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press release

Aug. 5, 2021, 4:05 p.m. EDT

JFrog Announces Second Quarter Fiscal 2021 Results

Quarterly Revenue Increases 34% Record Quarterly Operating Cash Flow of $19.2 million; Record Free Cash Flow of $18.0 million Completes the Acquisition of Vdoo - the Creators of the Product Security Platform - After Quarter End

SUNNYVALE, Calif., (BUSINESS WIRE) -- JFrog Ltd. /zigman2/quotes/220991554/composite FROG +1.44% , the liquid software company, today announced financial results for its second quarter ended June 30, 2021.

“JFrog again reported a strong quarter across the business - including revenue growth, gross margin, and record cash flow - while delivering technical innovations around security, binary distribution and more,” said Shlomi Ben Haim, JFrog’s Co-Founder and CEO. “To support the ongoing transformation of the DevSecOps market, we also took a major leap forward with the acquisition of Vdoo. When integrated with the JFrog Platform, we believe Vdoo will provide security all the way from development to IoT and other edge points. Our vision is to be the Company powering all software updates, and our continued investment in R&D and go-to-market brings us ever-closer to this reality, while positioning us for accelerating growth in the second half of the year.”

Second Quarter Financial Highlights

  • Revenue for the second quarter of 2021 was $48.7 million, an increase of 34% from $36.4 million for the second quarter of 2020.

  • GAAP Gross Profit was $39.6 million; GAAP Gross Margin was 81.4%.

  • Non-GAAP Gross Profit was $40.6 million; Non-GAAP Gross Margin was 83.4%.

  • GAAP Operating Loss was ($14.2 million); GAAP Operating Margin was (29.2%).

  • Non-GAAP Operating Income was $1.0 million; Non-GAAP Operating Margin was 2.0%.

  • GAAP Net Loss Per Diluted Share was ($0.14); Non-GAAP Net Income Per Diluted Share was $0.01.

  • Operating Cash Flow was $19.2 million, with Free Cash Flow of $18.0 million.

  • Cash, Cash Equivalents and Investments were $615.2 million as of June 30, 2021.

Second Quarter & Recent Business Highlights

  • At quarter end, 415 customers had ARR greater than $100,000; 12 customers had ARR above $1 million.

  • Net Dollar Retention rate for the trailing four quarters was 129%.

  • Cloud revenue in Q2 grew by 47% to $11.5 million over the same period last year, representing 24% of total revenue, up from 21% a year ago.

  • At quarter end, customers using the complete JFrog Platform (Enterprise+ subscription) represented 32% of revenue in the second quarter of 2021, versus 17% in the second quarter of 2020.

  • Completed the acquisition of Vdoo for approximately $287 million to deliver holistic, end-to-end, continuous security from development to device.

  • Hosted swampUP 2021, JFrog’s annual user conference for thousands of global attendees, affecting millions of developers.

  • Announced new product capabilities and innovations, including Private Distribution Network, Federated Repositories, Signed Pipelines and Cold Artifact Storage.

  • Announced the hiring of a new Executive Vice President of Product and Engineering.

Third Quarter and Full Year 2021 Outlook

  • Third Quarter 2021 Outlook:

  • Full Year 2021 Outlook:

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

About JFrog

JFrog, the creator of the DevOps platform, is on a “Liquid Software” mission to enable the flow of software seamlessly and securely from the developer’s keystrokes to production. The end-to-end, hybrid JFrog Platform provides the tools and visibility required by modern software development organizations to fully embrace the power of DevOps. JFrog’s universal, multi-cloud DevOps platform is available as open-source, self-managed, and SaaS services on AWS, Microsoft Azure, and Google Cloud. JFrog is trusted by millions of users and thousands of customers, including a majority of the Fortune 100 companies that depend on JFrog solutions to manage their mission-critical software delivery pipelines. Learn more at jfrog.com .

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 third quarter and for the full year of 2021, our leadership position in the markets in which we participate, our expectations regarding the acquisition of Vdoo by us, including our ability to successfully integrate the acquisition into our business operations, including the DevOps platform, and realize anticipated benefits and synergies from the acquisition, our ability to accelerate growth in the second half of 2021, and our ability to meet market demands. 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; risk of a security breach; 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 Vdoo’s technology into our offerings; our and Vdoo’s ability to provide continuity to our respective customers following the acquisition, and our ability to realize innovations following the acquisition; general market, political, economic, and business conditions; and the duration and impact of the COVID-19 pandemic. 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, 2020, our quarterly report on Form 10-Q for the quarter ended March 31, 2021, our quarterly report on Form 10-Q for the quarter ended June 30, 2021, 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. JFrog defines non-GAAP weighted-average shares used to compute non-GAAP net income (loss) per share, basic and diluted, as GAAP weighted average shares used to compute net income (loss) per share attributable to common shareholders, basic and diluted, adjusted to reflect the ordinary shares issued in connection with the IPO that are outstanding as of the end of the period as if they were outstanding as of the beginning of the period for comparability.

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 June 30,   Six Months Ended June 30,
    2021   2020   2021   2020
Revenue:                        
Subscription—self-managed and SaaS   $ 45,312     $ 33,161     $ 86,650     $ 63,458  
License—self-managed     3,345       3,270       7,094       5,794  
Total subscription revenue     48,657       36,431       93,744       69,252  
Cost of revenue:                        
Subscription—self-managed and SaaS [(1)]     8,881       6,475       17,117       12,665  
License—self-managed [(3)]     190       214       381       428  
Total cost of revenue—subscription     9,071       6,689       17,498       13,093  
Gross profit     39,586       29,742       76,246       56,159  
Operating expenses:                        
Research and development [(1)(2)]     16,688       9,776       30,524       19,071  
Sales and marketing [(1)(2)(3)]     22,026       13,882       41,791       27,905  
General and administrative [(1)(2)]     15,103       4,746       28,774       9,944  
Total operating expenses     53,817       28,404       101,089       56,920  
Operating income (loss)     (14,231 )     1,338       (24,843 )     (761 )
Interest and other income, net     346       574       706       1,138  
Income (loss) before income taxes     (13,885 )     1,912       (24,137 )     377  
Income tax expense (benefit)     (736 )     213       (3,093 )     803  
Net income (loss)   $ (13,149 )   $ 1,699     $ (21,044 )   $ (426 )
Undistributed earnings attributable to participating securities           (1,699 )            
Net income (loss) attributable to ordinary shareholders   $ (13,149 )   $     $ (21,044 )   $ (426 )
Net income (loss) per share attributable to ordinary shareholders:                        
Basic   $ (0.14 )   $     $ (0.23 )   $ (0.02 )
Diluted   $ (0.14 )   $     $ (0.23 )   $ (0.02 )
Weighted-average shares used in computing net income (loss) per share attributable to ordinary shareholders:                        
Basic     93,666       28,340       93,175       28,247  
Diluted     93,666       38,106       93,175       28,247  
                         
(1) Includes share-based compensation expense as follows:                        
Cost of revenue: subscription—self-managed and SaaS   $ 824     $ 199     $ 1,586     $ 339  
Research and development     2,680       930       4,509       1,696  
Sales and marketing     3,522       1,097       6,245       1,770  
General and administrative     7,078       557       13,514       934  
Total share-based compensation expense   $ 14,104     $ 2,783     $ 25,854     $ 4,739  
                         
(2) Includes acquisition-related costs as follows:                        
Research and development   $ 351     $ 352     $ 702     $ 699  
Sales and marketing           114             228  
General and administrative     361             361        
Total acquisition-related costs   $ 712     $ 466     $ 1,063     $ 927  
                         
(3) Includes amortization of acquired intangibles as follows:                        
Cost of revenue: license—self-managed   $ 190     $ 214     $ 381     $ 428  
Sales and marketing     182       182       364       364  
Total amortization expense of acquired intangible assets   $ 372     $ 396     $ 745     $ 792  
JFROG LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands; unaudited)
 
    June 30, 2021   December 31, 2020
Assets            
Current assets:            
Cash and cash equivalents   $ 259,220     $ 164,461  
Short-term investments     356,005       433,595  
Accounts receivable, net     36,070       37,048  
Deferred contract acquisition costs     3,952       3,247  
Prepaid expenses and other current assets     13,288       14,210  
Total current assets     668,535       652,561  
Property and equipment, net     6,231       4,963  
Deferred contract acquisition costs, noncurrent     6,524       4,949  
Operating lease right-of-use assets     19,231        
Intangible assets, net     3,302       4,047  
Goodwill     17,320       17,320  
Other assets, noncurrent     7,665       5,391  
Total assets   $ 728,808     $ 689,231  
Liabilities and Shareholders’ Equity            
Current liabilities:            
Accounts payable   $ 9,742     $ 9,911  
Accrued expenses and other current liabilities     17,316       21,039  
Operating lease liabilities     4,751        
Deferred revenue     102,752       91,750  
Total current liabilities     134,561       122,700  
Deferred revenue, noncurrent     16,413       11,087  
Operating lease liabilities, noncurrent     14,747        
Other liabilities, noncurrent     1,140       1,550  
Total liabilities     166,861       135,337  
Shareholders’ equity:            
Share capital     262       257  
Additional paid-in capital     657,509       628,054  
Accumulated other comprehensive income     9       372  
Accumulated deficit     (95,833 )     (74,789 )
Total shareholders’ equity     561,947       553,894  
Total liabilities and shareholders’ equity   $ 728,808     $ 689,231  
JFROG LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands; unaudited)
 
    Three Months Ended June 30,   Six Months Ended June 30,
    2021   2020   2021   2020
Cash flows from operating activities:                        
Net income (loss)   $ (13,149 )   $ 1,699     $ (21,044 )   $ (426 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:                        
Depreciation and amortization     1,076       896       2,082       1,755  
Share-based compensation expense     14,104       2,783       25,854       4,739  
Non-cash operating lease expense     1,380             2,658        
Net amortization of premium or discount on investments     1,543       156       2,886       424  
Changes in operating assets and liabilities:                        
Accounts receivable     15,353       (4,784 )     978       (2,427 )
Prepaid expenses and other assets     1,013       1,624       (1,373 )     (1,320 )
Deferred contract acquisition costs     (896 )     (284 )     (2,280 )     (445 )
Accounts payable     785       (420 )     (169 )     781  
Accrued expenses and other liabilities     1,048       1,071       4,706       2,154  
Operating lease liabilities     (1,275 )           (2,642 )      
Deferred revenue     (1,809 )     4,372       16,328       629  
Net cash provided by operating activities     19,173       7,113       27,984       5,864  
Cash flows from investing activities:                        
Purchases of short-term investments     (62,634 )     (45,277 )     (151,214 )     (86,055 )
Maturities and sales of short-term investments     164,129       35,035       225,954       69,075  
Purchases of property and equipment     (1,139 )     (357 )     (2,274 )     (1,506 )
Prepayment for purchase of intangible asset     (600 )           (600 )      
Net cash provided by (used in) investing activities     99,756       (10,599 )     71,866       (18,486 )
Cash flows from financing activities:                        
Payments of deferred offering costs           (1,612 )           (2,474 )
Proceeds from exercise of share options     1,316       510       3,606       906  
Payments to tax authorities from employee equity transactions, net     (7,699 )           (8,707 )      
Net cash used in financing activities     (6,383 )     (1,102 )     (5,101 )     (1,568 )
Net increase (decrease) in cash, cash equivalents, and restricted cash     112,546       (4,588 )     94,749       (14,190 )
Cash, cash equivalents, and restricted cash—beginning of period     146,942       31,341       164,739       40,943  
Cash, cash equivalents, and restricted cash—end of period   $ 259,488     $ 26,753     $ 259,488     $ 26,753  
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   $ 259,220     $ 26,461     $ 259,220     $ 26,461  
Restricted cash included in prepaid expenses and other current assets     13       14       13       14  
Restricted cash included in other assets, noncurrent     255       278       255       278  
Total cash, cash equivalents, and restricted cash   $ 259,488     $ 26,753     $ 259,488     $ 26,753  
JFROG LTD.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(in thousands; unaudited)
   
    Three Months Ended June 30,   Six Months Ended June 30,
    2021   2020   2021   2020
Reconciliation of gross profit and gross margin                        
GAAP gross profit   $ 39,586     $ 29,742     $ 76,246     $ 56,159  
Plus: Share-based compensation expense     824       199       1,586       339  
Plus: Amortization of acquired intangibles     190       214       381       428  
Non-GAAP gross profit   $ 40,600     $ 30,155     $ 78,213     $ 56,926  
GAAP gross margin     81.4 %     81.6 %     81.3 %     81.1 %
Non-GAAP gross margin     83.4 %     82.8 %     83.4 %     82.2 %
                         
Reconciliation of operating expenses                        
GAAP research and development   $ 16,688     $ 9,776     $ 30,524     $ 19,071  
Less: Share-based compensation expense     (2,680 )     (930 )     (4,509 )     (1,696 )
Less: Acquisition-related costs     (351 )     (352 )     (702 )     (699 )
Non-GAAP research and development   $ 13,657     $ 8,494     $ 25,313     $ 16,676  
                         
GAAP sales and marketing   $ 22,026     $ 13,882     $ 41,791     $ 27,905  
Less: Share-based compensation expense     (3,522 )     (1,097 )     (6,245 )     (1,770 )
Less: Acquisition-related costs           (114 )           (228 )
Less: Amortization of acquired intangibles     (182 )     (182 )     (364 )     (364 )
Non-GAAP sales and marketing   $ 18,322     $ 12,489     $ 35,182     $ 25,543  
                         
GAAP general and administrative   $ 15,103     $ 4,746     $ 28,774     $ 9,944  
Less: Share-based compensation expense     (7,078 )     (557 )     (13,514 )     (934 )
Less: Acquisition-related costs     (361 )           (361 )      
Non-GAAP general and administrative   $ 7,664     $ 4,189     $ 14,899     $ 9,010  
                         
Reconciliation of operating income (loss) and operating margin                        
GAAP operating income (loss)   $ (14,231 )   $ 1,338     $ (24,843 )   $ (761 )
Plus: Share-based compensation expense     14,104       2,783       25,854       4,739  
Plus: Acquisition-related costs     712       466       1,063       927  
Plus: Amortization of acquired intangibles     372       396       745       792  
Non-GAAP operating income   $ 957     $ 4,983     $ 2,819     $ 5,697  
GAAP operating margin     (29.2 )%     3.7 %     (26.5 )%     (1.1 )%
Non-GAAP operating margin     2.0 %     13.7 %     3.0 %     8.2 %
                         
Reconciliation of net income (loss)                        
GAAP net income (loss)   $ (13,149 )   $ 1,699     $ (21,044 )   $ (426 )
Plus: Share-based compensation expense     14,104       2,783       25,854       4,739  
Plus: Acquisition-related costs     712       466       1,063       927  
Plus: Amortization of acquired intangibles     372       396       745       792  
Less: Income tax effects [(1)]     (1,160 )           (3,896 )      
Non-GAAP net income   $ 879     $ 5,344     $ 2,722     $ 6,032  
Net income per share - basic   $ 0.01     $ 0.06     $ 0.03     $ 0.07  
Net income per share - diluted   $ 0.01     $ 0.05     $ 0.03     $ 0.06  
Shares used in non-GAAP net income per share calculations:                        
GAAP weighted-average shares used to compute net income per share - basic     93,666       28,340       93,175       28,247  
Add: Non-GAAP unweighted adjustment for ordinary shares issued in connection with IPO           61,937             61,937  
Non-GAAP weighted-average shares used to compute net income per share - basic     93,666       90,277       93,175       90,184  
                         
GAAP weighted-average shares used to compute net income per share - diluted     93,666       38,106       93,175       28,247  
Add: Non-GAAP unweighted adjustment for ordinary shares issued in connection with IPO           61,937             61,937  
Add: Dilutive ordinary share equivalents     9,091             9,873       9,634  
Non-GAAP weighted-average shares used to compute net income per share - diluted     102,757       100,043       103,048       99,818  
                         
(1) Income tax effects of non-GAAP adjustments in the three months and six months ended June 30, 2020 were immaterial.
JFROG LTD.
RECONCILIATION OF GAAP CASH FLOW FROM OPERATING ACTIVITIES TO FREE CASH FLOW
(in thousands; unaudited)
   
    Three Months Ended June 30,   Six Months Ended June 30,
    2021   2020   2021   2020
Net cash provided by operating activities   $ 19,173     $ 7,113     $ 27,984     $ 5,864  
Less: purchases of property and equipment     (1,139 )     (357 )     (2,274 )     (1,506 )
Free cash flow   $ 18,034     $ 6,756     $ 25,710     $ 4,358  

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20210805005163/en/

SOURCE: JFrog Ltd.

Investor Contact:
JoAnn Horne
jhorne@marketstreetpartners.com

COMTEX_391032110/2456/2021-08-05T16:05:03

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/zigman2/quotes/220991554/composite
US : U.S.: Nasdaq
$ 35.93
+0.51 +1.44%
Volume: 248,398
Oct. 20, 2021 12:42p
P/E Ratio
N/A
Dividend Yield
N/A
Market Cap
$3.40 billion
Rev. per Employee
$215,467
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