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JFrog Ltd (FROG)·Q1 2024 Earnings Summary

Executive Summary

  • Q1 2024 revenue was $100.3 million, up 26% year-over-year, with non-GAAP diluted EPS of $0.16; management stated results “exceeded the high-end of our guidance measures,” driven by strong cloud usage and Enterprise+ adoption .
  • Cloud revenue grew 47% YoY to $36.9 million (37% of total), while Enterprise+ subscriptions represented 49% of revenue ($49 million), reflecting consolidation of DevOps and security tooling and larger top-down enterprise deals .
  • Gross margin expanded: GAAP 79.5% and non-GAAP 85.1%, aided by the elimination of an outsourced database and cost discipline; management reiterated annual GM expectation of 83–84% for 2024 .
  • Guidance: Q2 revenue $103–$104 million; FY 2024 revenue raised to $425.5–$429.5 million; FY non-GAAP EPS raised to $0.59–$0.61; baseline cloud growth “mid-40s” reiterated; seasonality suggests stronger second half as projects ramp .
  • Street estimates from S&P Global were unavailable; as a result, we cannot benchmark beats/misses versus Wall Street consensus for this quarter (S&P Global consensus unavailable).

What Went Well and What Went Wrong

What Went Well

  • Cloud momentum: Cloud revenue grew 47% YoY to $36.9 million (37% mix), supported by usage above commitments; management: “Cloud growth above our guidance range of mid-40s was supported by increases in customer consumption” .
  • Platform consolidation: Enterprise+ subscriptions contributed 49% of revenue and grew 39% YoY; CEO emphasized “continued adoption of the JFrog platform… unified Software Supply Chain Platform” .
  • Margin efficiency: Non-GAAP gross margin increased to 85.1% (vs. 82.9% prior year), with CFO citing removal of a third-party outsourced database and standardization on Vdoo’s database as drivers .

What Went Wrong

  • Digestion after strong Q4: Management characterized Q1 as a “digestion” quarter following heavy Q4 consumption; cloud growth was strong YoY but sequential dynamics reflected cautious customer budgeting .
  • Longer security sales cycles: While pipeline is building, customers are running comprehensive POCs to consolidate multiple security tools, which extends cycles; “pipeline building on the landscape of security is taking longer” .
  • Large customers and KPIs: Net adds of customers >$100K ARR were slower versus recent pace due to seasonality and digestion; management expects normalization as the year progresses .

Financial Results

Consolidated Metrics Across Periods

MetricQ3 2023Q4 2023Q1 2024
Revenue ($USD Millions)$88.6 $97.3 $100.3
GAAP Gross Margin %77.7% 79.0% 79.5%
Non-GAAP Gross Margin %83.7% 84.6% 85.1%
GAAP Operating Margin %(20.4)% (15.8)% (16.6)%
Non-GAAP Operating Margin %13.4% 16.6% 14.0%
GAAP Net Loss per Share ($)(0.13) (0.11) (0.08)
Non-GAAP Diluted EPS ($)0.15 0.19 0.16

Notes:

  • YoY Q1 revenue +26%; non-GAAP operating margin +10.6 pts YoY; non-GAAP EPS $0.16 vs $0.06 prior year .
  • CFO reaffirmed annual GM trend 83–84% in 2024, moving toward low-80s over time with cloud mix shift .

Segment and Mix

Segment MetricQ3 2023Q4 2023Q1 2024
Cloud Revenue ($USD Millions)$30.6 $36.0 $36.9
Cloud Mix of Total Revenue (%)35% 37% 37%
License — Self-managed ($USD Millions)$4.505 $5.208 $4.905

KPIs

KPIQ3 2023Q4 2023Q1 2024
Net Dollar Retention (Trailing 4Q)119% 119% 118%
Gross Retention Rate——97%
Customers >$100K ARR (count)848 886 911
Customers >$1M ARR (count)30 37 40
Enterprise+ Revenue Share (%)46% 49% 49%
Enterprise+ Revenue ($USD Millions)——$49
Remaining Performance Obligations ($USD Millions)$235.1 $259.8 $261.7
Cash, Cash Equivalents and Investments ($USD Millions)$502.2 $545.0 $579.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($USD Millions)Q2 2024N/A$103–$104 New
Non-GAAP Operating Income ($USD Millions)Q2 2024N/A$13–$14 New
Non-GAAP EPS (Diluted) ($)Q2 2024N/A$0.13–$0.15 (≈116M diluted shares) New
Revenue ($USD Millions)FY 2024$424–$428 $425.5–$429.5 Raised
Non-GAAP Operating Income ($USD Millions)FY 2024$56–$58 $56–$58 Maintained
Non-GAAP EPS (Diluted) ($)FY 2024$0.58–$0.60 (≈116M shares) $0.59–$0.61 (≈116M shares) Raised
Baseline Cloud Growth (YoY %)FY 2024Mid-40s Mid-40s Maintained
Net Dollar Retention (Trailing 4Q)FY 2024 ExitHigh-teens High-teens Maintained

Management context: Q2 seasonality expected; stronger second half as budgets free up; expansions and migrations weighted later in the year .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 2023)Previous Mentions (Q4 2023)Current Period (Q1 2024)Trend
Cloud consumption vs. migrationsCloud up 46% YoY; consolidations; migrations slowed early-2023 Cloud up 59% YoY; consumption rebound; migrations stabilized; Q4 true-ups ~$1.5m Cloud up 47% YoY; Q1 “digestion” post-Q4; reiterates mid-40s baseline growth Consumption healthy; migrations gradual; seasonality evident
Platform consolidation (DevOps + Security)Enterprise+ 46% revenue; unveiling new Sec/ML capabilities Emphasis on consolidating point solutions; top-down enterprise GTM Enterprise+ 49% revenue; larger enterprise deals (Fidelity, Informatica); security integrated Consolidation accelerating in enterprise
Security (Advanced Security, Xray, Curation)New Sec features incl. ML model security Security becoming material in 2024; embedded in platform Security pipeline growing; POCs lengthen cycles; research team differentiator Growing importance; longer sales cycles
Public sector channels——Carahsoft partnership for public sector distribution Channel expanding to regulated sectors
AI/MLOps integrationsHugging Face repo; ML Model Mgmt introduced AWS SageMaker integration; early ML ops positioning MLflow & Qwak integrations; model-as-package, MLSecOps emphasis Rapid build-out; later Q2: Qwak acquisition (post-Q1)
Margins and cost disciplineNon-GAAP GM 83.7% Non-GAAP GM 84.6%; optimization of cloud hosting Non-GAAP GM 85.1%; eliminated outsourced DB; GM guide 83–84% Efficiency gains realized; sustained high GM

Management Commentary

  • CEO: “Q1 was another quarter of strong execution as we exceeded the high-end of our guidance measures… Growth in adoption of JFrog Platform subscriptions… highlights the need… for a unified Software Supply Chain Platform” .
  • CFO: “Cloud revenues… up 47% YoY… driven by customer usage levels above commitments… we reiterate fiscal 2024 baseline cloud growth around the mid-40s” .
  • On margins: “We removed [a] third-party outsourced database… standardized on the Vdoo database… [driving] efficiency… we guide between 83% to 84% gross margins during 2024” .
  • On enterprise consolidation: “Customers… standardize on holistic solutions… tool consolidation… embracing cloud hybrid and multi-cloud environments” .
  • On MLOps: “We recently introduced the industry’s first DevOps platform to seamlessly integrate with MLflow and Qwak… users can utilize Artifactory as a model registry with Xray to secure ML artifacts” .

Q&A Highlights

  • Seasonality and digestion: Q1 seen as digestion after a strong Q4; projects and spend weighted to 2H; cloud commitments underpin mid-40s baseline growth .
  • Visibility on cloud: Guidance based on commitments; upside from usage; migrations unlikely to pick up materially vs. 2023 levels in near term .
  • Security pipeline and cycles: Enterprise POCs aim to consolidate 5+ tools; cycles longer than DevOps; still expected to be “material” to revenue in 2024 .
  • Margin drivers: Strong GM aided by database standardization; 2024 GM expected 83–84% .
  • Mix and enterprise focus: Higher ASP lands via top-down motion; better durability and faster expansion from enterprise cohort .

Estimates Context

  • Street consensus from S&P Global for Q1 2024 revenue and EPS was unavailable due to data access limits; we cannot quantify beats/misses vs Wall Street expectations this quarter (S&P Global consensus unavailable).
  • Management highlighted performance exceeding company guidance and raised FY revenue/EPS ranges, which should prompt upward bias to sell-side models focused on cloud usage and Enterprise+ mix .

Key Takeaways for Investors

  • Cloud usage remains the core growth lever; commitments support mid-40s baseline growth, with potential upside from consumption in stronger quarters .
  • Enterprise consolidation of DevOps and security tooling is accelerating; Enterprise+ mix at 49% underpins pricing power and margin durability .
  • Margins are resilient (non-GAAP GM 85.1%); structural efficiencies (Vdoo database) and cost discipline offset cloud mix headwinds in 2024 .
  • Security suite is gaining traction but entails longer sales cycles; expect sequential build as POCs convert; pipeline strength across regulated sectors (Carahsoft) adds channel breadth .
  • Seasonality implies stronger 2H execution; Q2 guide is prudent; investors should watch usage trends and migrations, enterprise and public sector wins, and sustained Enterprise+ mix .
  • AI/MLOps positioning is strategic; integrations (MLflow, Qwak) and subsequent Qwak acquisition strengthen “model-as-package” narrative that could become a medium-term tailwind .