FROG - Earnings call transcript Q3 2024

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Operator

Thank you. Ladies and gentlemen, thank you for joining us, and welcome to JFrog's Third Quarter 2024 Financial Results Conference Call. I will now hand the conference over to Jeffrey Schreiner, Vice President of Investor Relations. Jeffrey, please go ahead.

Jeffrey Schreiner

Good afternoon, and thank you for joining us as we review JFrog's Third Quarter 2024 financial results, which were announced following market close today via a press release. will Grabscheid, CEO JFrog today Haim; Co-Founder, call Ed and CFO. the be and JFrog's Shlomi Leading

During this laws call, of XXXX, our pursuant business including we the the may make are to are to Reform under statements Private believe, our forward-looking statements Securities intended federal Act future harbor related securities and of safe XXXX. year and and Litigation made that are the provisions related of future financial full statements will forward-looking performance, identify expectations. intend, and words to including continue, anticipate, or our similar of expect, expressions outlook for QX indications estimate, to The similar

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

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

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

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

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

Shlomi Haim

Jeff. you, Snowflake, JFrog, for platform our thank user others at Capital was conference our and a joining quarter It call. stage. all, powerful you active the you to and very JFrog One Good Chase, including leaders JPMorgan industry with experience swampUP Thank Google, Intel, afternoon for share their annual like on when

GitHub, joined DevOps, commitment to driving new review in swampUP one Our NVIDIA underscoring was experience. partners, the supply first the seamless Docker our also platform to to integrate a us as an unified chain including future and DevSecOps growth, the announcing including MLOps of opportunity solution. JFrog's platform innovations collaboration and in levels and spotlight

recognizing JFrog with as to and for security expanded offerings critical with Security we back. our from customers development seeking organizations solution Additionally, it production and [indiscernible] full visibility

partner I'm pleased they that strong telling demonstrated JFrog We third in within a with execution see we quarter. as but are excited, focus At the JFrog, growth inspired. we belief strategy, aligned keeping well opportunities driven you this you share our and back, ahead, us broadly, our development the key believe with customers success us customers the more our not forward, in shown JFrog, won't once is retention go say, strategic as our software and processes. lift only in

the our in was quarter Now QX detail. me to JFrog's fronts. on all cover achievements some during more allow of strong

million align fueled revenue for $XXX.X that single QX QX, was of JFrog's in XX% period, from million, year with and resonate year-over-year. Customers enterprises by a migration reached guidance up of by XX, among coupled we in with total strongly quarter strategic million, cloud security in demand. year market QX some to Our ago in disciplined DevOps solutions ARR and differentiate a to migration the XXX, year these ago results, $XXX,XXX The in DevOps history, us exceeding unified Based up go-to-market execution steady total growth representing security. full XXXX the JFrog's and and customers software ARR cloud, year-over-year Cloud fueled our confident the for remain led XXX cloud on $XX.X JFrog's to with revenue customers. of MLOps comprehensive [indiscernible] year-over-year an growth. number to platform XX from In usage workload supply period. largest approach empower to seamlessly the up representing around go wins over committed continues patterns annual chain XX%. growth with the of to $X XX% on XX% increased

go-to-market our QX, platform, fields and winning for primarily security our demand complete execution, team by driven our large demonstrated In for cloud strong offerings.

delays As previously some slower, significant we a the to due shared, deals won procurement of environment. faced rigid more

Let address cloud. me first the

migration XXXX business, their not migration and to customers' activity the tell turned them remains though were migration compared usage hybrid activities, as pleased we an with usage moderate increased in Our has outlook and we a cloud trend QX. the previous do deals gives of that growth scalable in platform sequential maintained pace increased by migration confidence JFrog yet to and software they regarding year. need pipeline cautious believe the corner. cloud overall more the business nature experienced our the Customers We us driven modernize development

shift, JFrog therefore prioritizing this on line demand modernization In holistic a and standards secure meet software Next, are focus to market software right. achieving on industry higher The security. integrity requirement. the inseparable, their production continues creation trusted, on to for enterprises to and software supply left of this chain the processes to with from and with the traceable are highlight security. DevSecOps purpose-engineered DevOps platform is and distribution

and that by reducing workflows consolidating This over across security been and and to has security which customers thereby advanced question by if software about holistic dependencies, incorporates quarters will end-to-end as chain. but developer JFrog streamline to wins, of our and efficiency solution a a prospects point security, seek enhancing drivers. has anymore recent software and QX key evident the JFrog adopt [indiscernible] included They supply platform predicted tools supply not the when. company in It's question was trend vendor voiced a a our

our user QX, As held in conference we tenth Austin, swampUP mentioned, annual in Texas.

every delivering JFrog first pipeline As to as and phase. and with production solutions security, the the traceability excited from platform, industry continues part the to to and lineage development more across allows software demand the development our to companies future to our DevSecOps and the We and availability integrity that and have teams customers MLOps. DevOps, from drive DevSecOps regarded cost full of very were community back of grant announce of

solutions phase session of addition, In JFrog [indiscernible] of Thomas and with JFrog the with showcased second capabilities on a AI keynote course, we unified we our "Together growth security importantly, GitHub, the and companies led CoPilot. bubble. we're capabilities join via integration Catalog. bring announcing bringing strategic co-engineered out and partnership the Zonke, JFrog, GitHub's JFrog with me of to have GitHub power CEO, lightening shared, this the with And CoPilot of

the to internal Artifactory about your and ask is processes beginning." can just company, configurations about your and your in CoPilot you and specific this packages Now

as into analyst website optimized chain also we machine This on we our models and NVIDIA's We Austin model software also with shareholder in at supply shared the bring strategic announcement, on-site with registry. announced our to NIM serve joint secured, our a in and learning and Artifactory IR trusted collaboration available swampup.jfrog.com. briefing, NVIDIA customers or conducted

With This ecosystem execution delivery our CFO, platform recap Grabscheid, partnerships, and results will are of I'll we XXXX. the and dive our wins, demonstrated QX an outlook product QX of is in-depth success sales through with turn strategy we we provide and excited over fiscal flow business strong line Before about the efficiency. to into opportunities Ed? our ahead. our across our QX, for who free that, in cash financials. overall In expansion, strategy, year and Ed call financial and

Ed Grabscheid

Thank Shlomi, afternoon, good you, and everyone.

up quarter the were XXXX, million, revenues year-over-year. During of XX% third $XXX.X total

the As revenue revenues customers in to some Shlomi, paused prior quarter total XX% during by the million, on-prem revenues year-over-year, XX% managed year-over-year in the Self have year. representing revenues the million, XX% deployments. but or investment up to $XX.X to migrate growth on-prem equaled quarter, in cloud fourth Cloud their self-managed quarter. versus planning of $XX.X in the were We noted XX% third are note anticipate stable who trends up remain

Net dollar was for the retention XXX%, guidance. quarters trailing with X in our line

Plus, contribution from been as remained subscriptions, year-over-year. growth. penetration year. we our rate through with existing came at Plus an In XX% grew revenue XX%. subscriptions MLOps, in retention customer subscription Revenue full A security prior gross for of Enterprise total of expansion Our presents from opportunity adoption QX, motion platform growth platform our into further the and believe continued capabilities driving the Plus base up from expand we our Enterprise XX% Enterprise key customer has XX%

a review more period to Now in the gross margin The primarily I'll the gross in carries decrease gross million, than income XX.X% lower in XX.X% profit was compared revenues, profile ago relative is of the cloud margin quarter the detail. to year margin the average. representing period. which $XX.X a of statement in to year-ago corporate Gross higher due mix

sequentially, targets third capture ago from Current quarter expenses while of We year expenses million and level Qwak, year on the remain in equaling discipline the maintain $XX.X up expense million, for quarter fiscal between contributions period. XX.X% acquisition investment proper the $XX.X margin of revenues, focused to early maintain the of remaining include opportunities. were annual in in XX% which to We million July. for revenues $X.X Operating from XXXX. closed of expectations growth future or continuing gross XX% XX.X% up

million XX.X% operating margin in ago profit an period. profit $XX.X $XX.X operating of to million in margin operating Our or or compared XX.X% year was operating the QX

in year Diluted XXX.X average average weighted per XXX.X share $X.XX prior million equaled compared million approximately weighted on share diluted per shares. diluted the to based earnings $X.XX shares on

and in consideration million cash the million was requirements, initial the our XXXX acquisition of million in taking June Qwak the as to balance in consideration XXXX. the flow into the CapEx like and from or $XX.X We was free ended short-term July. free early to now million of with $XXX.X from utilized cash quarter Cash down I flow. flow million for quarter. sheet $XXX.X we cash cash that investments, $XX.X operations would XX.X% of margin. paid cash XX, in note third Turning flow for $XXX.X After

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

for fourth quarter to full of and Now I'd our speak about the outlook year XXXX. like guidance and

average revenue $XXX.X shares net in to income the outstanding. For weighted and the be per million range to expect million. income to operations million $XXX.X million We non-GAAP estimated $XX $XX XXX in non-GAAP on the from fourth of of range be $X.XX based of $X.XX the to we range be quarter, in to share forecast million to diluted

we of For the of XXXX, $XXX.X in to of be operations $XX.X to shares diluted $XXX.X million in range to per to the million. net full million year million the fiscal weighted in from estimated range $X.XX revenues expect $XX.X XXX million and income on range the non-GAAP be to based income to outstanding. $X.XX share average be Non-GAAP

context currently cloud spend at to wins as XX%. let We contribution our revenue strong to Now still be in contribution growth our supported execution cloud quarter migrations full remains year-over-year XX% commitments procurement believe annual cloud challenging scale year-to-date well in be what around growth anticipate cloud. quarter, the Fourth large-scale XXXX guidance. more third from quarter smaller me We will provide a represents growth in as XXXX environment. for achieve the growth with by around a forecast of to our and customer from cloud

be continue outlook in cautious from our pipeline our opportunities large-scale We guidance. forward current de-risking to

in of in shift observe spending overall to the the We have material large-scale being budgetary not sentiment environment customers still timing a commitments. regards to and observed sensitive

JFrog secure third and saw During for the larger a we as chain security and looking manage to consolidate of and point become enterprise deals the critical platform solutions. their combined customer software the customers driver industry with standard quarter, security view supply

Security and JFrog will revenue continue XXXX. Advanced contribution material to in that anticipate achieve JFrog Curation We

retention year dollar quarter XXXX fourth our the in reiterate guidance, net the we for range mid-teens. full our Given

Qwak of beginning contribution the was associated Finally, in third the less transaction closed Revenue of in than quarter with acquisition this the July. X.X%.

over the will JFrog As updates further integrate profitability. our into Qwak outlook for and we provide regarding periods, growth coming we

Shlomi we remarks call the to take turn closing I'll your for Now before questions. back

Shlomi Haim

Thank you, Ed.

happiness, XXXX, growth way. to our with remain and macroeconomic focused we achieving driven by innovation laid a challenges robust proud the the belong our are spirit. Our We of in in And food. of QX each your and by bearing the incredibly customers' while solid and and you powered successes global delivered [indiscernible] line with cloud resilience achievements a committed [indiscernible] constantly third and team foundation I'm guidance. team security by our believe persist, to leading and inspired quarter our

and safe of you their our and for questions, that brothers your remember peace cap to return terrorist in region and on year us open a of Thank those our been all the Israel Before are pray today Operator, families. in now fast the Hamas attacks for as we with the you. be we questions. Gaza. take And hostages since began. [indiscernible] We sisters to XXX by call the take made let and for it held attending remain has now we over speak,

Operator

[Operator Instructions]

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

Sanjit Singh

a some more QX more deals? closing generating I of days some you If closing come Or solid Congrats results. beyond push deals QX of a and you see did was and strength so I back deals on to of characterize those XX kind revenues wanted out would as you of a sense just get saw quarter? guys had rewind QX And I ago, broad-based in. to the function how follow-up. then it

Ed Grabscheid

This is Ed.

that a a that several pleased results. really We one talked QX. largely we of during we're our in projects thought overperformance about we the from that QX, strong being saw those the to quarter derisked those of execution from significant it we pushed closed saw that forecast. was due So QX deals We of deal these was with was

we due to of largely saw saw many large fact closed. what the being was the deals overperformance we of therefore, that So those

Sanjit Singh

we is great context. hard to It's your go show to strategic security wanted these are That's build around deals XXXX year. me that great pipeline. And of sort line. the question and -- around to to over comments my the hear I from coming follow-up -- that have being

more terms now that now security. be the you some from will of of VM side? you're What points are give year confidence you're security seeing material what so right And you on that that right for in XXXX that seeing to confidence proof the gives the contribution that

Shlomi Haim

customers. Shlomi. is in reported, we is we that are of QX. this big And part Security being secured as deals all strategic Sanjit, those our

by much are we the So strategy. more being very than expected. and and platform growth then was longer big with sizable at security, cloud our coupled derisking the cycle a sales But was deal, won it. that this and we very the about that when mentioned, opportunities took that as aligned pipeline, see triggered combine When security. together deal cloud they're deals. on it now We we cautious And all it is looking

us XXXX we confidence gives momentum the that getting into that are created. So same we with the

Operator

Bora question next Pinjalim of the Our from JPMorgan. comes from line

Pinjalim Bora

ACV QX that you thread had a Congrats big there that staying component from deals kind year are more. just came security QX, wanted as of for me coming you, about a to of from -- well. security ago, bit ask the believe of on a were I if involved Shlomi, side. signed understand coming you, are to a pricing in little or lot for behavior have to kind into security to what kind there. conversion kind introductory of as customer the seeing in want signing those understand you're bigger the of Is Any on ask deals, renewals? some what rates way those the is that they coming possible it deals of deals? I

Ed Grabscheid

I'll and go ahead In, this is Ed. with that. start

And of on the and expansion we're seeing of those those. in know coming the of committed JFrog. focus Those of of as customers. these adoption have year. starting concept, to for leading to general projects, second those mentioned, of deals the and That's security. we proof they're about. you still on these are are in in these most in went large has of terms And introductory we're we pricing. sizable the The really now derisking terms we timing we up a The win of we're see projects number been we where So and projects, why large uncertain. projects those lot we did once are renewals, what's that of migration have seats a of a seats announcement security those of talk half last These projects

Shlomi Haim

for now designed And an what is you question. thank and if the security JFrog Enterprise may, time that subscription we I only X offering all Class the and Enterprise Pinjalim, duration parts into add-on. advanced are as of the

runway but also kind the around us the that and the needed play see displace not what So introductory products our that other order security we we add-on. in an of customers platform and to not the only is just to gave market consolidate penetrate as to prices

Pinjalim Bora

Ed. exiting about One you're not should know to XXXX, of but You're how still for the macro and think licensed anything XX%, puts I seems ask takes? is talking the XX% of not about kind as about wanted at growth you, follow-up now. really being we I like environment

the seems more big gives about is kind built security as think we you we then visibility about that models? a should RPO the probably base hand, and like XXXX How you think On other have there of the trend.

Ed Grabscheid

Yes. you on that, comments your not commenting Pinjalim. on the and Thank We're at for moment XXXX. question

more that forward. do But quarter. As like to and the going one our comment way overall our end that that do, outlook our we and year during we build the building I'd we conservative normally is make fourth are in at we're we'll being as the fiscal of guidance

Operator

next from from Needham. Mike the question Cikos comes of Our line

Michael Cikos

the from the closing this about up from being on building talking know ground forward. up you're more I Pinjalim, I conservative just X wanted to that And but how you're first circle in guidance point going really, components, out

know migrations? in large stand for you're signal as comment to these cloud relates a for be more to prudence is there Or that introduced? where derisking that you've today? obviously is I potential we it incremental Because So cautious

Shlomi Haim

this Mike, Shlomi. is

We fronts. quarter strong, at all pleased, are strong the are looking very very QX, on very we on delivery

QX do because migration, and the opportunities. resell But big the is we big we we still are are big pipeline. of that are seeing not deals completely We [indiscernible] the now, deals, cloud out our what cautious are woods. yet remain looked at We the platform the security

to to have a cautious remain XXXX. and strong we So on deliver

we committed approach are communicated guide we with, past. what take we We as conservative but the you in the to will

Michael Cikos

And probably it's RPO, maybe and what quarter billings I recently? I wanted appreciate admittedly kind some guess larger a both that secondary, But deals I of that. those I more then this look help of And sense, of the if metric. just that a significantly anything else better get versus know is at I push metrics QX to those even we follow-up, to to these to my to, a specifically, catch-up to from should us understand stronger dimensions? there tertiary Or in were it's point QX? equate more been maybe

Ed Grabscheid

Mike, that to your when Much for was it's question. these deals. Ed. that, we look saw see in It Thanks are noticing contribution at multiyear Yes, a be thank you to now deals of in to the deals. of very you that is these addition that. for start very that fact starting the we and many And quarter. large strong RPO,

well. obviously, RPO consideration, into in taken that's as So the

Shlomi Haim

be but in wait, me and also are is a will because and potential, it in those Mike, what that the some multi-deal, but exact were wait bring and call maybe different mentioned, the of we the bit of deal of not sizable kind the of I multi-technology of a we the that requires deliver future to pushed deals third, quarter completely in pushed a team more, strategic sizable, RPO because from result would will that to second the in our multi-cloud, play, only some that and you to, the see be to according a the working can strategy. larger, is if side, previous

Operator

from the MacWilliams from Ryan Barclays. question next comes Our line of

Ryan MacWilliams

on the is how those consumption throughout towards did And quarter or end currently this to the cloud like impacting of maybe usage cloud XQ? Just Just linearity at on for the point? hear getting in about since say the usages how you side, macro you cloud undergoing. any notice quarter, are would better

Shlomi Haim

about negotiated The Shlomi. on being been be in is Thank being cloud to it of has are it we are only still Listen, joining more the bit is be past. planning this also than used us, to the to steam This not the our cloud for Ryan, customers with of the ahead, you made. on marketplace, executed takes longer. why in call. is migrating ready Deals biggest yet pipeline, concepts it's chosen. so in some full but vendor cloud, approach a see but proof conservative migration not our our

And they customers to cloud. with takes decide investing the of on that that kind start work customers, be double The move to to And to today's kind are also are partner they not would happened and if -- that's cloud. until while they ready, we second these but will not are a gears them the bit what shift macro. in they thing prospects, click planning coastal of is until a longer the in the move we will

Ryan MacWilliams

Just the say more up on migrations there let's point. that become Is And price does maybe to way macro further self-hosted incentivize the in clear migration any side? the to just taking those on like activate these their moving Are could they you Or multi-quarter could go? time quickly just quarter. to Like and process we'll here. migrations fourth the from more over? migration like feel ready a cloud accelerate to follow

Shlomi Haim

about show pricing don't successful to point. they are a we keep Yes, we self-hosted the punish to that you migration with partnering accomplish by se, think that's our the partner Those future year-over-year the will full in next today's using make the customers price the our your don't them the a also the of as are with good unless you might platform. with want very the that them that self-hosted struggled pipeline, migration only sure about raising to growth future. incentives, but in as we lead currently we not solution cohort and do that cloud. every macro now on think will But year to a motivate per When year, are that migration we will that

Operator

of Our comes next from Crane line Kingsley William Canaccord. from the question

William Kingsley Crane

Congrats in a on scale some in that of things, you QX. couple implies of quarter think quarter. large with growth. year, And XX% full want the significant pretty called the a start cloud I in annual to then growth I acceleration customer similar rank ones to sort any to cloud. QX, as commitment I a true-up any is the consumption and migrations stack And follow-up, those? expected to way smaller there of guess then there Is last QX. out

Ed Grabscheid

no expectations is we consistent move the Ed. as are what This stack cloud kind rank far our what There's of X way Those factors been really contributing into those. has to usage we The with have see to been. QX. so

In somewhere we the I But growth, look had first remove on level same want you benefit, the onetime this a QX everybody, this you range year. when onetime year, anticipate a remind year perspective. time sequential onetime benefit of will when it to last at compared during similar XXXX. to dollars be in sequential, that true-up a We QX a off, same terms that benefit around of it don't a of from

And cloud has then in still our see very that execution budgetary growth strategy what the terms strong is of I a in think overall, delivered environment. cloud tough around you'll

Operator

Kothari Baird. question comes from from Shrenik Our next

Shrenik Kothari

swampUP it's RPO. would and mentioned you larger in are if these, showing longer it's I a security all bit Shlomi, Great of execution. adopt as end-to-end but companies a when deals up will question of little say, focus no

integration the stage you like in still are with kind sales hard ramp Are you kind have workflows? curious deploying customers a really needing I how the Are have Just to support deployment of then helping deeper actualities, of early about of these or integration training into of to on Just bottlenecks. kind efforts? pushing follow-up. the going of we both, overcome marketing up them dose curious, advanced you quick

Shlomi Haim

I right. hope heard the that I question

I this how If how announced take these the strategy it guess you're it innovated of swampUP, asking to we is take some of what to market. you a about technologies was that our and asked.

of chain around to security that will all you strategy end-to-end JFrog solutions the way acquisition platform software provide the is management the ontime ability one the the creation the Our technology DevOps need all announced including code, and to Therefore, our platform use from Qwak the supply customers that production, platform. with security consolidate the therefore, for swampUP not the of MLOps and that was following to the DevSecOps. and MLOps at just same

our Enterprise these these add-ons X generate an are if the of will it a on And subscription. available will you on the them implement you not would allow bit Enterprise there, of platform. All there, for be Plus to customers and that mechanism if are it are And upgrade. technologies top the

Shrenik Kothari

it. appreciate add follow-up, I a and in. quick could you it. helpful. And Got chime Very if Shlomi,

of to to measure terms that of key the talking Can and physically is deeper [indiscernible] which the of us play color for you GitHub, XXXX should how some this amongst expected kind terms base, [indiscernible] adoption X% we retention perhaps out integration. In of it what and playing? the of how And integration? trade in you're course, the includes And think and parts CoPilot are about Or of beyond? it advance is is upsell security bringing kind already give that? to and AI customer

Shlomi Haim

Wonderful question. conference sell generate Currently, we the more factors at pace more we very customers might week business what announced pushing capabilities Universe There and the are determine X just of on One is to it innovation GitHub of we is innovation co-engineering the our not, that that X prospects with with this is and -- are including can hard, partners, of -- actually be of good a ago our bringing or some and a board; CoPilot. two customers; will together together. at GitHub whether three retention right? partnership

We co-sell all and a CoPilot. are consider it DevOps together security At moment, future mechanism the AI might pursuing X in we fronts, with our with are with We not Microsoft. on partners. this

Operator

question next Our with of Securities. comes Miller from [indiscernible] the line Truist

Unknown Analyst

Great.

back earlier. I wanted Ryan's to to your Shlomi, comments question So on go

self-managed the estimates. kind causing some their cloud customers self-managed as feet, on quarter, the outperformance this about driver talked deals top of just side against was looking our to You the at larger drag of migrations, well. But line signing

So I'm getting comfortable just you trying staying customers on-prem? to change understand, there's no saying there? Or are are more like,

Shlomi Haim

you of process. to know don't No. quarter, but saying this if [indiscernible] where migrate or remember, managers is business, zone, Actually, Miller, of because they complete strategically are called they they board the the what going have we to [indiscernible] the the even the to last cloud, the they are that the twilight

chose invest to, [indiscernible] staying posted, but they they service. and adopting other MLOps while in option, cannot not they adopting security adding because So any because more and have don't

So QX keep because running saw what what big the years we XXXX, momentum that happens we are the this cloud. with migration of the that for that business believe will and strategic deal a quarter fourth in to us to the woods. is to with out have the they with planning they We very but not we conservative be have gone in are they yet

Unknown Analyst

Understood.

Okay.

cases, year? So also in having I to if all actually to case, I these that contracts the vendors you guess with wait I that the double you QX you other to out. do consolidation rest of guess is the have the expect relatively more in just on are opportunities click the to called for expand of those to opportunities end customer? And want

Sanjit Singh

are met swap software one seen supply a covering Consolidation that do not tool day, year. from XX hear what But over customers, on another have an a it's vendor customers even to want even security we a from matter just a to vendors. enterprise how they or from switched at never They what a X never that had And is our -- I hear chain. what to technology customer the nobody that don't you consolidate. technology over what I to up want of or is about. you the supplies multiple is They compromising don't want we CIO, our software and security. when have heard they talking

This of sunsetting we loudly CISOs be being slowly market. the of very expressed what competitor probably beginning, is So by solutions. customers. running This in in it and the parallel from the our would the kind and CIOs the is hear point

Operator

Koji form of America. Ikeda Bank line Our next of question comes from the

Koji Ikeda

a committing reserveness for Just And today. I one here me. of to of the on JFrog into kind wanted scale the with buyer double-click bigger on

very that a you maybe within being that's driving JFrog like And understanding just this there's of little the offering of to reserved invest answer another understand what JFrog? question. buyer future with It so with in in up this little sounds JFrog deployed or also way a today the something there component your the bit to alluded little is really posture. is a And is specific to to this enterprises in more. Shlomi, I'm trying needed a catch used bit more the to bit

Shlomi Haim

born what it the that were they we of So in X history. more. that is see? -- company's QX, This sizable QX, in deals ever see won born is and in ago a the most year was We JFrog not even

Connect our X the JFrog discussed have choose And technologies be playbook, level, understand and other only some start we the to customers very to are is the Strategically, but level I'm that customers JFrog, of adding also different like for glad that the C-level, chain a to and we happy -- on supply JFrog. see What to about on buyer chose and this and devices. from going platform, question that being buyer, not completely DevSecOps they DevOps by that even and they managed not a by very there. by technologies, budget more your line spend our got VP software board to the need grew they to IoT just now start their doubling

the This by we Board see the the macro. in now. size And would communicated are we happened be not deal is with minus But what that we being the This approvals X we of conservative again, very is what sometimes with signed minus a when themselves. QX. pipeline but the saw what X, in or CEO

Operator

comes line question Sherman Andrew TD next from of from Our the Cowen.

Andrew Sherman

pipeline? to closing. of Great the And type about big those? in have the rates visibility your these factored quarter. Are the on timing there? pipeline? of hear deals into QX big these about How deals what's you and any close your Congrats more in deals Wondering of there

Shlomi Haim

something deals that born quarter that few was call obviously no There before. we a That's for right? it quarters, see or pipeline big Yes. that we a for negatives is

every pipeline, the we yes, and bottom those we see but pipeline. from answer about quarters customers well top the So at the communicate down. And derisk sizable up deals as future deal in is with the looking are We the our we strategy.

our a push bit it's we Sometimes, security because to it opportunity decision now to and add even maybe can deal a win meet to it. the

not strategy longer. the the it's strategically customers, It's we with of adoption also a our the we the full macro, only of might platform. when stick So bit take

consideration your see a to pipeline we opportunity derisking to So also we environment the very moving we excited before. to reported and we pipeline on the in as into optimize And the the basis macro daily forward. what are about are take question,

Andrew Sherman

great. That's

for more one you. Just

when binaries but think that that your revenues up revenue for I potentially do are thoughts more I On we in still I huge, drive would show and see you? these could love on you, we for would we're could AI front, think, storage hear early, the know AI that. but to

Shlomi Haim

clear. question. very AI, Putting binary. [indiscernible] equal AI make let's Yes. aside, model equals it Great models,

So and the see even production, clarity, the future in it an right the will the R&D in engine. up include ground will questions will that to we them, will bit at have I regulation growth And customers, path mode. we for for it and of more had are you. quarters. customers than open of so bracing are compliance about experiment it were take the solution The a my know take are the this answer if investing in and our and when all just to I budget, at the including adopt scale obviously, question and When that I for and we looking there a paving we guidance. security growth think down, that many seeds most I paying wish with MLOps Currently, [indiscernible]. those we longer plant few

Operator

UBS. from Our Hickey the comes from next line of Jeff question

Koji Ikeda

monthly get I could any we color customers. ask to on wanted if

customers. steady patterns where Or change quarter, you're with mid-August. were you would monthly what has guide been think trends year any usage we early there I kind side. committed internally? described from Last there from in back on cloud that you the derisk you're really consistent this the seeing cloud Are seeing to side the partially those of amongst

Shlomi Haim

I'll Jeff. our we groups, retention dollars quarter. growth are reason a see for and What go that usage not and and profile, them in. that incentivize users last will what we that of ARR also by the funnel we reducing is we discussed strategically but that by cloud terms Ed is you, of we and see the annual doing thousands cloud don't only enterprise but X become And monthly data to and Thank platform I volatility those couple this to is high, what customers the our of chime start, will in go is happy And see that the with are serve did. main and only of is are the to ready is top this not year as of them, and what annual. but

had adopting the want migrating volatility to year, part to And will the progress strategy base very are and true-up of moving but these and some the to to the also that and last on security. of reduce just we an in of we movement annual with happy our upgrades solution, more more XXXX. monthly be than of we see DevOps Currently, the future, customers for them hopefully, this

Ed Grabscheid

expect saying, would come have with decline stable the consistent those to cloud over and carry forward to are that time. with the of continue with to time, been And customers for saw around as XX% it's strategy moving And we compared and monthly those on Shlomi customers, previously. our start down what just to annual monthly And them monthly expectations. customers usage Yes. we to over is we the move those contribution what has customers from

Joseph Hickey

That's retention color. else quick just in mid-teens, trailing at of metric. growth there relative that's we net dollar through And mind now, and really Ed, keep on just maybe one helpful algorithm you're conservatism it. for XXX we're then reiterating the outside mentioned earlier. should just you Is follow-up. as XX-month a the Got anything guidance, right a

Ed Grabscheid

from much fact take question. into in the approach, that's we wouldn't Jeff, I the mid-teens outlook Yes, good too factored besides very the forward. that projecting and going we're a that guidance in remain that's that being the conservative

Operator

comes Our Reback the from next line from Stifel. Brad of question

Brad Reback

of sense of the give million $XX you that much RPO long us how RPO, was versus sequential can term? Ed, a current increase in

Ed Grabscheid

current our is on RPO on year-over-year RPO We basis. growth around Sure. a had and $XXX of is current XX% million that

Brad Reback

or ticked helpful. like year, numbers you question, super That's it XXs? than quarter year, going down the about the this margin night. know think we'll in for And the I Is to forward? looks less Great. exit the then Gross XX hopefully obviously that about last and each that. How low but we for stabilizing talked should into maybe XXs XX

Ed Grabscheid

Yes.

see mix. cloud is we see change in revenue what So we the more and start to a

lower cloud. margin We profile our have a for

to on continue cost cloud focus terms of in optimization of We our revenue.

our of cloud to basis. start greater However, margins saw decline mix that becomes start terms of versus would would a time. gross what is that would our XX% mix piece QX. We in during move would expect on margins forward our you a gross that from had year and total I revenue to and we expect, cloud last a year-over-year our as as of we bigger XX% shifts, over coming is at decline. This revenue,

Operator

question next comes from from KeyBanc Celino Jason Our the Capital Markets. of line

Jason Celino

the not more last coming the revenue free a than but by like looks free question, up on nicely question of raise. Actually cash flow flow the guide night. quite the kind It cash numbers is

that? what's of Just to leading curious kind

Ed Grabscheid

deals, the talked the what to that during fact we about closed very leading Well, we several that very, quarter. what's large is

quarter the Three company the history So is contributing the of largest deals execution the in free during of flow. to with the cash the

multiyear pay the we collections that have some can of In cash general, upfront. that the timing from just quarter-to-quarter. shift very do But in a strong a flow addition to are customers free

Jason Celino

over guess is quarters? I the what some interest anecdotal partnership couple Okay. maybe sense. co-innovation curation, the from announcement? top-of-funnel today I advanced That And before of you anecdotal with about moment. Shlomi, you've GitHub versus security for drivers GitHub before top last being looks trying of immediate at talked if the then can Curious I'm makes think partnership, of seen or funnel share to you phase the that -- that pipeline in any metrics what like the ask or

Shlomi Haim

even exposed a question. good GitHub of will co-engineered security of glass are that single using only buy X they integration the our any it's that's are platform. are differentiator. GitHub, using as Yes, think I customers that a platform, customers are our pane bucket. very it. Atlassian the pricing a Enterprise Enterprise of JFrog, on way a feature, also users. customers X page integration And that sensitive and presented It's the because don't to But differentiator Plus customers strong security of on Even been and these as best-of-breed to that or GitHub big with for the

So but it not on catalysts. panel, momentum only it the it's I think the cannot of the be just top -- of reason. creates some one It's

Operator

William question Blair. next the of line Ader Our Jason comes from

Jason Ader

incorrectly? want say in have Did -- QX. hear I just of the you to subscription growth rate as did couple you Ed, ones QX for a quick that Just that similar me. I would a clarify, business that self-managed

Ed Grabscheid

that I -- QX would quarter. see revenue QX. believe is upfront but of I that, think in contribution to about Therefore, said self-managed portion, because what I we would our it would way is the renewal didn't. don't highest you the get Jason, the I

with be growth the will We in few we've expect quarters. seen over last self-managed basically what the that line

Jason Ader

But get Okay. XX% QX, be which that in around year, in to trying would the because for square $XX cloud-managed assume means cloud to somewhat to I'm million have just that would to sequentially licenses QX. lower year-over-year, subscription down growth self-managed I'm like growth licenses that way in full growth much work. a unless are the double-digit math in rate rate, self-managed doesn't if something even in be down with just growth X% missing otherwise, which would not and

trying I'm that figure So to out.

Ed Grabscheid

a maybe rate, or most likely point, percentage down. same down the up around be will self-managed Your

Jason Ader

But to year you Okay. point. for get the That's then the on cloud. can't XX%

math the Just doesn't work.

You midpoint gave $XXX guidance. a million

So The work. can doesn't offline. we math this take

Ed Grabscheid

the to year. around for XX% guided We

Jason Ader

Okay.

sounding, to the growth, rate to -- cloud is get [indiscernible]that to rate you self-managed XX like won't not that's year. year-over-year. your in for in growth QX growth number you it the the The Just math. XX% if will close I'm get just will

Ed Grabscheid

We'll talk you after XX% around we it's for It's help correct. the but to can call, year. that's that, with Yes, XX%. full you the around

Jason Ader

be like Okay. below to it sounds going XX%. it's But

Shlomi Haim

it think take a as can I Jason, we follow-up.

Our no the significant but what for is you The guidance Street on [indiscernible] that's commit. do change, the math with we cloud, the if want, XX% later,

Jason Ader

just And Okay. I QX? are And exiting of what just to mind? in the do specific how that all, And the that want get think target? to with do you let's there puts retention expect and then then on I a to All what right. sort I year, And net believe target it's forward? is going mid-teens first get retention, of mean, there? QX drives you sense where said and you right? you So to the of get then know net Like kind going stable that in a year? if be do your takes you to, say, a

Ed Grabscheid

Yes.

focused QX this see on dollar the we mid-teens. for and QX of stabilization into going our and we're retention the So rate around full call net year fiscal is what

Shlomi Haim

predicted. As

Jason Ader

trying not to what of it would -- security some but net renewals? what Would puts just the you're giving these larger just know what... I takes of are And you. and it be -- again, be Got higher? would guidance, drive retention dollar I'm I'm understand

Shlomi Haim

triggered dollar cloud retention net Jason, by security migrations. add-on is and

Jason Ader

cloud Security items and migration.

Operator

end session call will the back I we for will the now turn constraints, to time Q&A over here. to closing Shlomi Due remarks.

Shlomi Haim

Take deliver by itself. JFrog, be and X,XXX resilience, the will a have XXXX, with very working you may for care. I joining for to very deliver. swamp, and quarter. smart is we thank and strong want the happening committed to We people not today frog had strong us We a Yes. here you. from This

Operator

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

now may disconnect. You

JFrog (FROG) 7 Nov 242024 Q3 Earnings call transcript