JFrog(FROG) - 2023 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - JFrog's Q3 2023 revenue was $88.6 million, reflecting a 23$16.6 million, with free cash flow of $25.4 million [22][37] - Operating profit was$11.9 million, representing a 13.4% operating margin compared to 1.7% in the prior year [37] - Net dollar retention for the trailing four quarters was 119%, a decline of one point sequentially [36] Business Line Data and Key Metrics Changes - Cloud revenue reached $30.6 million, increasing 46$58 million, up 14% year-over-year [57] - Customers with ARR over $1 million increased to 30, a 67$100,000 grew to 848, a 22% year-over-year increase [22] - 46% of total revenue came from Enterprise Plus subscriptions, up from 39% in Q3 2022 [36] Company Strategy and Development Direction - JFrog is focusing on large-scale enterprise adoption of its software supply chain platform, driven by strategic sales and cloud partnerships [11][31] - The company is expanding into machine learning operations and AI solutions, integrating security for ML models [33][54] - JFrog aims to consolidate security solutions under one vendor to enhance customer value [27][68] Management's Comments on Operating Environment and Future Outlook - Management remains confident in meeting 2023 business goals despite the ongoing conflict in Israel [7][21] - The company anticipates continued growth in cloud adoption and security solutions as key drivers for future revenue [35][57] - Management noted that macroeconomic headwinds are impacting the pace of migrations but cloud usage continues to grow [110] Other Important Information - JFrog appointed Orit Goren as Chief Sustainability Officer, emphasizing its commitment to responsible business practices [40] - The company has a strong cash position with $502 million in cash and short-term investments as of September 30, 2023 [59] Q&A Session Summary Question: Can you walk us through the cloud optimizations and the acceleration of cloud revenue growth? - Management noted positive momentum in cloud usage, driven by large customers and marketplace growth [64][65] Question: What is the opportunity for advanced security and curation going into Q4? - Advanced security and curation are expected to support revenue growth, with significant adoption already seen [68] Question: How does AI and ML impact the usage of the cloud Artifactory? - AI and ML adoption is expected to accelerate platform usage as enterprises seek to secure and automate their processes [102][104] Question: Can customers buy security solutions without Artifactory? - Currently, security solutions are integrated with the platform and not available as standalone products [100] Question: How are optimization headwinds affecting the company? - Management believes optimization headwinds are behind them, with continued growth in cloud usage [110]