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JFrog Ltd (FROG)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue was $116.1M, up 19% YoY, with non-GAAP EPS of $0.19 and record quarterly free cash flow of $48.5M; cloud revenue rose 37% YoY to $49.4M and comprised 43% of total, aided by migrations and a new cloud database service contribution (~$1.3M) .
  • Management issued conservative 2025 guidance: Q1 revenue $116.0–$118.0M, FY revenue $499.0–$503.0M, non-GAAP operating income $73–$75M, and non-GAAP EPS $0.67–$0.69; baseline cloud growth targeted at 30–32% for FY25 with NDR stabilizing in the mid-teens .
  • Platform adoption and security consolidation accelerated: Enterprise+ reached 54% of Q4 revenue, customers >$1M ARR rose to 52, and security core ended at >5% of ARR and ~12% of RPO; RPO climbed to $403.1M (+55% YoY) on multiyear commitments .
  • Call tone emphasized derisked guidance and disciplined spend; catalysts include AWS strategic collaboration (procurement and cost advantages), expanding GitHub co-engineering around Copilot/Advanced Security, and ML model management via Qwak integration .

What Went Well and What Went Wrong

What Went Well

  • Cloud momentum: Q4 cloud revenue grew 37% YoY to $49.4M and 43% of total revenue; management cited large wins, migrations, and the enhanced cloud database service recognizing ~$1.3M in Q4 cloud revenue .
  • Security consolidation driving platform deals: Core security reached >5% of ending ARR and ~12% of ending RPO, with ~250 customers adopting advanced security/curation; “we set out to deliver a platform...unmatched protection and risk mitigation” (CEO) .
  • Cash generation and mix shift: Record Q4 free cash flow of $48.5M (42% margin) and Q4 non-GAAP operating margin rose to 18.0%; “a record quarter for JFrog” (CFO) .

What Went Wrong

  • GAAP losses and elevated SBC: Q4 GAAP operating loss of ($25.4)M and net loss per share ($0.21), reflecting $38.8M SBC and higher amortization of intangibles as investments ramped .
  • Margin pressure from cloud mix: Non-GAAP gross margin declined YoY to 83.2% (from 84.6% in Q4’23) as cloud grows; management expects annual gross margins 82.5–83.5% near term .
  • Conservative demand posture: Management reiterated cautious outlook—customers remain cost-conscious with usage at minimum commits and large project timings tending to 2H; “we’re going with a much more conservative guide” (CFO) .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$97.3 $103.0 $109.1 $116.1
GAAP Gross Margin (%)79.0% 78.8% 75.0% 75.4%
Non-GAAP Gross Margin (%)84.6% 84.4% 82.8% 83.2%
GAAP Operating Income (Loss) ($M)($15.4) ($19.1) ($29.9) ($25.4)
Non-GAAP Operating Income ($M)$16.2 $13.6 $14.7 $20.9
GAAP Diluted EPS ($)($0.11) ($0.13) ($0.21) ($0.21)
Non-GAAP Diluted EPS ($)$0.19 $0.15 $0.15 $0.19
Operating Cash Flow ($M)$32.6 $16.7 $27.6 $49.1
Free Cash Flow ($M)$32.0 $16.0 $26.7 $48.5

Segment and Mix

Segment/MixQ3 2024Q4 2024
Cloud Revenue ($M)$42.4 $49.4
Cloud % of Total39% 43%
Self-Managed (On-Prem) Revenue ($M)$66.7 $66.7
Enterprise+ % of Revenue50% 54%

KPIs

KPIQ2 2024Q3 2024Q4 2024
Net Dollar Retention (Trailing 4Q)118% 117% 116%
Gross Retention97% 97% 96%
Customers >$100K ARR928 966 1,018
Customers >$1M ARR42 46 52
RPO ($M)$272.0 $346.1 $403.1
Cash + ST Investments ($M)$591.3 $467.8 $522.0
Unique Customers (FY)——~7,300

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q1 2025N/A$116.0–$118.0 New
Non-GAAP Operating Income ($M)Q1 2025N/A$16.5–$17.5 New
Non-GAAP Diluted EPS ($)Q1 2025N/A$0.15–$0.17 (≈118M diluted shares) New
Revenue ($M)FY 2025N/A$499.0–$503.0 New
Non-GAAP Operating Income ($M)FY 2025N/A$73.0–$75.0 New
Non-GAAP Diluted EPS ($)FY 2025N/A$0.67–$0.69 (≈120M diluted shares) New
Cloud Growth Baseline (%)FY 2025N/A30–32% (baseline expectation) New

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 2024, Q3 2024)Current Period (Q4 2024)Trend
Cloud migrations & usage disciplineH2 cloud guide cut to ~40% on delayed migrations and lower monthly usage; uplift 20–80% on migrations Cloud +37% YoY; usage at minimum commits; database product shift contributes $1.3M; baseline FY25 cloud growth 30–32% Stable migrations pace; conservative framing
Security consolidationIntro pricing led to pipeline of larger, longer-cycle deals; material revenue expected in 2025 ~250 customers adopting Advanced Security/Curation; >5% of ending ARR; ~12% of RPO; customers consolidating point solutions Acceleration; material contribution targeted FY25
GitHub partnership & CopilotCo-engineering to unify code/binaries; expected to drive Advanced Security and AI shift-left Positive field feedback; focus on Copilot + JFrog platform integration (DevOps, security, AI) Deepening integration; demand catalyst
AWS strategic collaboration—New SCA to streamline cloud migrations and procurement via AWS Marketplace; improved commercial terms New lever for migrations/cost
Guidance philosophyQ3: conservative, derisked large deals and usage Explicitly “much more conservative guide” (CFO), focusing on committed deals; usage not in guidance More conservative
RPO/multiyear commitmentsQ3 RPO $346.1M, stronger multiyear RPO $403.1M (+55% YoY), benefiting from multiyear security/platform commitments Strengthening backlog
MLOps/AI (Qwak)Qwak acquired; integration beginning; limited near-term revenue JFrog ML launched for cloud customers; AI/ML models treated as binaries; no FY25 MLOps contribution in guide Product released; revenue optionality beyond FY25

Management Commentary

  • “JFrog achieved strong cloud expansion, accelerated Platform adoption, and growth in security… We have solidified our position as the single system of record for all types of software packages and AI models” (CEO) .
  • “Our operating profit in Q4 increased to $20.9 million or an operating margin of 18%… after CapEx, free cash flow reached $48.5 million or 42% margin, a record quarter” (CFO) .
  • “We have recently signed a strategic collaboration agreement with AWS… to cost effectively scale DevSecOps and AI-driven software solutions in the cloud” (CEO) and AWS release .
  • “Security core becoming a mission-critical piece… successfully adopted by approximately 250 customers… migrating from point solution tools” (CEO) .

Q&A Highlights

  • Estimates and guidance assumptions: NDR stabilizing mid-teens; pricing changes similar to 2024; migrations consistent with 2024; usage not assumed above minimum commits .
  • Cloud revenue composition: ~$1.3M recognized from enhanced cloud database migration; no Q4 true-ups like 2023; shifts monthly to use-it-or-lose-it reduce true-ups over time .
  • Security sales motion: Larger, multiyear, multimillion deals coupled with platform; proof-of-concepts longer; broad opportunity beyond 250 adopters .
  • Partnerships as catalysts: AWS SCA improves cost/procurement; GitHub integration with Copilot seen as strong differentiator and pipeline driver .

Estimates Context

  • S&P Global consensus data was unavailable at the time of analysis due to request limits; therefore, comparisons vs Wall Street consensus could not be provided. Values would ordinarily be retrieved from S&P Global.
  • Company guidance and actuals suggest Q4 revenue exceeded JFrog’s prior Q4 guidance ($113.5–$114.5M) issued in November, while non-GAAP EPS matched the high end of the prior Q4 range ($0.13–$0.15) .

Key Takeaways for Investors

  • Cloud growth drivers appear durable (migrations, product shifts, AWS SCA), but management’s conservative posture and minimum-commit usage discipline temper upside risk near term; watch consumption trends through 1H’25 .
  • Security is becoming material to ARR/RPO and embedded in platform deals; expect 2025 revenue contribution to step up as consolidation replaces multiple point solutions .
  • Mix shift to cloud weighs on gross margins, but operating leverage and strong cash generation offset; near-term gross margins guided to 82.5–83.5% .
  • Backlog strength (RPO $403.1M, +55% YoY) and Enterprise+ adoption (54% of revenue) support visibility; monitor conversion pace of multiyear commitments to revenue .
  • 2025 guidance signals derisked execution with baseline cloud growth 30–32% and NDR mid-teens; upside catalysts include AWS SCA-driven migrations, GitHub/Copilot integration, and ML model management (Qwak) .
  • For near-term trading, the conservative guide could set up beat-and-raise potential if migrations or usage exceed minimums; any acceleration in security monetization or AI/ML workloads would be positive surprises .
  • Risks: elongated sales cycles, macro procurement rigidity, and elevated SBC driving GAAP losses; keep an eye on monthly cloud mix and migration timelines .