Summary
JFrog's third quarter revenue reached $72.0 million, up 34.1% from the prior-year quarter. Nine-month revenue was $203.5 million, up 38.0% from the same period a year earlier. GAAP gross profit was $56.1 million, while gross margin slipped to 77.9%, down 0.7 percentage points. The GAAP operating loss widened to $23.4 million, and the operating margin was negative 32.6%, up 6.4 percentage points from the prior-year quarter. The GAAP net loss widened to $23.6 million, and diluted EPS was -$0.24. MD&A attributes the top-line increase to growth from existing customers and new customers.
Cloud remained the main growth engine. Cloud revenue grew 60% and accounted for 29% of total revenue, compared with 24% in the year-ago period. Net dollar retention was 130%. Customers with $100,000 or more in ARR rose to 696, up 49% from 466 a year earlier. Customers with $1 million or more in ARR increased to 18, up 29% from 14. Enterprise Plus subscription revenue represented 39% of total revenue, compared with 34% in the prior-year period. On the product side, JFrog launched Advanced Security, a binary-focused DevSecOps offering. The company also completed its first large JFrog Connect deal, with an international defense electronics company to manage an armed forces DevOps flow and enable over-the-air software updates. It also closed a multi-million dollar deal with a top-three automotive manufacturer that leveraged the full JFrog Platform. Management said cloud marketplace partners and higher customer usage drove the cloud increase.
Non-GAAP results showed a small profit. Non-GAAP gross profit was $60.6 million, with a non-GAAP gross margin of 84.2%. Non-GAAP operating profit was $1.2 million, with a 1.7% non-GAAP operating margin, and non-GAAP net income per diluted share was $0.02. Operating cash flow was $5.1 million for the quarter, up from a negative result a year earlier, and free cash flow was $3.8 million. For the nine months, operating cash flow was $14.1 million, up 37.8%, and free cash flow was $10.7 million. Deferred revenue was $143.2 million, up 29.1% year over year, and remaining performance obligations were $189.8 million, up 35.9%. The gap between GAAP and non-GAAP results remains wide, mostly because of share-based compensation and other adjustments.
Guidance for the fourth quarter of 2022 includes non-GAAP operating income between $1.0 million and $2.0 million and non-GAAP net income per diluted share between $0.01 and $0.02, assuming approximately 106 million weighted average diluted shares. For the full fiscal year 2022, JFrog guided to non-GAAP operating income and non-GAAP net income per diluted share in the same ranges. Revenue guidance ranges were also provided for the fourth quarter and the full fiscal year. The company does not provide GAAP guidance because reconciliations are not available on a forward-looking basis without unreasonable effort.
The company faces several risks. It has a history of losses and a limited operating history. Rapid growth puts pressure on management and internal controls. A security breach or product vulnerability could harm trust in the platform. Competition is intense, and general market, political, economic and business conditions could slow demand. The COVID-19 pandemic remains a wildcard. Integration of acquisitions also carries execution risk. The 10-Q also cites risks tied to retaining and upgrading existing customers, attracting new customers, expanding sales and marketing capabilities, adapting to rapidly changing technology or customer needs, and realizing synergies from acquisitions.
Forecast
Reported figures
GAAP, from SEC filings| Metric | Q3 FY2022 | Q2 FY2022 | QoQ | Q3 FY2021 | YoY |
|---|---|---|---|---|---|
| Revenue | $72.0M | $67.8M | +6.2% | $53.7M | +34.1% |
| Gross profit | $56.1M | $52.6M | +6.7% | $42.2M | +32.8% |
| Gross margin | 77.9% | 77.5% | +0.4 pp | 78.7% | -0.7 pp |
| Research & development | $31.7M | $28.9M | +9.5% | $23.1M | +37.0% |
| Sales & marketing | $33.2M | $32.0M | +3.6% | $24.3M | +36.3% |
| General & administrative | $14.7M | $14.0M | +4.6% | $15.7M | -6.5% |
| Total operating expenses | $79.5M | $75.0M | +6.1% | $63.2M | +25.9% |
| Operating income (loss) | -$23.4M | -$22.4M | -4.6% | -$20.9M | -12.1% |
| Operating margin | -32.6% | -33.0% | +0.5 pp | -39.0% | +6.4 pp |
| Net income (loss) | -$23.6M | -$23.8M | +0.9% | -$20.5M | -15.1% |
| Net margin | -32.7% | -35.1% | +2.3 pp | -38.1% | +5.4 pp |
| Diluted EPS | -$0.24 | -$0.24 | ±$0.00 | — | — |
| Net retention rate | 130.0% | 132.0% | -2.0 pp | 129.0% | +1.0 pp |
Risks
Unfavorable global economic conditions, including U.S. inflation above 8.2% as of September 2022 and rising interest rates, could reduce customer IT spending and increase labor costs. The filing notes customers may develop in-house software or competitors may lower prices, which could pressure revenue.
The platform supports customers' software and may process sensitive data, and supply chain attacks such as SolarWinds Orion and Kaseya VSA increase customer security expectations. Remote work and Russia's invasion of Ukraine heighten nation-state cyber risk, and the Vdoo acquisition could give products access to more sensitive customer information.
Stringent and changing privacy, data protection, and data security laws, including CCPA/CPRA, GDPR with fines up to the greater of €20 million or 4% of global annual turnover, cross-border transfer rules after Schrems II, ePrivacy, China's DSL and PIPL, and Israeli privacy law, increase compliance costs and liability.
Net loss widened to $23.6 million for the three months ended September 30, 2022 from $20.5 million, and to $67.0 million for the nine months ended September 30, 2022 from $41.5 million. Operating loss also widened to $23.4 million for the quarter and $65.0 million year to date.
COVID-19 has increased the average length of sales cycles to onboard new customers, caused delays in new projects, and led some customers to request payment extensions. The company also expects continued slowed growth for new customers and fewer upgrade orders from existing customers.
Primary R&D is in Israel, customers are in over 90 countries, and employees are in nine countries as of September 30, 2022. Risks include Russia's military action against Ukraine, sanctions, Brexit, currency exchange, labor regulations, and anti-corruption laws such as the FCPA.
The 2021 Vdoo acquisition increased amortization of acquired intangibles and compensation expense, contributing to gross margin decline and higher R&D costs. Expanding into new security services could subject the company to additional regulations and greater adverse effects from security breaches.
Gross margin was 78% for the three months ended September 30, 2022, down from 79%, and 78% for the nine months ended September 30, 2022, down from 80%. The decreases reflect higher personnel-related expense and higher amortization from the Vdoo acquisition.
SaaS KPIs
All quarters →Free Cash Flow
Non-GAAP Operating Margin
Cloud Revenue
Non-GAAP Gross Margin
Net Dollar Retention
Remaining Performance Obligations (RPO)
Summary, forecast, risks and KPIs are extracted from JFrog Ltd's SEC filings for Q3 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.