part us equation function of through you for going sort Is going us? larger of it to a be assumptions, I segments Jacob there to

Shlomi Haim

X So vectors believe in basically additional will yes, we see years. we based next the on X the growth that sustainable model we

the cloud business, One our them services. of cloud is

comes of mid-XXs, revenue that cloud at goes that guided as And trend and versus the the this the will coming still from is portion project. and the go see projected we know, you As on-prem we this we still in.

X contribution will the we that it have think next further So years. in

a lot cloud invested years. version in we We XXXX, it. the the Advanced self-hosted We security. quarter play next will of that a the will Security. JFrog last released believe security of quarter material impact in significant In the and version role this revenue bring of Second, we released X

Operator

question comes next Bora of Pinjalim the Your line from with JPMorgan.

Noah Herman

is for This Pinjalim. Noah on

that just I the in kind have Advanced been also has follow-up. what March? And launch any, SKU self-managed for from a First, the Security quick of impact, if

Jacob Shulman

customer Security quarterly just version material to impact was and Yes. on March, The happy not the results. any engagement. Advanced of We're did in launched have it self-hosted the see early

it's quarter material. have first for production, the customers it -- We wasn't in but itself,

Noah Herman

that And Advanced guess it. dramatically. X And developers seems for cloud Got lever I also the for for of the would the rationale pricing then What introducing decision? be Security? came like what Enterprise down the number of price was behind a it driving

Jacob Shulman

Yes.

-- is what product Security introducing a And are wanted goals achieve Advanced several new to by this us. for we So metric. there

of all, metric be between it self-hosted. First a seamless should SaaS and

competition the to comparable into be should it market. the Second,

a solutions solution help -- in when -- point we expectation the have solutions other and consolidate of as we other to market. So will this that replace said, lot

that help products value, lastly, of product was customers with will decision also . by And So consolidate our opportunities the going expand to see and to will compare as business to a on our also technical to forward. the to go customers continue value, these continue this the we lot

that the This that, have as I remember Advanced on -- we solution of would solution, aspect. model. comes the current security solution all, fact of first our this add also security is top used it, coming Security But subscription. around DevSecOps to market Jacob to the JFrog is is with the mentioned, one

makes up than we also to base to pay subscription. more had our that model So sense for with a customers the come

Operator

Stifel. from Your of Reback with the Brad next line question comes

Brad Reback

from new you as fewer of Jacob, to as workloads optimization about any sense ways you the accelerating think usage that here, finding commentary just the to money? customers coming of or Shlomi sort opposed presented guys net save

Shlomi Haim

the business? Your question to referred cloud

Brad Reback

Shlomi, exactly. Yes,

Shlomi Haim

Yes.

the of much market is in the is this of binaries cloud, in and the transfer So, what and data for charge best with we storage aligned practices binary. very for

for both customers. and new on So existing optimization customers goes this

Our is monthly commitment between cloud business split annual and commitment.

during start the the see numbers quarter we we to referred to you question. the we in new we hope commitment, the the optimization I that annual And being of renewed experienced And climb This saw. the monthly saw that your we commitment, is, obviously, year what year. back in more that last the these On to see to business. are that previous commitments think,

see customers to we adopting platform. may full a our add I as that,

just used production not environment, is in platform developer also in used environment. our So

by, development new reflect usage operational cloud is standardization but of just So that the customers definitely, driven well. as not workloads on, or activities

Brad Reback

just high base? is I've this. in fairly Or Very it great. gotten level, exposure on helpful. And Is there any disproportionate the few broad-based? a customer That's questions vertical then

Jacob Shulman

fairly is It broad-based.

represents have than The our We financials verticals customers base. be of diversified our X% very revenue. largest us and more a customer industry. for None tech of would the the

Operator

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

Michael Cikos

Cikos from some financial with companies broader we're more the be some why the And to or then bit guys second. the as a question Mike the from immune help it X surprising maybe have I that the you line I regional are impacted maybe build a to guys a be season? If follow-up this with to of us largest industry that I reporting other of system exposure little here. just well. have for didn't could And heard that verticals. the growth some by why level exposure, as of you know chatter you versus was banks. seem your that solution both seem that I specifically last the in services to let's think of customers the seeing are shocks guys citing your enterprise little we've and, tech a given financials financial this through say, think you the Can

Shlomi Haim

bank our is not any will infrastructure software, I know you software. of will Mike, think Yes, versus don't will it other, the this business. at you the or a or build you any market, build sector comes whether matter that is and from release and stop I look other that organizations the one when

applications that provided have we bit So a reason to more the believe than services cloud. in other this a are sustainable that or is

the we are going them And and cloud time that that manage them give on industries. their between both coexist that sometimes versus we migration the cloud the see of picks. The second provide the the in on-prem to infrastructure customers and based both that, different trend to have they in same move the of both consumption at base the self-hosted our same piece cost and like to stay organization, on the JFrog and is own flexibility the fact

that, that smaller more products on do tremendous see a to in spread like scale If less out financial add provide regional different extent, exposed to value installed I in of And we therefore, banks. see may top-tier our regions, organizations. to larger ourselves global we institutions Mike, and, organizations

Michael Cikos

that I exposure was going next the because was you of year calling appreciate to Got it to drive it. something regional That lack those banks. be going out then, to And if my guess, here. around accelerating a the could guys know offered I commentary I that through XQ. follow-up usage I have people cloud the just circling are regarding of you lot

helpful, seen XQ. be from what you would to it least with trends think I I at perspective, similar my you very had XQ know started that said guys in

XQ versus and on And the start of be cloud I commentary your into did return are data helpful here. would the guys been that consumption. the where So guidance able X the played here factoring be points have start to April? normalize algorithm that's both but points XQ, you'd when of XQ? around more trend one to in those how during trend One, into things you of growth provide guys XQ, imagine or I for then to think a typical, any you guess, I

Shlomi Haim

Yes.

will in So we expect we customers did don't fully do conservatism. of trends. growing month to our our We of our in that call think see guidance April, see cloud more the level that usage grow similar We is the of certain optimization we us. on assumes said a behind did faster efficiently. continue that And the Obviously, kind March.

of there's still conservatism. uncertainty some lot the market. so, in level a And guidance of And assume therefore, does our

Operator

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

William Crane

significant a opportunity in for It like seems So the Jacob. one and for on-premise. for is Advanced Shlomi immediate one Security portion of

guidance? this into incremental how compared the to baked past? is Advanced Security cloud the And how in then 'XX much it for the of fiscal So having update only is

Shlomi Haim

And JFrog our the a is Security room Advanced think based model. it's self-hosted actually hybrid still customers using we as version. there. answering is which a there for our in lot So strategy. version Therefore, self-hosted of cloud, is and the model the growth an identical a bi-fit philosophy majority are on of The

a think lot the with we to there's of Advanced Security. So grow room that JFrog self-hosted

most we self-hosted The point the that was second that displace quarter solution. of excited we it, that with on the Advanced are reason JFrog of and this to with platform were Security top announce aim solution to that

So the that target market and are aligned financial space. the we and solution that a is coming fragmented, with we with know model for also with this the both the of self-hosted is cloud

Jacob Shulman

expect fiscal products we Yes. And said Kingsley, XXXX. Mr. Security a contribution in that we material from Advanced

up. happy We with XXXX. We're see Security ramping from a very we in we're lot of contribution expect and the So Advanced material opportunities, engagement. customer

William Crane

Okay.

one more. so, And

So profitable capital about you're just think today. want moving I deployment forward. to solidly

So an valuation and integrate consider? And would what's be M&A levels, stock in something to ever of appetite then at would these you also for buyback asset? the the stock ability terms

Shlomi Haim

Yes.

our capital optimize of to ways consider different first So structure all, constantly Board is options. and looking at

in market, In terms a and of fragmented the opportunities of M&A, we see lot market.

in believe they which on we So if will opportunities will the act future, we there come. be

Operator

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

Koji Ikeda

optimizations are believe and commentary to from and the about also in wanted back you you don't had that some that optimizations question where the fully go behind. to I prepared of remarks a prior

it a that that wave thinking or coming? could you there another that about? there may be into too Is feel first that here might hearing kind And you vertical you be the You maybe them geography behind. wave there commentary you're alluding out you're are wave seems there but what makes is or not or that us believe but optimizations I'm much, understand Or wave help optimization second certain of or fully behind, another like seeing had? you are said a reading to be

Shlomi Haim

We efficient manner. cloud customers wave. effort we don't more use to expect is see continued in by second that, What a our

know, As data we know charge by -- more optimization Storage immediate. as storage. you Optimization transfer data we transfer Koji, and more optimization results provides longer-term and immediate more process. is

would customers budget approvals. additional that tight to see cost-oriented. budget we The be require in and because, is want still they they So our very otherwise,

in us it's will going a play, So because manner grow grow they more to forward. continue that, to the infrastructure but they what customers products with is continue continue efficient we see with us, to use

Jacob Shulman

how different of migrating slow process Koji, are And already more we that wave that cloud of to solution down of I they are big the optimization in solution of was believe the saw to might migrated previous the because behind much we there we activities have saw move are quarter. And year cloud would the in there with have signed why with down for that the see, probably cloud. will are is the and say both infrastructure. add their guys are we that to prioritize but very have in in and significant is don't last other start quarter with. infrastructure we careful the the the they have they they optimization being They In to want versus companies, use us, slowly cloud. than with enterprise This big might still And workload to JFrog, segments us is the the others slow market it. what coming that already migrating the scenarios, that these to that on-prem process The to with what this reason we we projected. or back.

Koji Ikeda

it. XX% XX% target, the to the a Got assuming target, XXXX revenue CAGR on then there. And

that Just assumptions an you wondering embedded NRR perspective? sort what specifically from have of in

Shlomi Haim

the retention We period. in expect XXX% high-teens this our to net course over be of dollar to up

Operator

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

Ittai Kidron

are that Nice behind have what elaborate you the year a bit 'XX than fiscal on previous you quarter. as reasoning you asked Can that had model. that, start slightly Since about long-term your margin Koji little in guide, targets it? The well. the I'll lower with for

Jacob Shulman

as to more on Well, contracts from is and multiyear expect, a SaaS because cash of it's impact at free do bigger portion, SaaS free result cash don't that, expect flow. impact that's high probably the flow least. a contribution we tend SaaS many We be will contracts in the a We business have becomes slightly shorter-term SaaS. probably do more what today,

provide targets. we think In of the profitability, I same terms

Ittai Kidron

pronounced? region then quarter, there the find there any double-click X bit? more Were on really usage, jumped customers just X, denominator trying And on you kind vertical any in a on to up this I'm where upside the X their can Is provide broad that Okay. was the little how you that a can or common color in of was? there. that cloud or

Shlomi Haim

Ittai. Yes,

was it So sector across-the-board, was by by a first, customer one whether or or trend. the customer. we one geography, saw it not question everywhere, It by to not not

I before, and think that mentioned rebuild their fruit at enable cleanup and the to low-hanging end they costs had moved of the most service. the and the Jacob infrastructure instructed now year of the on as and start they very fast. the to the cut storage to of companies were year of the start And to repositories hosting previous

it coming to we So started see back.

It for So sector and at us, took starting customers. time. normal We end the specific start or geography January. it back. didn't and this no where of started climb is we back to quarter, saw the is And on or climbing it

Ittai Kidron

Shlomi, is be attach the Nice for lastly I to different the Do that customers? the come base. premise, talk the this to think adding I -- your you the non-SaaS any guess, rate this a about that get into then hosted. be long-term customer of adding what versus Advanced of rate SaaS Advanced differences And Okay. to I'm usually this? of on And is you customers for SaaS dollar can non-SaaS Security on going to customer will uplift a than attach on Security. guess, -- me the there potential of see this trying to

Shlomi Haim

Yes.

options. are So One have portfolio, is when X at fully different we we looking the self-hosted.

is is market doesn't there because third anything cloud. started time a hybrid have install to faster and We and customer the Second the cloud. to that no fully is with Obviously, . was

Advanced end this And deeper was what just of self-hosted you we a at embed Security which JFrog And for with then the great You and released stop. the click version of platform. that do how requires quarter, a the XXXX. launch of that conversation

that second are enterprises So self-hosted some had multiple -- we the big using JFrog tools. We today's still and majority already are the came think practices. in portfolio, that customers' when

The majority DevSecOps. of them will use more than XX different tools the to gather

And because of the brings. Advanced to JFrog terms they will we while you move that that supply while installed the see, in migrate be focusing push as appealing business it chain migrate to the platform in will terms cloud well So and parallel, the they an the we and is as easy they on have cloud consolidation, performance software Security smooth features hope already because of secure, the practicing value will cloud, it in keep the very organization.

Operator

Securities. Miller Your Truist with next line of the from comes question Jump

William Jump

Congrats quarter. on solid in the the execution

I lot on first want the cuts the made of of guess, in beginning year. one, start your I hiring A on So, headcount competitors have of hiring. pumped to even kind or brakes to the

you the talk in you So hiring can environment goes the given you about sales how and about that with called there? long-term model out your in productivity, how that think guys current leverage just especially just

Jacob Shulman

Yes. I'll take that question, Miller.

you growing So been first of as all, manner. we've know efficient well, in a as very

execution DNA. and plan many our profitability years to what's And the So started this embedded in a ago. path have and is company's

So force. reduction the didn't did so a have so we through employees, in in we first hire go many place, not to

execution. have performance. to kind We some projects we focusing closed therefore, We this do reallocate go improving hiring, half -- projects do of on of basis, focus ongoing on resources ROI. some we big reported in and We year. we're ROI. through and of on do headcount to therefore, on that And the don't profitability. continue to the with efficiency second did We focus an reductions. high that improvements we provide we and And we didn't Second, slow actually last

William Jump

that makes should pay-as-you-go QX? there as is That annual that about guidance? then, we of guess, that I called something you another out guess, it. the just a sense. as far And Is think your contracts. kind continue there you see to question, last Got to trend quarter shifting I customers was And, in any impact

Jacob Shulman

transition of customers want -- they to some -- on to cautious, them. progression then products. to to -- how therefore, Typically, then new annual want not pay-as-you-go the maybe to self-host the is And because don't use going customers. yet to the start customers They they be a they're commitment. they're size term. get of yet they're pay-as-you-go natural product, Yes. to not as long to these Once with commit The become discounts utilize they know familiar and commit they depending they only of willing they the that the familiar, know

our map from deliver the working old natural longer JFrog, and actually with see customer it's the it's So better we're could -- a beneficial for progression journey, of commitment, the the because and better they their customer the products. value

this commitments on from annual continue strict additional customers imposed transitioning we was of to pay-as-you-go some But some requirements this So just users. was more quarter. our QX given budget pronounced to see that

Shlomi Haim

And committed annual map our customers would to This to prefer part aligned they the be happen of very run. will have and a an strategy. with clear Jacob if it's them, contract mentioned, about the them, to to that, be committed strategy. as long the We that's build road only platform with also to with build will

to push we So way it. aligned much sales see very our strategic it, it's with but direct team yes, will also we the

Operator

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

Jonathan Ruykhaver

Nice quarter.

there, But around that about might you Artifactory and you thoughts positioning integrations I how numerous could updated focus design, doing pipelines. see pricing change been you around packaging on the and/or that know by anything I with you feel talk if wondering with on innovation how you that opportunity think, any the other or might I'm So built, has CI/CD pipeline? your tools. opportunity be with have

Shlomi Haim

the you JFrog question. this a platform. Thank the to solution, for is Yes. automate Pipeline process better within CI/CD

of of automating provide. to test terms also with part whatever DevSecOps to market. CI/CD automate in Now, processes, remember, JFrog not completely Pipelines is terms business from the we build but we JFrog that Pipelines integrates you in release, the in security from in the -- moving another. one solution to way probably of stage we are these just what have -- the as tools best is are bandwidth to

scene Actions feature customers the LEAP behind from the So event of integrate another. this is to releases that mentioned our whether by script, GitHub platform. And lead shared use Pipelines customers will with environment adopt or actually motivated new software that. all another This our or to was is or in other top powered Jenkins product you full In we our with one JFrog one capabilities stage Pipelines. tools, JFrog the that the

integrated automated next-gen. platform our an makes piece more for it's the ready our So which platform, of and

Jonathan Ruykhaver

I be Pipelines quite that about talk that customers have imagine they then pipeline. heavily sold CI/CD a that or using would because the to Jenkins would need already So motion go-to-market for some on other with tools

Shlomi Haim

Yes.

X ways are there So to at look it.

in first model. you is for a our subscription to that, to subscription Pipelines The a be of part reason higher upgrade platform our subscription and would thing a from is it lower

cloud. Second, also is pipeline a a on consumption-based, the self-hosted both in and

So and better, the would be be will use pay you more secured, on we side releases that and than The it. you then faster more adding motivation features around the keep customers' more base more if more. to

platform. is Some integrating and CI/CD, the before which a the of step some it with it you are of implementing developers chosen your was by while

Operator

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

Robbie Owens

interesting your more thought all does and to I'm process guess, from I where product potential With you on opportunity could the focus question. wondering impact said and for applicability the purview, industry, the this across down DevSecOps, around where around road? lend generative then AI your number just benefit JFrog X, the its number follow-up, And from sets X, it prior

Shlomi Haim

software Yes. in to is securing and Listen, by in company. question. is domain. and of our here definition, AI, process replace a binary human Obviously, great releasing JFrog human a intervention the building,

are with We binaries. dealing

you a create binaries, more the the this you you is create and more us be for obviously, -- great build, So, will more opportunity.

So language a machine we were forever company.

because generate we Artifactory. maintain automation built But well. we that, the have this is being So this binaries business disrupted blessed business is by What with not as how AI what is from will it for more get-go, make you of is to sure JFrog.

developers XX the versus So, excited binaries work are and machine about generated opportunity. ago, more or very years binaries we for created obviously, work people. CI/CD

So a like a big AI for is opportunity JFrog. company

are finding not security is that be can and Security by managing. powered it we the scanning around . piece The second but side and of also vulnerabilities only around AI, CVs,

excited in when replace this and and put production, we AI, is done Artifactory can that storing by binary opportunities. be are to So it about you these a have

speak implementing regulations know, different some ways the We the probably now. at being you of are created responsible are also looking AI as of we because, as

not or intervention we smart feature build process the human JFrog. what it the are we and and level should the implement automation want of we on be cling that the at when a just trends So on AI. looking high it's is from responsible to how responsible remove we what about And strategic

have , the you or not and it you follow make be developers. AI. would production. with result generation integrate build sure you with powered AI of be deploy binary, DevSecOps by you we of that, just the better doesn't what take way binaries And by is AI? AI people what And to to by this we build how with market, all is result means implementing replaced this the software ecosystem machines, also The because that Regarding would can and the developers of be, mean and next DevOps binaries, whether many binaries

Operator

question comes from Capital. final KeyBanc with Turits Michael Your

William Mandl

reasonable Congratulations projects the on make is software sense Michael. be of seems the developer development a it to quarter. of seat-based the in model, as since or in headcount developer Billy you less headcount on you're Have pace across impacted any development and reductions. impacted not that result results It slowing for directly not This you'd by seen reductions seems industry? a the

Shlomi Haim

real kind of year balancing way. a the work it This take they They just disciplined to So prioritize will to that the in more our maybe all customers think, we that of experiments. market. a ago they are on year, That's, things. prioritize kinds bit telling would us that in this see throw have money they have I behind

second a if in the a that require that, a cloud is environment. you process will infrastructure were migrating period The thing parallel of of to

maybe sometimes the your It a Moving cloud project. legacies a a happen over doesn't in day. will happen to period, multiyear

will they decision some although there, push they push further. this them And they it strategically know of further, go that

our both projection. have So this are on hybrid you ways, not prioritize will you environment, enabling impact or a an in whether

Operator

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

Shlomi Haim

I'd coming more a results you. be quarter, quarters. like we looking and to May share thank with FROG you the to you all for the with Thank are your wonderful attendance you. today. forward We in had

Operator

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

You may now disconnect.

JFrog (FROG) 3 May 232023 Q1 Earnings call transcript