Summary
JFrog reported second-quarter revenue of $84.2 million for the period ended June 30, 2023. Revenue was up 24.1% from the prior-year quarter. Gross profit was $65.7 million, and gross margin was 78.1%, up 0.6 percentage points from 77.5%. The company still posted a GAAP operating loss of $18.9 million, but that loss narrowed from $22.4 million a year earlier. Net loss narrowed to $15.5 million, or -$0.15 per diluted share, from $23.8 million, or -$0.24 per diluted share, in the prior-year quarter. On a non-GAAP basis, operating income was $8.2 million, non-GAAP operating margin was 9.7%, and non-GAAP earnings per share was $0.11. For the six months ended June 30, 2023, revenue was $164.0 million, up 24.7% from the prior-year period, and net loss narrowed to $36.3 million.
Cloud revenue reached $27.6 million in the second quarter, up 44% year over year. Cloud made up 33% of total revenue, compared with 28% in the year-ago period. Net dollar retention for the trailing four quarters was 120%, compared with 130% as of June 30, 2022. The company said it started seeing slower expansion across existing customers toward the end of fiscal 2022 and expects net dollar retention to stabilize around current levels. Customers with $100,000 or more in annual recurring revenue increased to 813 from 647 a year earlier. Customers with $1 million or more in ARR increased to 24 from 17. Enterprise Plus subscriptions represented 45% of total revenue, compared with 36% a year earlier. JFrog launched general availability of JFrog Curation, a security tool that blocks malicious packages from entering software supply chains. A commissioned Forrester study found nearly 400% ROI on JFrog Platform investments over 36 months.
Cash generation improved. Operating cash flow was $16.7 million for the quarter, up from $3.9 million in the prior-year quarter. For the six months ended June 30, 2023, operating cash flow was $15.6 million, up from $9.0 million. Free cash flow was $16.2 million for the quarter. Capital expenditures were $0.5 million, down from $1.0 million in the prior-year quarter. Deferred revenue was $184.4 million, up 17.4% from $157.1 million a year earlier. Remaining performance obligations were $213.6 million, up 15.6% from $184.7 million.
Management provided guidance for the third quarter of 2023 and the full fiscal year 2023. Third-quarter revenue is expected between $87.0 million and $88.0 million. Third-quarter non-GAAP operating income is expected between $6.0 million and $7.0 million, and non-GAAP net income per diluted share is expected between $0.08 and $0.09. The third-quarter guidance assumes about 110 million weighted average diluted shares outstanding. For the full fiscal year 2023, revenue is expected between $343.5 million and $345.5 million. Full-year non-GAAP operating income is expected between $24.0 million and $25.0 million, and full-year non-GAAP net income per diluted share is expected between $0.26 and $0.28.
The results carry clear risks. JFrog has a history of losses and a limited operating history. It must retain and upgrade existing customers, attract new customers, and expand sales and marketing. The company also faces risks tied to acquisitions, security breaches or product vulnerabilities, interruptions or performance problems, rapidly changing technology, competition, and general market, political, economic, and business conditions. The COVID-19 pandemic remains a listed risk. The second quarter showed better GAAP profitability than a year ago and strong cloud growth. Still, the GAAP business remains unprofitable, and the cooling net dollar retention rate is a key watch item.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q2 FY2023 | Q1 FY2023 | QoQ | Q2 FY2022 | YoY |
|---|---|---|---|---|---|
| Revenue | $84.2M | $79.8M | +5.4% | $67.8M | +24.1% |
| Gross profit | $65.7M | $61.4M | +7.0% | $52.6M | +25.0% |
| Gross margin | 78.1% | 76.9% | +1.2 pp | 77.5% | +0.6 pp |
| Research & development | $33.5M | $34.9M | -3.8% | $28.9M | +15.9% |
| Sales & marketing | $36.4M | $35.5M | +2.4% | $32.0M | +13.6% |
| General & administrative | $14.7M | $14.2M | +3.5% | $14.0M | +5.0% |
| Total operating expenses | $84.6M | $84.6M | +0.0% | $75.0M | +12.9% |
| Operating income (loss) | -$18.9M | -$23.2M | +18.5% | -$22.4M | +15.6% |
| Operating margin | -22.5% | -29.1% | +6.6 pp | -33.0% | +10.6 pp |
| Net income (loss) | -$15.5M | -$20.8M | +25.7% | -$23.8M | +34.9% |
| Net margin | -18.4% | -26.1% | +7.7 pp | -35.1% | +16.7 pp |
| Diluted EPS | -$0.15 | -$0.21 | +$0.06 | -$0.24 | +$0.09 |
| Customers | 736 | 736 | ±0.0% | — | — |
| Net retention rate | 120.0% | 124.0% | -4.0 pp | 132.0% | -12.0 pp |
Risks
Adverse macroeconomic conditions including inflation, slower growth or recession, bank failures or instability in the financial services sector, tighter credit, higher interest rates, and currency fluctuations could reduce IT spending and demand. The filing states the company is currently operating in a period of economic uncertainty and that customers may view its products as discretionary, making revenue disproportionately affected by delays or reductions in technology spending.
Customers are applying enhanced budget scrutiny, additional approvals, cloud optimization efforts, and longer evaluation and testing to technology purchases, which can lead to long and unpredictable sales cycles. The company has recently experienced longer sales cycles for certain products and expects to continue facing these challenges given the current macroeconomic environment.
Net dollar retention rate was 120% as of June 30, 2023 compared to 130% as of June 30, 2022, and the company started experiencing slower expansion across existing customers towards the end of fiscal 2022. It expects its net dollar retention rate to stabilize around current levels.
Many employees, including certain management members, operate from offices in Netanya and Tel Aviv, Israel, and the region has experienced armed conflicts with Hamas, Hezbollah, and Iranian-backed military forces. Commercial insurance does not cover war and terrorism losses, and military reserve call-ups could disrupt operations.
The Israeli government passed the reasonableness bill on July 24, 2023, part of a planned judicial overhaul that led to domestic social and political tensions during the second quarter of 2023. Concerns include reluctance of foreign investors to invest or transact business in Israel, increased currency fluctuations, credit rating downgrades, higher interest rates, and reduced ability to raise additional funds.
Customers may choose to develop in-house software as an alternative to using the company's products, and competitors may respond to negative economic conditions by lowering prices. These dynamics could adversely affect demand and limit the company's ability to grow its business.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Operating Margin
Cloud Revenue
Non-GAAP Gross Margin
Remaining Performance Obligations
Cloud Revenue % of Total Revenue
Net Dollar Retention
Customers > $100K ARR
Customers > $1M ARR
Enterprise+ Subscription % of Total Revenue
Non-GAAP Operating Income
Total Revenue
Summary, forecast, risks and KPIs are extracted from JFrog Ltd's SEC filings for Q2 FY2023 (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.