Summary
JFrog reported $67.8 million of revenue for the second quarter of fiscal 2022, up 39% from $48.7 million in the same quarter a year earlier. Cloud revenue was the standout at $19.2 million, up 68% year over year, and it grew to 28% of total revenue from 24%. Customers running the complete JFrog Platform generated 36% of total revenue, against 32% in the prior-year period. Revenue from subscriptions that give customers access to multiple products was roughly 94% of the total, compared with 92% a year earlier. Backlog indicators moved up as well. Deferred revenue ended the quarter at $157.1 million, up 31.8%, and remaining performance obligations reached $184.7 million, up 45.4%. On the product side, the company announced an advanced security package that pulls in functionality from the Vdoo acquisition, launched JFrog Connect for over-the-air updates on edge devices, and added integrations for Artifactory and Xray with ServiceNow's Lightstep and Microsoft Teams.
The bottom line moved the other way. Gross profit rose 32.8% to $52.6 million, but gross margin fell to 77.5% from 81.4%. Management pinned the decline on higher amortization of intangibles tied to the Vdoo acquisition and on added personnel costs. Operating loss widened to $22.4 million from $14.2 million, and the operating margin slipped to negative 33.0% from negative 29.2%. Net loss was $23.8 million, or $0.24 per diluted share, compared with $13.1 million, or $0.14 per diluted share, in the prior-year quarter. The loss widened 80.8%. Research and development absorbed more spending as headcount grew, including staff added through 2021 acquisitions, and holdback and retention arrangements carried cost. Sales and marketing also expanded. General and administrative expense was the one line that shrank, helped by the CEO equity award that fully vested in September 2021.
Cash generation slowed sharply. Operating cash flow was $4.0 million for the quarter, down 79.4% from $19.2 million a year earlier, and capital expenditures were $1.0 million, down 13.3%. Free cash flow, a non-GAAP measure the company defines as operating cash flow minus purchases of property and equipment, came to $3.0 million. For the six months ended June 30, 2022, revenue was $131.5 million, up 40%, while operating cash flow was $9.0 million against $28.0 million for the same period of 2021. Cash, cash equivalents and short-term investments totaled $430.2 million as of June 30, 2022. Non-GAAP results frame profitability differently: non-GAAP gross margin was 83.7%, the non-GAAP operating loss was $2.0 million and non-GAAP net loss per diluted share was $0.02. The bridge between the two sets of numbers is mostly share-based compensation, acquisition-related costs and intangible amortization.
Customer metrics suggest expansion is holding. The net dollar retention rate was 132%. Customers with annual recurring revenue of $100,000 or more rose 56% year over year to 647, up from 415. Customers at $1 million or more in annual recurring revenue rose 42% to 17, from 12.
For the third quarter of fiscal 2022, guidance points to non-GAAP operating income between a loss of $0.5 million and income of $0.5 million, and non-GAAP net income per diluted share between a loss of $0.01 and income of $0.01, assuming approximately 106 million weighted average diluted shares outstanding. The full fiscal year 2022 outlook is non-GAAP operating income between a loss of $1.0 million and income of $1.0 million, with non-GAAP net income per diluted share between a loss of $0.01 and income of $0.01, assuming approximately 107 million weighted average diluted shares outstanding.
Risks are the usual mix for a high-growth software vendor. JFrog carries a history of losses and is managing rapid growth. A security breach or product vulnerability would hit hard for a company selling software supply chain security. Competition in DevOps remains fierce, and the company still has to integrate acquisitions such as Vdoo and capture the expected benefits. General market, political and economic conditions and the ongoing COVID-19 pandemic could dampen enterprise spending. Purchase obligations of $83.9 million and operating lease obligations of $36.4 million sit on the books, alongside the $430.2 million of liquidity.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2022 | Q1 FY2022 | QoQ | Q2 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $67.8M | $63.7M | +6.5% | $48.7M | +39.4% |
| Gross profit | $52.6M | $49.8M | +5.5% | $39.6M | +32.8% |
| Gross margin | 77.5% | 78.2% | -0.7 pp | 81.4% | -3.8 pp |
| Research & development | $28.9M | $27.1M | +6.8% | $16.7M | +73.4% |
| Sales & marketing | $32.0M | $29.2M | +9.6% | $22.0M | +45.2% |
| General & administrative | $14.0M | $12.7M | +10.6% | $15.1M | -7.1% |
| Total operating expenses | $75.0M | $69.0M | +8.7% | $53.8M | +39.3% |
| Operating income (loss) | -$22.4M | -$19.1M | -17.1% | -$14.2M | -57.5% |
| Operating margin | -33.0% | -30.1% | -3.0 pp | -29.3% | -3.8 pp |
| Net income (loss) | -$23.8M | -$19.7M | -20.7% | -$13.1M | -80.8% |
| Net margin | -35.1% | -30.9% | -4.1 pp | -27.0% | -8.0 pp |
| Diluted EPS | -$0.24 | — | — | -$0.14 | -$0.10 |
| Net retention rate | 132.0% | 131.0% | +1.0 pp | 129.0% | +3.0 pp |
Risks
Unfavorable global economic conditions and reductions in IT spending could limit growth. The filing notes U.S. annual inflation was approximately 7.0% for 2021 and increased to more than 9.1% as of June 2022, which could raise employee compensation and customer operating costs and lead to delayed or reduced IT budgets.
Stringent and changing privacy, data protection, and data security laws increase compliance costs and liability. The filing cites GDPR fines of up to the greater of 20 million euros and 4% of global annual turnover, new U.S. state laws including the CPRA and Virginia, Colorado, Utah, and Connecticut acts, plus China's DSL and PIPL and cross-border transfer uncertainty under Schrems II and SCCs.
A security breach or supply chain attack could harm platform trust and create significant liability. The filing references incidents such as SolarWinds Orion, Kaseya VSA, and Log4j, states that the Vdoo acquisition may give products access to more sensitive customer information, and warns of heightened cyber and privacy breach risks from Russia's invasion of Ukraine and remote work.
International operations and expansion expose the company to geopolitical, regulatory, and labor risks. Primary R&D is in Israel, customers were in over 90 countries, and employees were in nine countries as of June 30, 2022; the filing also cites Russia's military action against Ukraine, sanctions, Brexit, and currency exchange rate changes.
COVID-19 has slowed growth and lengthened sales cycles. The filing states it has experienced and expects to continue experiencing an increase in average sales cycles to onboard new customers, delays in new projects, requests for payment extensions, slowed growth for new customers, and fewer upgrades from existing customers.
Inflation could increase compensation costs. The filing states inflation could affect expenses especially employee compensation, and MD&A shows research and development expense increased 73% for the three months ended June 30, 2022 and sales and marketing expense increased 45%, primarily from personnel-related expenses and increased headcount.
Integration of 2021 acquisitions, including Vdoo, is increasing costs and reducing profitability. MD&A attributes higher cost of revenue partly to $4.8 million of amortization of intangibles for the six months ended June 30, 2022, and higher R&D to $4.3 million of compensation expense for holdback and retention arrangements; gross margin decreased to 77.5% from 81.4% for the quarter.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Operating Margin
Cloud Revenue
Non-GAAP Gross Margin
Cloud Revenue as % of Total Revenue
Customers > $100K ARR
Customers > $1M ARR
Summary, forecast, risks and KPIs are extracted from JFrog Ltd's SEC filings for Q2 FY2022 (10-Q / 10-K and the 8-K earnings release); GAAP figures in the summary are checked against the reported XBRL data. They can contain errors; the filings are authoritative. Processed Oct 2, 2026.