JFrog Ltd

Previous wording

We generate revenue from the sale of subscriptions to customers. We offer subscription tiers for self-managed deployments, where our customers deploy and manage our products across their public cloud, on-premise, private cloud, or hybrid environments, as well as JFrog-managed public cloud deployments, which we refer to as our SaaS subscriptions. Revenue from SaaS subscriptions contributed 38% and 37% of our total revenue for the three and six months ended June 30, 2024, respectively, compared to 33% and 32% for the corresponding periods in 2023, respectively.

Current wording

We generate revenue from the sale of subscriptions to customers. We offer subscription tiers for self-managed deployments, where our customers deploy and manage our products across their public cloud, on-premise, private cloud, or hybrid environments, as well as JFrog-managed public cloud deployments, which we refer to as our SaaS subscriptions. Revenue from SaaS subscriptions contributed 39% and 38% of our total revenue for the three and nine months ended September 30, 2024, respectively, compared to 35% and 33% for the corresponding periods in 2023, respectively.

Previous wording

Our self-managed subscriptions are offered on an annual and multi-year basis, and our SaaS subscriptions are offered on a monthly, annual, and multi-year basis. Revenue from Enterprise Plus subscription represented approximately 50% and 49% of our total revenue for the three and six months ended June 30, 2024, respectively, compared to approximately 45% for each of the corresponding periods in 2023. The growth in revenue from our Enterprise Plus subscription demonstrates the increased demand for our end-to-end solutions for customers’ entire software supply chain management.

Current wording

Our self-managed subscriptions are offered on an annual and multi-year basis, and our SaaS subscriptions are offered on a monthly, annual, and multi-year basis. Revenue from Enterprise Plus subscription represented approximately 50% of our total revenue for the three and nine months ended September 30, 2024, compared to approximately 46% and 45% for the corresponding periods in 2023, respectively. The growth in revenue from our Enterprise Plus subscription demonstrates the increased demand for our end-to-end solutions for customers’ entire software supply chain management.

Previous wording

We generated revenue of $103.0 million and $84.2 million for the three months ended June 30, 2024 and 2023, respectively, representing 22% growth, and $203.4 million and $164.0 million for the six months ended June 30, 2024 and 2023, respectively, representing 24% growth. We have continued to invest in our business and had a net loss of $14.3 million and $15.5 million for the three months ended June 30, 2024 and 2023, respectively, and $23.1 million and $36.3 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

We generated revenue of $109.1 million and $88.6 million for the three months ended September 30, 2024 and 2023, respectively, representing 23% growth, and $312.4 million and $252.6 million for the nine months ended September 30, 2024 and 2023, respectively, representing 24% growth. We have continued to invest in our business and had a net loss of $22.9 million and $13.7 million for the three months ended September 30, 2024 and 2023, respectively, and $46.0 million and $50.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

On October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against these terrorist organizations. Since the commencement of these events, there have been additional active hostilities, including with Hezbollah in Lebanon, Iran, and most recently, the Houthi movement which controls parts of Yemen. It is possible that these hostilities will escalate in the future into a greater regional conflict, and that additional terrorist organizations and countries could actively join the hostilities.

Current wording

On October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets. Following the attack, Israel’s security cabinet declared war against Hamas and commenced a military campaign against these terrorist organizations. Since the commencement of these events, there have been additional active hostilities, including with Hezbollah in Lebanon, Iran, and most recently, the Houthi movement which controls parts of Yemen. The conflict has recently expanded into Lebanon and it is possible that hostilities will escalate in the future into a greater regional conflict, and that additional terrorist organizations and countries could actively join the hostilities.

Previous wording

We quantify our expansion across existing customers through our net dollar retention rate. Our net dollar retention rate compares our annual recurring revenue (“ARR”) from the same set of customers across comparable periods. We define 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 we generate revenue from these customers. We annualize our monthly subscriptions by taking the revenue we would contractually expect to receive from such customers in a given month and multiplying it by 12. We calculate 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”). We then calculate 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. We then divide total Comparison Quarter ARR by total Base Quarter ARR for Base Customers. Our 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. Our net dollar retention rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features, and our ability to retain our customers. As of June 30, 2024 and 2023, our net dollar retention rate was 118% and 120%, respectively. We expect our net dollar retention rate to remain relatively stable, with minor fluctuations around current levels.

Current wording

We quantify our expansion across existing customers through our net dollar retention rate. Our net dollar retention rate compares our annual recurring revenue (“ARR”) from the same set of customers across comparable periods. We define 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 we generate revenue from these customers. We annualize our monthly subscriptions by taking the revenue we would contractually expect to receive from such customers in a given month and multiplying it by 12. We calculate 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”). We then calculate 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. We then divide total Comparison Quarter ARR by total Base Quarter ARR for Base Customers. Our 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. Our net dollar retention rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features, and our ability to retain our customers. As of September 30, 2024 and 2023, our net dollar retention rate was 117% and 119%, respectively. We expect our net dollar retention rate to remain relatively stable, with minor fluctuations around current levels.

Previous wording

We focus on growing the number of large customers as a measure of our ability to scale with our customers and attract larger organizations to adopt our products. As of June 30, 2024, 928 of our customers had ARR of $100,000 or more, increasing from 886 customers as of December 31, 2023. We had 42 customers with ARR of at least $1.0 million as of June 30, 2024, increasing from 37 customers as of December 31, 2023.

Current wording

We focus on growing the number of large customers as a measure of our ability to scale with our customers and attract larger organizations to adopt our products. As of September 30, 2024, 966 of our customers had ARR of $100,000 or more, increasing from 886 customers as of December 31, 2023. We had 46 customers with ARR of at least $1.0 million as of September 30, 2024, increasing from 37 customers as of December 31, 2023.

Previous wording

Income tax expense consists primarily of income taxes related to the United States and other foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on certain deferred tax assets in Israel as we have concluded that it is not more likely than not that the deferred tax assets will be realized. Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, non-deductible expenses, excess tax benefits from share-based compensation awards, and changes in our valuation allowance.

Current wording

Income tax expense (benefit) consists primarily of income taxes related to the United States and other foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on certain deferred tax assets in Israel as we have concluded that it is not more likely than not that the deferred tax assets will be realized. Our effective tax rate is affected by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, non-deductible expenses, excess tax benefits from share-based compensation awards, and changes in our valuation allowance.

Previous wording

The increase in total subscription revenue for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 consisted of approximately $15.5 million in growth from existing customers and the remaining attributable to new customers.

Current wording

The increase in total subscription revenue for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 consisted of approximately $17.1 million in growth from existing customers and the remaining attributable to new customers.

Previous wording

Total cost of revenue increased for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily attributable to an increase of $2.2 million in third-party hosting costs mainly driven by increased revenue from SaaS subscriptions and an increase of $1.2 million in share-based compensation expense as discussed in the section titled “Share-Based Compensation Expense” below.

Current wording

Total cost of revenue increased for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily attributable to an increase of $2.8 million in third-party hosting costs mainly driven by increased revenue from SaaS subscriptions, an increase of $2.0 million in intangible amortization mainly as a result of our acquisition of Qwak AI Ltd. (“Qwak”) in July 2024, an increase of $1.8 million in personnel-related expenses mainly as a result of increased headcount, and an increase of $1.2 million in share-based compensation expense as discussed in the section titled “Share-Based Compensation Expense” below.

Previous wording

Research and development expense increased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily attributable to an increase of $4.9 million in share-based compensation expense, an increase of $2.7 million in personnel-related expenses mainly as a result of increased headcount, and an increase of $1.0 million in costs of development environments and tools, partially offset by the absence of $4.8 million in compensation expense associated with the acquisition holdback arrangements which ended in July 2023.

Current wording

Research and development expense increased for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily attributable to an increase of $5.0 million in share-based compensation expense and an increase of $2.7 million in personnel-related expenses mainly as a result of increased headcount.

Previous wording

Sales and marketing expense increased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily attributable to an increase of $7.0 million in share-based compensation expense, an increase of $6.3 million in personnel-related expenses mainly as a result of increased headcount, and an increase of $1.9 million in commissions.

Current wording

Sales and marketing expense increased for the three months ended September 30, 2024 compared to the three months ended September 30, 2023. The increase was primarily attributable to an increase of $5.3 million in share-based compensation expense, an increase of $4.0 million in personnel-related expenses mainly as a result of increased headcount, and an increase of $0.9 million in intangible amortization driven by our Qwak acquisition.

Previous wording

General and administrative expense increased for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily attributable to an increase of $1.4 million in professional fees mainly related to legal services for our acquisition of Qwak, recruiting, and other consulting services and an increase of $1.1 million personnel-related expenses mainly as a result of increased headcount.

Current wording

General and administrative expense increased for the three months ended September 30, 2024 compared to the three months ended September 30, 2023, primarily attributable to an increase of $1.7 million in personnel-related expenses mainly as a result of increased headcount.

Previous wording

The increase in total subscription revenue for the six months ended June 30, 2024 compared to the six months ended June 30, 2023 consisted of approximately $33.5 million in growth from existing customers and the remaining attributable to new customers.

Current wording

The increase in total subscription revenue for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 consisted of approximately $53.1 million in growth from existing customers and the remaining attributable to new customers.

Previous wording

Total cost of revenue increased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily attributable to an increase of $4.0 million in third-party hosting costs mainly driven by increased revenue from SaaS subscriptions, an increase of $2.1 million in share-based compensation expense as discussed in the section titled “Share-Based Compensation Expense” below, and an increase of $1.3 million in personnel-related expenses mainly as a result of increased headcount, partially offset by a decrease of $1.4 million in costs associated with software and subscription services.

Current wording

Total cost of revenue increased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily attributable to an increase of $6.8 million in third-party hosting costs mainly driven by increased revenue from SaaS subscriptions, an increase of $3.3 million in share-based compensation expense as discussed in the section titled “Share-Based Compensation Expense” below, and an increase of $3.1 million in personnel-related expenses mainly as a result of increased headcount, partially offset by a decrease of $2.0 million in costs associated with software and subscription services.

Previous wording

Research and development expense increased for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily attributable to an increase of $2.4 million in personnel-related expenses mainly as a result of increased headcount, an increase of $2.4 million in share-based compensation expense, and an increase of $0.6 million in costs of development environments and tools, partially offset by the absence of $2.4 million in compensation expense associated with the acquisition holdback arrangements which ended in July 2023.

Current wording

Research and development expense increased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily attributable to an increase of $9.9 million in share-based compensation expense, an increase of $5.4 million in personnel-related expenses mainly as a result of increased headcount, and an increase of $1.4 million in costs of development environments and tools, partially offset by a decrease of $4.3 million in compensation expense associated with the acquisition holdback and retention arrangements.

Previous wording

Sales and marketing expense increased for the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was primarily attributable to an increase of $3.7 million in share-based compensation expense, an increase of $3.0 million in personnel-related expenses mainly as a result of increased headcount, and an increase of $0.9 million in commissions.

Current wording

Sales and marketing expense increased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily attributable to an increase of $12.3 million in share-based compensation expense, an increase of $10.3 million in personnel-related expenses mainly as a result of increased headcount, and an increase of $2.6 million in commissions.

Previous wording

General and administrative expense increased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was primarily attributable to an increase of $2.2 million in personnel-related expenses mainly as a result of increased headcount and an increase of $2.0 million in professional fees mainly related to legal services for our acquisition of Qwak, recruiting, and other consulting services.

Current wording

General and administrative expense increased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023. The increase was primarily attributable to an increase of $3.9 million in personnel-related expenses mainly as a result of increased headcount and an increase of $2.6 million in professional fees mainly related to legal and recruiting services.

Previous wording

Share-based compensation expenses increased for the six months ended June 30, 2024 compared to the six months ended June 30, 2023, primarily attributable to grants to new and existing employees.

Current wording

Share-based compensation expenses increased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023, primarily attributable to grants to new and existing employees.

Previous wording

Interest and other income, net increased for the three months ended June 30, 2024 compared to the three months ended June 30, 2023, primarily due to higher interest income on deposits and marketable securities as a result of higher investment balances and higher interest rates.

Current wording

Interest and other income, net increased for the nine months ended September 30, 2024 compared to the nine months ended September 30, 2023 primarily due to higher interest income on deposits and marketable securities as a result of higher interest rates.

Previous wording

As of June 30, 2024, our principal sources of liquidity were cash, cash equivalents, and short-term investments of $591.3 million. Cash and cash equivalents primarily consist of cash in banks and money market funds. Short-term investments generally consist of bank deposits, certificates of deposit, commercial paper, corporate debt securities, municipal securities, and government and agency debt. We believe our existing cash, cash equivalents, and short-term investments, together with cash provided by operations, will be sufficient to meet our needs for the next 12 months, as well as in the long-term. Upon the closing of the Qwak acquisition on July 9, 2024, we paid an aggregate of $163.7 million cash, pursuant to the share purchase agreement.

Current wording

As of September 30, 2024, our principal sources of liquidity were cash, cash equivalents, and short-term investments of $467.8 million. Cash and cash equivalents primarily consist of cash in banks and money market funds. Short-term investments generally consist of bank deposits, certificates of deposit, commercial paper, corporate debt securities, municipal securities, and government and agency debt. We believe our existing cash, cash equivalents, and short-term investments, together with cash provided by operations, will be sufficient to meet our needs for the next 12 months, as well as in the long-term.

Previous wording

Net cash provided by operating activities of $34.2 million for six months ended June 30, 2024 was related to our net loss of $23.1 million adjusted for non-cash charges of $64.4 million, including share-based compensation expense of $55.9 million and depreciation and amortization expense of $7.6 million, and net cash outflow of $7.1 million from changes in our operating assets and liabilities. The changes in our operating assets and liabilities were primarily related to an increase of $5.6 million in accounts receivable, an increase of $5.0 million in prepaid expense and other assets due to timing of payments, and a decrease of $4.2 million in operating lease liabilities as a result of payments. The outflows were partially offset by an increase of $7.2 million in deferred revenue. The increases in accounts receivable and deferred revenue were driven by higher sales.

Current wording

Net cash provided by operating activities of $61.8 million for nine months ended September 30, 2024 was related to our net loss of $46.0 million adjusted for non-cash charges of $108.5 million, including share-based compensation expense of $92.3 million and depreciation and amortization expense of $14.6 million, and net cash outflow of $0.6 million from changes in our operating assets and liabilities. The total cash outflows of $38.7 million from changes in our operating assets and liabilities were primarily related to an increase of $15.8 million in accounts receivable, an increase of $8.2 million in deferred contract acquisition costs, an increase of $6.9 million in prepaid expenses and other assets mainly due to timing of payments, and a decrease of $6.2 million in operating lease liabilities as a result of payments. These outflows were partially offset by an increase of $30.1 million in deferred revenue and an increase of $8.0 million in accrued expense and other liabilities mainly due to accrued compensation and benefits. The increases in deferred revenue, accounts receivable, and deferred contract acquisition costs were driven by higher sales.

Previous wording

Net cash provided by operating activities of $15.6 million for the six months ended June 30, 2023 was related to our net loss of $36.3 million adjusted for non-cash charges of $49.6 million, including share-based compensation expense of $41.2 million and depreciation and amortization expense of $7.7 million, and changes in our operating assets and liabilities of $2.3 million. The changes in our operating assets and liabilities were primarily related to an increase of $8.7 million in deferred revenue driven by higher sales and an increase of $3.0 million in accrued expenses and other liabilities primarily due to higher income tax obligations, partially offset by a decrease of $3.8 million in operating lease liabilities as a result of payments, an increase of $2.0 million in prepaid assets and other assets primarily due to higher accrued interest receivable, a decrease of $1.9 million in accounts payable due to timing of payments, and an increase of $1.6 million in deferred contract acquisition costs related to capitalized commissions.

Current wording

Net cash provided by operating activities of $41.6 million for the nine months ended September 30, 2023 was related to our net loss of $50.0 million adjusted for non-cash charges of $79.3 million, including share-based compensation expense of $66.9 million and depreciation and amortization expense of $11.5 million, and changes in our operating assets and liabilities of $12.3 million. The changes in our operating assets and liabilities were primarily related to an increase of $16.2 million in deferred revenue driven by higher sales and an increase of $4.9 million in accrued expenses and other liabilities primarily due to higher income tax obligations, partially offset by a decrease of $5.8 million in operating lease liabilities as a result of payments and an increase of $4.8 million in deferred contract acquisition costs related to capitalized commissions.

Previous wording

Net cash provided by investing activities of $88.3 million for the six months ended June 30, 2024 consisted primarily of the net proceeds from maturities and sales of short-term investments of $89.8 million.

Current wording

Net cash used in investing activities of $99.7 million for the nine months ended September 30, 2024 consisted primarily of payments for the Qwak acquisition of $156.7 million, net of cash acquired, partially offset by the net proceeds from maturities and sales of short-term investments of $59.5 million.

Previous wording

Net cash used in investing activities of $22.2 million for the six months ended June 30, 2023 consisted primarily of the net purchase of short-term investments of $21.4 million.

Current wording

Net cash used in investing activities of $37.8 million for the nine months ended September 30, 2023 consisted primarily of the net purchase of short-term investments of $36.5 million.

Previous wording

Net cash provided by financing activities of $11.9 million for the six months ended June 30, 2024 consisted primarily of proceeds from exercise of share options of $7.7 million and proceeds from employee share purchases under our ESPP of $4.5 million.

Current wording

Net cash provided by financing activities of $16.8 million for the nine months ended September 30, 2024 consisted primarily of proceeds from exercise of share options of $8.8 million and proceeds from employee share purchases under our ESPP of $8.7 million.

Previous wording

Net cash provided by financing activities of $7.7 million for the six months ended June 30, 2023 consisted primarily of proceeds from employee share purchases under our ESPP of $3.5 million and proceeds from exercise of share options of $3.4 million.

Current wording

Net cash provided by financing activities of $11.8 million for the nine months ended September 30, 2023 consisted primarily of proceeds from employee share purchases under our ESPP of $6.7 million and proceeds from exercise of share options of $5.4 million.

Previous wording

Our critical accounting policies and estimates were disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report. There have been no significant changes to these policies and estimates during the six months ended June 30, 2024.

Current wording

Our critical accounting policies and estimates were disclosed in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report. There have been no significant changes to these policies and estimates during the nine months ended September 30, 2024.