Eamon Coughlin

Eamon Coughlin asked about the consumption profile for LLMs within JFrog's MLOps solution compared to traditional binaries, and what positions JFrog as the preferred LLM repository for enterprises.

Answer

JFrog CEO Shlomi Ben Haim explained that treating models as binaries means increased data transfer and storage, with models generally being larger than other binaries. Since JFrog's pricing is consumption-based, he anticipates higher consumption and customer commitments if MLOps capabilities, security, and storage are utilized for models. He stated that JFrog is tracking this closely.

Eamon Coughlin asked for clarification on the consumption profile for LLMs compared to traditional binaries within the MLOps motion, and what positions JFrog as the preferred LLM repository for enterprises.

Answer

JFrog CEO Shlomi Ben Haim stated that treating models as binaries implies increased data transfer and storage. Given that models are typically larger binaries, he anticipates higher monetization potential from storage, which would drive increased consumption and customer commitments for JFrog's MLOps capabilities.

Eamon Coughlin, on for Raimo Lenschow, asked about the linearity and key drivers of cloud growth in the quarter, as well as the drivers for the self-managed subscription business.

Answer

CFO Ed Grabscheid detailed that Q2 cloud growth was driven by three dynamics: major security wins, converting customers with over-usage to larger annual contracts, and sustained usage above minimums. CEO Shlomi Ben Haim added that the self-managed business is driven by the enterprise need for hybrid AI deployments and the adoption of on-prem security solutions.

Eamon Coughlin asked about the tangible impact of the GitHub partnership on landing new deals or expanding usage. He also inquired about the performance and pipeline for the JFrog Advanced Security platform in Q1.

Answer

CEO Shlomi Haim described customer reaction to the GitHub partnership as 'astonishing,' stating it strengthens their market message and is driving growth across the board. Regarding security, he said they were 'very pleased' with Q1 performance and pipeline growth, aiming to maintain the momentum seen in 2024.

Eamon Coughlin of Barclays, on for Ryan MacWilliams, asked for details on the key levers for free cash flow and EBITDA margin expansion in the 2028 guide, and whether there have been any changes in customer spending willingness post-election.

Answer

CFO Chris Greiner outlined several levers for margin expansion: cost of revenue improvement from the 'One Zeta' initiative and direct channel mix; OpEx leverage from slower headcount growth; and for free cash flow, lessening working capital headwinds and lower CapEx as a percentage of revenue. CEO David Steinberg stated they have seen no changes in customer spending post-election and continue to be 'full speed ahead.'

Eamon Coughlin, on behalf of Ryan MacWilliams, asked about the Q3 SMB purchasing environment and linearity, and questioned the new CFO on potential strategic changes or shifts in metrics and guidance philosophy.

Answer

COO Evan Berlin stated there were no significant changes in the SMB purchasing environment, noting continued ASP expansion and flat to compressed sales cycles. CFO Ryan Siurek indicated no immediate changes to key metrics or guidance philosophy, emphasizing a continued focus on transformation, optimization, and embedded functionality as key priorities for 2025.

Eamon Coughlin from Barclays asked if Bandwidth's vertically integrated platform provides a competitive edge for enterprises adopting generative AI voice use cases. He also inquired about the expected political revenue contribution in the fourth quarter.

Answer

CEO David Morken confirmed that Bandwidth's control over the entire tech stack offers a quality and compliance advantage for AI. Chief Product Officer John Bell added that the platform's flexibility is key for integrating various AI models. Regarding guidance, John Bell clarified that after recognizing $8 million in Q3, the company expects the remaining $11 million of its $25 million annual political revenue forecast to be recognized in Q4.