JFrog Ltd Q4 FY2022 earnings

JFrog closed fiscal 2022 with fourth quarter revenue of $76.5 million, up 29.2% year over year. GAAP gross profit was $59.3 million, up 27.8%, with a gross margin of 77.4%, down 0.9 percentage points. The company reported a GAAP operating loss of $24.9 million, and the loss widened 9.9%. GAAP operating margin was (32.5)%, up 5.7 percentage points. GAAP net loss was $23.2 million, and the loss widened 2.0%. Operating cash flow for the quarter was $7.3 million, down 58.6%. Capital expenditures were $0.89 million, down 14.2%. Non-GAAP operating profit was $1.6 million, with a 2.1% margin. Non-GAAP gross profit was $64.0 million, with an 83.7% margin. Non-GAAP earnings per share were $0.04. The CEO attributed the results to continued expansion in the adoption of the JFrog Software Supply Chain Platform, with customers favoring a single, universal platform for DevOps and DevSecOps.

For the full fiscal year, revenue reached $280.0 million, up 35%. GAAP gross profit was $217.8 million, up 32.1%, with a gross margin of 77.8%, down 2.0 percentage points. GAAP operating loss was $89.8 million, and the loss widened 31.4%. GAAP net loss was $90.2 million, and the loss widened 40.5%. Diluted GAAP net loss per share was $0.91, and the loss widened 33.8%. Operating cash flow for the year was $21.4 million, down 23.2%. Capital expenditures were $4.3 million, up 2.4%. Free cash flow, a non-GAAP measure, was $17.1 million. Cash, cash equivalents, and short-term investments were $443.2 million as of December 31, 2022. Deferred revenue was $175.7 million, up 19.4% year over year. Remaining performance obligations were $204.7 million, up 26.7%. For fiscal 2022, non-GAAP operating profit was $1.3 million, with a 0.5% margin. Non-GAAP gross profit was $235.2 million, with an 84.0% margin. Non-GAAP earnings per share were $0.04.

The customer base grew to roughly 7,200 organizations, up 8% from about 6,650 a year earlier. Customers with annual recurring revenue of at least $100,000 increased 37% to 736, while customers with at least $1 million in ARR increased 27% to 19. Net dollar retention rate for the trailing four quarters was 128%, down from 130% as of December 31, 2021. Management noted slower expansion across existing customers toward the end of fiscal 2022 and expects that trend to continue in the near future. Cloud revenue was $22.6 million in the fourth quarter, up 53% year over year, and $80 million for fiscal 2022, up 60%. Cloud represented 30% of fourth quarter revenue, compared with 25% a year earlier. Customers adopting the complete JFrog Platform accounted for 43% of total revenue, compared with 35% a year earlier. Enterprise Plus subscriptions represented approximately 38% of total fiscal 2022 revenue, up from approximately 32% in fiscal 2021. SaaS subscriptions contributed 28% of total fiscal 2022 revenue, up from 24%. The top 10 customers represented approximately 7% of total revenue for fiscal 2022, and no single customer accounted for more than 1%. International customers generated 37% of revenue. As of December 31, 2022, approximately 89% of Fortune 100 organizations were customers.

For the first quarter of 2023, JFrog guided revenue between $78 million and $79 million, non-GAAP operating income between $1.5 million and $2.5 million, and non-GAAP net income per diluted share between $0.03 and $0.05, assuming approximately 107 million weighted average diluted shares outstanding. For the full fiscal year 2023, the company guided revenue between $340 million and $344 million, non-GAAP operating income between $17 million and $19 million, and non-GAAP net income per diluted share between $0.18 and $0.20, assuming approximately 110 million weighted average diluted shares outstanding. Risks include managing rapid growth, a history of losses, limited operating history, the ability to retain and upgrade existing customers, attract new customers, develop and expand sales and marketing capabilities, integrate acquisitions, security breaches or product vulnerabilities, interruptions or performance problems, adapting to rapidly changing technology or customer needs, competition, and general market, political, economic, and business conditions. The company also faces the duration and impact of the COVID-19 pandemic. Management expects free cash flow to fluctuate in future periods as the company invests in growth. Total contractual obligations stood at $93.7 million as of December 31, 2022, with $27.0 million due short term and $66.7 million long term.