Quarterly Revenue Increased 37%
Quarterly Operating Cash Flow of $8.8 million;
Free Cash Flow of $7.7 million
Empowers End-to-End Platform with Breakthrough
Technologies for Enhanced Security and Software Distribution
Capabilities
JFrog Ltd. (NASDAQ: FROG), the liquid software company, today
announced financial results for its first quarter ended March 31,
2021.
“Our strong first quarter results are setting a solid tone for
the year, with 37% revenue growth, 130% net dollar retention rate
for the trailing four quarters, and increasing net new customer
additions,” said Shlomi Ben Haim, CEO of JFrog. “In Q1, we took a
significant leap forward in product innovation, releasing
capabilities around modern DevOps scalability; enhanced security,
software distribution and the developer ecosystem in response to
increasing demand for a full, end-to-end DevOps platform. It’s our
goal to make developers the transformers in the digital era, and
we’re proud to partner with them and their organizations as they
continuously deliver software rapidly and securely to the
edge.”
First Quarter Financial Highlights
- Revenue for the first quarter of 2021 was $45.1 million, an
increase of 37% from $32.8 million for the first quarter of
2020.
- GAAP Gross Profit was $36.7 million; GAAP Gross Margin was
81.3%.
- Non-GAAP Gross Profit was $37.6 million; Non-GAAP Gross Margin
was 83.4%.
- GAAP Operating Loss was ($10.6 million); GAAP Operating Margin
was (23.5%).
- Non-GAAP Operating Income was $1.9 million; Non-GAAP Operating
Margin was 4.1%.
- GAAP Net Loss Per Diluted Share was ($0.09); Non-GAAP Net
Income Per Diluted Share was $0.02.
- Operating Cash Flow was $8.8 million, with Free Cash Flow of
$7.7 million.
- Cash, cash equivalents and investments were $605.7 million as
of March 31, 2021.
First Quarter & Recent Business Highlights
- At quarter end, 395 customers had ARR greater than $100,000; 10
customers had ARR above $1 million.
- Net Dollar Retention rate for the trailing four quarters was
130%.
- Cloud revenue in Q4 grew by 62% to $10.3 million over the same
period last year, representing 23% of total revenue, up from 19% a
year ago.
- At quarter end, customers using the complete platform
(Enterprise+ subscription) represented 29% of revenue in the first
quarter of 2021 versus 16% in the first quarter of 2020.
- Increased footprint in APAC, including significant expansion of
operations in China.
- Expanded third party tool integrations to deliver best-of-breed
operations across DevOps pipelines, including integrations with
Atlassian, Datadog, AWS GovCloud and Microsoft Government Cloud
among others.
Second Quarter and Full Year 2021 Outlook
- Second Quarter 2021 Outlook:
- Revenue between $47.6 million and $48.6 million
- Non-GAAP operating income between $0.5 million and $1.5
million
- Non-GAAP net income per share between $0.00 and $0.01, assuming
approximately 104 million weighted average diluted shares
outstanding
- Full Year 2021 Outlook:
- Revenue between $198 million to $204 million
- Non-GAAP operating income between $5 million and $7
million
- Approximately 3% increase in weighted average diluted
shares
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 First Quarter 2021 Financial Results Conference
Call
- Date: Thursday, May 6, 2021
- Time: 2:00 p.m. PT (5:00 p.m. ET)
- Webcast Link:
https://investors.jfrog.com/events-and-presentations A live webcast
of the conference call will be accessible from the investor
relations website at
https://investors.jfrog.com/events-and-presentations/events.
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 second quarter and for
the full year of 2021, our leadership position in the markets in
which we participate, 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; 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; 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, 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 March
31,
2021
2020
Revenue:
Subscription—self-managed and SaaS
$
41,338
$
30,297
License—self-managed
3,749
2,524
Total subscription revenue
45,087
32,821
Cost of revenue:
Subscription—self-managed and SaaS(1)
8,236
6,190
License—self-managed(3)
191
214
Total cost of revenue—subscription
8,427
6,404
Gross profit
36,660
26,417
Operating expenses:
Research and development(1)(2)
13,836
9,295
Sales and marketing(1)(2)(3)
19,765
14,023
General and administrative(1)(2)
13,671
5,198
Total operating expenses
47,272
28,516
Operating loss
(10,612
)
(2,099
)
Interest and other income, net
360
564
Loss before income taxes
(10,252
)
(1,535
)
Income tax expense (benefit)
(2,357
)
590
Net loss
$
(7,895
)
$
(2,125
)
Net loss per share - basic and diluted
$
(0.09
)
$
(0.08
)
Weighted-average shares used in computing
net loss per share, basic and diluted
92,680
28,154
(1) Includes share-based compensation
expense as follows:
Cost of revenue: subscription—self-managed
and SaaS
$
762
$
140
Research and development
1,829
766
Sales and marketing
2,723
673
General and administrative
6,436
377
Total share-based compensation expense
$
11,750
$
1,956
(2) Includes acquisition-related costs as
follows:
Research and development
$
351
$
347
Sales and marketing
—
114
Total acquisition-related costs
$
351
$
461
(3) Includes amortization of acquired
intangibles as follows:
Cost of revenue: license—self-managed
$
191
$
214
Sales and marketing
182
$
182
Total amortization expense of acquired
intangible assets
$
373
$
396
JFROG LTD.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(in thousands;
unaudited)
March 31, 2021
December 31, 2020
Assets
Current assets:
Cash and cash equivalents
$
146,676
$
164,461
Short-term investments
458,977
433,595
Accounts receivable, net
51,423
37,048
Deferred contract acquisition costs
3,655
3,247
Prepaid expenses and other current
assets
14,430
14,210
Total current assets
675,161
652,561
Property and equipment, net
5,598
4,963
Deferred contract acquisition costs,
noncurrent
5,925
4,949
Operating lease right-of-use assets
20,611
—
Intangible assets, net
3,674
4,047
Goodwill
17,320
17,320
Other assets, noncurrent
6,722
5,391
Total assets
$
735,011
$
689,231
Liabilities and Shareholders’
Equity
Current liabilities:
Accounts payable
$
8,957
$
9,911
Accrued expenses and other current
liabilities
23,777
21,039
Operating lease liabilities
4,876
—
Deferred revenue
102,432
91,750
Total current liabilities
140,042
122,700
Deferred revenue, noncurrent
18,542
11,087
Operating lease liabilities,
noncurrent
15,897
—
Other liabilities, noncurrent
1,132
1,550
Total liabilities
175,613
135,337
Shareholders’ equity:
Share capital
261
257
Additional paid-in capital
642,090
628,054
Accumulated other comprehensive income
(loss)
(269
)
372
Accumulated deficit
(82,684
)
(74,789
)
Total shareholders’ equity
559,398
553,894
Total liabilities and shareholders’
equity
$
735,011
$
689,231
JFROG LTD.
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in thousands;
unaudited)
Three Months Ended March
31,
2021
2020
Cash flows from operating
activities:
Net loss
$
(7,895
)
$
(2,125
)
Adjustments to reconcile net loss to net
cash provided by (used in) operating activities:
Depreciation and amortization
1,006
859
Share-based compensation expense
11,750
1,956
Non-cash operating lease expense
1,278
—
Net amortization of premium or discount on
investments
1,343
268
Changes in operating assets and
liabilities:
Accounts receivable
(14,375
)
2,357
Prepaid expenses and other assets
(2,386
)
(2,944
)
Deferred contract acquisition costs
(1,384
)
(161
)
Accounts payable
(954
)
1,201
Accrued expenses and other liabilities
3,658
1,083
Operating lease liabilities
(1,367
)
—
Deferred revenue
18,137
(3,743
)
Net cash provided by (used in) operating
activities
8,811
(1,249
)
Cash flows from investing
activities:
Purchases of short-term investments
(88,580
)
(40,778
)
Maturities of short-term investments
61,825
34,040
Purchases of property and equipment
(1,135
)
(1,149
)
Net cash used in investing activities
(27,890
)
(7,887
)
Cash flows from financing
activities:
Payments of deferred offering costs
—
(862
)
Proceeds from exercise of share
options
2,290
396
Payments to tax authorities from employee
equity transactions, net
(1,008
)
—
Net cash provided by (used in) financing
activities
1,282
(466
)
Net decrease in cash, cash equivalents,
and restricted cash
(17,797
)
(9,602
)
Cash, cash equivalents, and restricted
cash—beginning of period
164,739
40,943
Cash, cash equivalents, and restricted
cash—end of period
$
146,942
$
31,341
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
$
146,676
$
31,062
Restricted cash included in prepaid
expenses and other current assets
14
14
Restricted cash included in other assets,
noncurrent
252
265
Total cash, cash equivalents, and
restricted cash
$
146,942
$
31,341
JFROG LTD.
RECONCILIATION OF GAAP TO
NON-GAAP RESULTS
(in thousands;
unaudited)
Three Months Ended March
31,
2021
2020
Reconciliation of gross profit and
gross margin
GAAP gross profit
$
36,660
$
26,417
Plus: Share-based compensation expense
762
140
Plus: Amortization of acquired
intangibles
191
214
Non-GAAP gross profit
$
37,613
$
26,771
GAAP gross margin
81.3
%
80.5
%
Non-GAAP gross margin
83.4
%
81.6
%
Reconciliation of operating
expenses
GAAP research and development
$
13,836
$
9,295
Less: Share-based compensation expense
(1,829
)
(766
)
Less: Acquisition-related costs
(351
)
(347
)
Non-GAAP research and
development
$
11,656
$
8,182
GAAP sales and marketing
$
19,765
$
14,023
Less: Share-based compensation expense
(2,723
)
(673
)
Less: Acquisition-related costs
—
(114
)
Less: Amortization of acquired
intangibles
(182
)
(182
)
Non-GAAP sales and marketing
$
16,860
$
13,054
GAAP general and administrative
$
13,671
$
5,198
Less: Share-based compensation expense
(6,436
)
(377
)
Non-GAAP general and
administrative
$
7,235
$
4,821
Reconciliation of operating income
(loss) and operating margin
GAAP operating loss
$
(10,612
)
$
(2,099
)
Plus: Share-based compensation expense
11,750
1,956
Plus: Acquisition-related costs
351
461
Plus: Amortization of acquired
intangibles
373
396
Non-GAAP operating income
$
1,862
$
714
GAAP operating margin
(23.5
)%
(6.4
)%
Non-GAAP operating margin
4.1
%
2.2
%
Reconciliation of net income
(loss)
GAAP net loss
$
(7,895
)
$
(2,125
)
Plus: Share-based compensation expense
11,750
1,956
Plus: Acquisition-related costs
351
461
Plus: Amortization of acquired
intangibles
373
396
Less: Income tax effects(1)
(2,736
)
—
Non-GAAP net income
$
1,843
$
688
Net income per share - basic
$
0.02
$
0.01
Net income per share - diluted
$
0.02
$
0.01
Shares used in non-GAAP per share
calculations:
GAAP weighted-average shares used to
compute net income per share - basic
92,680
28,154
Add:
Non-GAAP unweighted adjustment for
ordinary shares issued in connection with IPO
—
61,937
Non-GAAP weighted-average shares used to
compute net income per share - basic
92,680
90,091
GAAP weighted-average shares used to
compute net income per share - diluted
92,680
28,154
Add:
Non-GAAP unweighted adjustment for
ordinary shares issued in connection with IPO
—
61,937
Dilutive ordinary share equivalents
10,563
9,502
Non-GAAP weighted-average shares used to
compute net income per share - diluted
103,243
99,593
(1) Income tax effects of non-GAAP
adjustments in the three months ended March 31, 2020 were
immaterial.
JFROG LTD.
RECONCILIATION OF GAAP CASH
FLOW FROM OPERATING ACTIVITIES TO FREE CASH FLOW
(in thousands;
unaudited)
Three Months Ended March
31,
2021
2020
Net cash provided by (used in) operating
activities
$
8,811
$
(1,249
)
Less: purchases of property and
equipment
(1,135
)
(1,149
)
Free cash flow
$
7,676
$
(2,398
)
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210506006044/en/
Investor Contact: JoAnn Horne
jhorne@marketstreetpartners.com
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