Total Revenues of $109.1 million; up 23% Year-over-Year
Cloud Revenues up 38% Year-over-Year; driven by cloud migrations and security
Customers with ARR Greater than $1 million equaled 46, up 53% Year-over-Year
Announced expansion of the JFrog Platform with MLOps and Runtime Security

JFrog Ltd. ("JFrog") (NASDAQ:FROG), the Liquid Software company and creators of the JFrog Software Supply Chain Platform, today announced financial results for its third quarter ended September 30, 2024.

"Our third quarter results reflect strong execution in a tight budgetary environment, with some of the largest enterprise wins in JFrog's history," said Shlomi Ben Haim, Co-founder and CEO of JFrog. "The continued expansion of the JFrog Platform - with Artifactory at its core as the single source of truth for DevOps, DevSecOps, and MLOps - laid the foundation for future success, while remaining aligned with our DNA of driving efficient growth," Ben Haim added.

Third Quarter 2024 Financial Highlights

Revenue for the third quarter of 2024 was $109.1 million, up 23% year-over-year.
GAAP Gross Profit was $81.8 million; GAAP Gross Margin was 75.0%.
Non-GAAP Gross Profit was $90.3 million; Non-GAAP Gross Margin was 82.8%.
GAAP Operating Loss was ($29.9) million; GAAP Operating Margin was (27.4%).
Non-GAAP Operating Income was $14.7 million; Non-GAAP Operating Margin was 13.5%.
GAAP Net Loss Per Share was ($0.21); Non-GAAP Diluted Earnings Per Share was $0.15.
Operating Cash Flow was $27.6 million; Free Cash Flow of $26.7 million.
Cash, Cash Equivalents and Investments were $467.8 million as of September 30, 2024.
Remaining performance obligations were $346.1 million as of September 30, 2024.

Recent Business & Product Highlights

Cloud revenue equaled $42.4 million during the third quarter of 2024, an increase of 38% year-over-year. Cloud revenue represented 39% of total revenue, compared to 35% in the year-ago period.
Net Dollar Retention rate for the trailing four quarters was 117%.
Customers with greater than $100K ARR increased to 966, compared with 848 in the year-ago period.
Customers with greater than $1 million ARR increased to 46, up from 30 in the year-ago period.
Customers adopting the end-to-end JFrog Platform Enterprise+ subscription represented 50% of total revenue during the third quarter of 2024 versus 46% in the year-ago period.
Announced JFrog Runtime Security, driving traceability from code to production and back.
Announced GitHub and JFrog Platform integrations at 10th annual swampUP user conference, delivering seamless DevSecOps and AI experiences across code and binaries.
Announced collaboration with NVIDIA to deliver secure machine learning (ML) models and large language models (LLMs) with transparency, traceability, and trust.
Announced JFrog ML to bridge Data Science and DevSecOps processes for machine learning, based on JFrog's own technologies and its recently-acquired Qwak AI MLOps technologies.

Fourth Quarter and Fiscal Year 2024 Outlook

Fourth Quarter 2024 Outlook:
- Revenue between $113.5 million and $114.5 million
- Non-GAAP operating income between $14.0 million and $15.0 million
- Non-GAAP net income per diluted share between $0.13 and $0.15, assuming approximately 117 million weighted average diluted shares outstanding

Fiscal Year 2024 Outlook:
- Revenue between $425.9 million to $ 426.9 million
- Non-GAAP operating income between $56.4 million and $57.4 million
- Non-GAAP net income per diluted share between $0.59 and $0.61, assuming approximately 116 million weighted average diluted shares outstanding

The section titled "Non-GAAP Financial Information" below describes our usage of non-GAAP financial measures. Reconciliations between historical GAAP and non-GAAP information are contained at the end of this press release following the accompanying financial data.

Conference Call Details

Event: JFrog's Third Quarter 2024 Financial Results Conference Call
Date: Thursday, November 7, 2024
Time: 2:00 p.m. PT (5:00 p.m. ET)

A live webcast of the conference call will be accessible from the investor relations website at https://investors.jfrog.com/events-and-presentations.

About JFrog

JFrog Ltd. (NASDAQ:FROG), is on a mission to create a world of software delivered without friction from developer to device. Driven by a "Liquid Software" vision, the JFrog Software Supply Chain Platform is a single system of record that powers organizations to build, manage, and distribute software quickly and securely, ensuring it is available, traceable, and tamper-proof. The integrated security features also help identify, protect, and remediate against threats and vulnerabilities. JFrog's hybrid, universal, multi-cloud platform is available as both self-hosted and SaaS services across major cloud service providers. Millions of users and 7K+ customers worldwide, including a majority of the Fortune 100, depend on JFrog solutions to securely embrace digital transformation. Learn more at www.jfrog.com or follow us on X @JFrog.

Forward-Looking Statements:

This press release and the earnings call referencing this press release contain "forward-looking" statements, as that term is defined under the U.S. federal securities laws, including but not limited to statements regarding JFrog's future financial performance, including our outlook for the fourth quarter and for the full year of 2024, expectations regarding the market and revenue potential for the JFrog Platform, including JFrog Artifactory, JFrog Xray, JFrog Curation, JFrog Advanced Security, JFrog ML and JFrog Runtime Security, and including the efficacy and benefit of integrating of any of the foregoing with other products and platform, our expectations regarding the mission-critical nature of the "JFrog Platform" to our customers' infrastructure and its growth potential, the growth potential of our cloud business, including hybrid and multi-cloud, our expectations regarding potential for growth in binary management within MLOps/MLSecOps, our ability to provide effective tools and solutions to detect and remediate security vulnerabilities, our expectations regarding our strategic integrations and collaborations, the ability of our strategic sales team to grow the business across top-tier accounts, our ability to expand usage of our platform in the government and commercial sectors, our ability to contribute data to global security standards bodies, our ability to innovate and meet market demands and the software supply chain needs of our customers and our expectations regarding the integration of Qwak AI's business into ours, including our ability to successfully integrate into our business operations, including our software supply chain-focused platform, and realize anticipated benefits and synergies from the acquisition. These forward-looking statements are based on JFrog's current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause JFrog's actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement.

There are a significant number of factors that could cause actual results to differ materially from statements made in this press release and our earnings call, including but not limited to: risks associated with managing our rapid growth; our history of losses; our limited operating history; our ability to retain and upgrade existing customers our ability to attract new customers; our ability to effectively develop and expand our sales and marketing capabilities; our ability to integrate and realize anticipated synergies from acquisitions of complementary businesses and our strategic collaborations; risk of a security breach incident or product vulnerability; risk of interruptions or performance problems associated with our products and platform capabilities; our ability to adapt and respond to rapidly changing technology or customer needs; our ability to compete in the markets in which we participate; our ability to successfully integrate technology from acquisitions into our offerings; our ability to provide continuity to our respective customers and realize innovation following our acquisitions; and general market, political, economic, and business conditions. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in our filings with the Securities and Exchange Commission, including in our annual report on Form 10-K for the year ended December 31, 2023, our quarterly report on Form 10-Q for the quarter ended March 31 and June 30, 2024, and other filings and reports that we may file from time to time with the Securities and Exchange Commission. Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.

About Non-GAAP Financial Measures:

JFrog discloses the following non-GAAP financial measures in this release and the earnings call referencing this press release: non-GAAP operating income (loss), non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (research and development, sales and marketing, general and administrative), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share, non-GAAP net income (loss) per basic share, and free cash flow. JFrog uses each of these non-GAAP financial measures internally to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate JFrog's financial performance. JFrog believes they are useful to investors, as a supplement to GAAP measures, in evaluating its operational performance, as further discussed below. JFrog's non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to non-recurring and unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on JFrog's reported financial results.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. A reconciliation of the historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, reconciling items that may be incurred in the future such as share-based compensation, the effect of which may be significant.

JFrog defines non-GAAP gross profit, non-GAAP operating expenses (research and development, sales and marketing, general and administrative), non-GAAP gross margin, non-GAAP operating margin, non-GAAP operating income (loss) and non-GAAP net income (loss) as the respective GAAP balances, adjusted for, as applicable: (1) share-based compensation expense; (2) the amortization of acquired intangibles; (3) acquisition-related costs; and (4) income tax effects. JFrog defines free cash flow as Net cash provided by (used in) operating activities, minus capital expenditures. Investors are encouraged to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.

Management believes these non-GAAP financial measures are useful to investors and others in assessing JFrog's operating performance due to the following factors:

Share-based compensation. JFrog utilizes share-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its shareholders and at long-term retention, rather than to address operational performance for any particular period. As a result, share-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.

Amortization of acquired intangibles. JFrog views amortization of acquired intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of acquired intangibles is an expense that is not typically affected by operations during any particular period.

Acquisition-related costs. Acquisition-related costs include expenses related to acquisitions of other companies. JFrog views acquisition-related costs as expenses that are not necessarily reflective of operational performance during a period.

Income tax effects. JFrog's non-GAAP financial results are adjusted for income tax effects related to these non-GAAP adjustments and changes in our assessment regarding the realizability of our deferred tax assets, if any. Excluding income tax effects of non-GAAP adjustments provides a more accurate view of JFrog's operating results.

Non-GAAP weighted average share count. Diluted GAAP and non-GAAP weighted-average shares are the same, except in periods that there is a GAAP loss and a non-GAAP income. The non-GAAP weighted-average shares used to compute the non-GAAP net income per share - diluted are adjusted to reflect dilution equal to the dilutive impact had there been GAAP income.

Additionally, JFrog's management believes that the non-GAAP financial measure, free cash flow, is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations.

Operating Metrics

JFrog's number of customers with annual recurring revenue ("ARR") of $100,000 or more is based on the ARR of each customer, as of the last month of the quarter. JFrog's number of customers with ARR of $1 million or more is based on the ARR of each customer, as of the last month of the quarter. JFrog defines ARR as the annualized revenue run-rate of subscription agreements from all customers as of the last month of the quarter. The ARR includes monthly subscription customers, so long as JFrog generates revenue from these customers. JFrog annualizes its monthly subscriptions by taking the revenue it would contractually expect to receive from such customers in a given month and multiplying it by 12.

JFrog's net dollar retention rate compares its ARR from the same set of customers across comparable periods. JFrog calculates net dollar retention rate by first identifying customers (the "Base Customers"), which were customers in the last month of a particular quarter (the "Base Quarter"). JFrog then calculates the contracted ARR from these Base Customers in the last month of the same quarter of the subsequent year (the "Comparison Quarter"). This calculation captures upsells, contraction, and attrition since the Base Quarter. JFrog then divides total Comparison Quarter ARR by total Base Quarter ARR for Base Customers. JFrog's net dollar retention rate in a particular quarter is obtained by averaging the result from that particular quarter with the corresponding results from each of the prior three quarters.

JFROG LTD. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data; unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Revenue:
Subscription—self-managed and SaaS	$	103,487		$	84,131		$	297,297		$	238,141
License—self-managed		5,569			4,505			15,113			14,485
Total subscription revenue		109,056			88,636			312,410			252,626
Cost of revenue:
Subscription—self-managed and SaaS^(1)(2)(3)		27,156			19,532			69,363			55,966
License—self-managed⁽³⁾		135			218			425			654
Total cost of revenue—subscription		27,291			19,750			69,788			56,620
Gross profit		81,765			68,886			242,622			196,006
Operating expenses:
Research and development⁽¹⁾⁽²⁾		42,996			33,358			115,945			101,788
Sales and marketing^(1)(2)(3)		50,956			37,915			140,423			109,753
General and administrative⁽¹⁾⁽²⁾		17,733			15,663			51,937			44,635
Total operating expenses		111,685			86,936			308,305			256,176
Operating loss		(29,920	)		(18,050	)		(65,683	)		(60,170	)
Interest and other income, net		5,705			5,733			19,690			14,621
Loss before income taxes		(24,215	)		(12,317	)		(45,993	)		(45,549	)
Income tax expense (benefit)		(1,270	)		1,430			45			4,474
Net loss	$	(22,945	)	$	(13,747	)	$	(46,038	)	$	(50,023	)
Net loss per share, basic and diluted	$	(0.21	)	$	(0.13	)	$	(0.42	)	$	(0.49	)
Weighted-average shares used in computing net loss per share, basic and diluted		110,772			104,135			108,921			102,646

(1) Includes share-based compensation expense as follows:
Cost of revenue: subscription—self-managed and SaaS	$	3,864		$	2,650		$	10,203		$	6,865
Research and development		13,611			8,596			33,453			23,566
Sales and marketing		13,506			8,248			33,759			21,461
General and administrative		5,414			6,192			14,922			15,028
Total share-based compensation expense	$	36,395		$	25,686		$	92,337		$	66,920

(2) Includes acquisition-related costs as follows:
Cost of revenue: subscription–self-managed and SaaS	$	1		$	6		$	9		$	16
Research and development		1,628			1,251			2,605			6,931
Sales and marketing		546			19			610			89
General and administrative		180			18			856			158
Total acquisition-related costs	$	2,355		$	1,294		$	4,080		$	7,194

(3) Includes amortization of acquired intangibles as follows:
Cost of revenue: subscription–self-managed and SaaS	$	4,493		$	2,386		$	9,265		$	7,160
Cost of revenue: license—self-managed		135			218			425			654
Sales and marketing		1,259			357			1,975			1,073
Total amortization expense of acquired intangible assets	$	5,887		$	2,961		$	11,665		$	8,887

JFROG LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands; unaudited)

	September 30, 2024			December 31, 2023
Assets
Current assets:
Cash and cash equivalents	$	62,246		$	84,765
Short-term investments		405,540			460,245
Accounts receivable, net		92,892			76,437
Deferred contract acquisition costs		14,929			11,378
Prepaid expenses and other current assets		17,769			12,976
Total current assets		593,376			645,801
Property and equipment, net		6,051			6,663
Deferred contract acquisition costs, noncurrent		22,631			18,032
Operating lease right-of-use assets		16,268			22,427
Intangible assets, net		66,739			25,768
Goodwill		371,377			247,955
Other assets, noncurrent		4,447			5,910
Total assets	$	1,080,889		$	972,556
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable	$	16,282		$	16,970
Accrued expenses and other current liabilities		43,803			35,815
Operating lease liabilities		8,150			8,272
Deferred revenue		223,985			201,118
Total current liabilities		292,220			262,175
Deferred revenue, noncurrent		20,257			12,987
Operating lease liabilities, noncurrent		7,693			13,954
Other liabilities, noncurrent		4,513			4,317
Total liabilities		324,683			293,433
Shareholders' equity:
Share capital		312			297
Additional paid-in capital		1,091,910			968,245
Accumulated other comprehensive income		454			1,013
Accumulated deficit		(336,470	)		(290,432	)
Total shareholders' equity		756,206			679,123
Total liabilities and shareholders' equity	$	1,080,889		$	972,556

JFROG LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands; unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Cash flows from operating activities:
Net loss	$	(22,945	)	$	(13,747	)	$	(46,038	)	$	(50,023	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		6,980			3,837			14,605			11,512
Share-based compensation expense		36,395			25,686			92,337			66,920
Non-cash operating lease expense		2,104			2,149			6,323			6,294
Net amortization of premium or discount on investments		(1,388	)		(1,718	)		(5,134	)		(4,588	)
Losses (gains) on foreign exchange		6			(278	)		360			(869	)
Changes in operating assets and liabilities, net of effect of acquisition:
Accounts receivable		(10,227	)		1,558			(15,782	)		1,337
Prepaid expenses and other assets		(1,905	)		2,491			(6,923	)		530
Deferred contract acquisition costs		(6,582	)		(3,175	)		(8,150	)		(4,769	)
Accounts payable		(732	)		1,794			(1,669	)		(119	)
Accrued expenses and other liabilities		5,066			1,905			7,958			4,935
Operating lease liabilities		(2,040	)		(2,048	)		(6,207	)		(5,818	)
Deferred revenue		22,908			7,527			30,126			16,220
Net cash provided by operating activities		27,640			25,981			61,806			41,562
Cash flows from investing activities:
Purchases of short-term investments		(123,603	)		(98,738	)		(379,546	)		(303,310	)
Maturities and sales of short-term investments		93,284			83,676			439,067			266,847
Purchases of property and equipment		(936	)		(591	)		(2,509	)		(1,364	)
Acquisition of business, net of cash acquired		(156,714	)		—			(156,714	)		—
Net cash provided by used in investing activities		(187,969	)		(15,653	)		(99,702	)		(37,827	)
Cash flows from financing activities:
Proceeds from exercise of share options		1,097			2,066			8,804			5,433
Proceeds from employee share purchase plan		4,250			3,166			8,744			6,665
Payments to tax authorities from employee equity transactions, net		(445	)		(1,149	)		(724	)		(332	)
Net cash provided by financing activities		4,902			4,083			16,824			11,766
Effect of exchange rate changes on cash, cash equivalents and restricted cash		117			(121	)		(700	)		(112	)
Net increase (decrease) in cash, cash equivalents, and restricted cash		(155,310	)		14,290			(21,772	)		15,389
Cash, cash equivalents, and restricted cash—beginning of period		218,315			46,706			84,777			45,607
Cash, cash equivalents, and restricted cash—end of period	$	63,005		$	60,996		$	63,005		$	60,996
Reconciliation of cash, cash equivalents, and restricted cash within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows above:
Cash and cash equivalents	$	62,246		$	60,984		$	62,246		$	60,984
Restricted cash included in prepaid expenses and other current assets		759			12			759			12
Total cash, cash equivalents, and restricted cash	$	63,005		$	60,996		$	63,005		$	60,996

JFROG LTD. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (in thousands except per share data; unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Reconciliation of gross profit and gross margin
GAAP gross profit	$	81,765		$	68,886		$	242,622		$	196,006
Plus: Share-based compensation expense		3,864			2,650			10,203			6,865
Plus: Acquisition-related costs		1			6			9			16
Plus: Amortization of acquired intangibles		4,628			2,604			9,690			7,814
Non-GAAP gross profit	$	90,258		$	74,146		$	262,524		$	210,701
GAAP gross margin		75.0	%		77.7	%		77.7	%		77.6	%
Non-GAAP gross margin		82.8	%		83.7	%		84.0	%		83.4	%

Reconciliation of operating expenses
GAAP research and development	$	42,996		$	33,358		$	115,945		$	101,788
Less: Share-based compensation expense		(13,611	)		(8,596	)		(33,453	)		(23,566	)
Less: Acquisition-related costs		(1,628	)		(1,251	)		(2,605	)		(6,931	)
Non-GAAP research and development	$	27,757		$	23,511		$	79,887		$	71,291

GAAP sales and marketing	$	50,956		$	37,915		$	140,423		$	109,753
Less: Share-based compensation expense		(13,506	)		(8,248	)		(33,759	)		(21,461	)
Less: Acquisition-related costs		(546	)		(19	)		(610	)		(89	)
Less: Amortization of acquired intangibles		(1,259	)		(357	)		(1,975	)		(1,073	)
Non-GAAP sales and marketing	$	35,645		$	29,291		$	104,079		$	87,130

GAAP general and administrative	$	17,733		$	15,663		$	51,937		$	44,635
Less: Share-based compensation expense		(5,414	)		(6,192	)		(14,922	)		(15,028	)
Less: Acquisition-related costs		(180	)		(18	)		(856	)		(158	)
Non-GAAP general and administrative	$	12,139		$	9,453		$	36,159		$	29,449

Reconciliation of operating income (loss) and operating margin
GAAP operating loss	$	(29,920	)	$	(18,050	)	$	(65,683	)	$	(60,170	)
Plus: Share-based compensation expense		36,395			25,686			92,337			66,920
Plus: Acquisition-related costs		2,355			1,294			4,080			7,194
Plus: Amortization of acquired intangibles		5,887			2,961			11,665			8,887
Non-GAAP operating income	$	14,717		$	11,891		$	42,399		$	22,831
GAAP operating margin		(27.4	)%		(20.4	)%		(21.0	)%		(23.8	)%
Non-GAAP operating margin		13.5	%		13.4	%		13.6	%		9.0	%

Reconciliation of net income (loss)
GAAP net loss	$	(22,945	)	$	(13,747	)	$	(46,038	)	$	(50,023	)
Plus: Share-based compensation expense		36,395			25,686			92,337			66,920
Plus: Acquisition-related costs		2,355			1,294			4,080			7,194
Plus: Amortization of acquired intangibles		5,887			2,961			11,665			8,887
Less: Income tax effects		(4,277	)		420			(9,195	)		1,658
Non-GAAP net income	$	17,415		$	16,614		$	52,849		$	34,636
Net income per share - basic	$	0.16		$	0.16		$	0.49		$	0.34
Net income per share - diluted	$	0.15		$	0.15		$	0.46		$	0.32
Shares used in non-GAAP net income per share calculations:
GAAP weighted-average shares used to compute net loss per share - basic and diluted		110,772			104,135			108,921			102,646
Add: Dilutive ordinary share equivalents		4,486			6,056			6,099			5,747
Non-GAAP weighted-average shares used to compute net income per share - diluted		115,258			110,191			115,020			108,393

JFROG LTD. RECONCILIATION OF GAAP CASH FLOW FROM OPERATING ACTIVITIES TO FREE CASH FLOW (in thousands; unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2024			2023			2024			2023
Net cash provided by operating activities	$	27,640		$	25,981		$	61,806		$	41,562
Less: purchases of property and equipment		(936	)		(591	)		(2,509	)		(1,364	)
Free cash flow	$	26,704		$	25,390		$	59,297		$	40,198

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