The Liquid Software Company

News Release Details

JFrog Announces Strong Fourth Quarter and Fiscal Year 2020 Results

Feb 11, 2021 at 11:17 AM EST

Fourth Quarter Revenue Increased 39%; Fiscal 2020 Revenue Increased 44% 
Fourth Quarter Record Operating Cash Flow of $12.8 million and Record Free Cash Flow of $11.9 million        

SUNNYVALE, Calif., Feb. 11, 2021 (GLOBE NEWSWIRE) -- JFrog Ltd. (NASDAQ: FROG), the liquid software company, today announced financial results for its fourth quarter and fiscal year ended December 31, 2020.

“The fourth quarter was a strong finish to what has been a milestone year for JFrog,” said Shlomi Ben Haim, CEO of JFrog. “Results were driven by increased demand for our hybrid, universal DevOps platform, expansion by current customers, along with accelerating growth in our multi-cloud business. In addition to 44% revenue growth for the year, we achieved record operating and free cash flow, while increasing our investments despite the pandemic reality. We believe we will see a full alignment with our Liquid Software vision in the market as organizations increasingly recognize they need to release software faster and more efficiently, without sacrificing security. JFrog’s ability to meet these demands, both self-hosted and in the cloud, is driving our excitement for the coming year.”

Fourth Quarter Financial Highlights

  • Revenue for the fourth quarter of 2020 was $42.7 million, an increase of 39% from $30.8 million for the fourth quarter of 2019.
  • GAAP Gross Profit was $34.6 million; GAAP Gross Margin was 81.0%.
  • Non-GAAP Gross Profit was $35.2 million; Non-GAAP Gross Margin was 82.6%.
  • GAAP Operating Loss was ($8.0 million); GAAP Operating Margin was (18.8%).
  • Non-GAAP Operating Income was $2.2 million; Non-GAAP Operating Margin was 5.1%.
  • GAAP Net Loss Per Diluted Share was ($0.04); Non-GAAP Net Income Per Diluted Share was $0.02.
  • Operating Cash Flow was $12.8 million, with Free Cash Flow of $11.9 million.
  • Cash, cash equivalents and investments were $598 million as of December 31, 2020.

Fiscal Year 2020 Financial Results

  • Revenue for fiscal year 2020 was $150.8 million, an increase of 44% from $104.7 million for fiscal year 2019.
  • GAAP Gross Profit was $122.4 million; GAAP Gross Margin was 81.1%.
  • Non-GAAP Gross Profit was $124.3 million; Non-GAAP Gross Margin was 82.4%.
  • GAAP Operating Loss was ($14.2 million); GAAP Operating Margin was (9.4%).
  • Non-GAAP Operating Income was $13.0 million; Non-GAAP Operating Margin was 8.6%.
  • GAAP Net Loss Per Diluted Share was ($0.20); Non-GAAP Net Income Per Diluted Share was $0.13.

Fourth Quarter & Recent Business Highlights

  • At quarter end, 352 customers had ARR greater than $100,000; 10 customers had ARR above $1 million.
  • Net Dollar Retention for the trailing four quarters was 133%.
  • Cloud revenue in Q4 grew by 69% to $9.8 million over the same period last year, representing 23% of total revenue, up from 19% a year ago.
  • As of December 31, 2020, JFrog had approximately 6,050 paying customers versus approximately 5,600 on December 31, 2019.
  • At quarter end, customers using the platform (Enterprise+) represented 26% of revenue in the fourth quarter of 2020 versus 13% in the fourth quarter of 2019.

First Quarter and Full Year 2021 Outlook

  • First Quarter 2021 Outlook:
    • Revenue between $44 million and $45 million.
    • Non-GAAP operating income between $0.5 million and $1.5 million.
    • Non-GAAP net income per share between $0.00 and $0.01, assuming approximately 104 million weighted average diluted shares outstanding.
  • Full Year 2021 Outlook:
    • Revenue between $196 million to $204 million.
    • Non-GAAP operating income between $5 million and $7 million.
    • Approximately 4% increase in weighted average diluted shares.

The section titled "Non-GAAP Financial Information" below describes our usage of non-GAAP financial measures. Reconciliations between historical GAAP and non-GAAP information are contained at the end of this press release following the accompanying financial data.

Conference Call Details

  • Event: JFrog’s Fourth Quarter and Fiscal Year 2021 Financial Results Conference Call
  • Date: Thursday, February 11, 2021
  • Time: 2:00 p.m. PT (5:00 p.m. ET)
  • Webcast Link: https://investors.jfrog.com/events-and-presentations 
    A live webcast of the conference call will be accessible from the investor relations website at https://investors.jfrog.com/events-and-presentations/events.

About JFrog

JFrog, the creator of the DevOps platform, is on a “Liquid Software” mission to enable the flow of software seamlessly and securely from the developer’s keystrokes to production. The end-to-end, hybrid JFrog Platform provides the tools and visibility required by modern software development organizations to fully embrace the power of DevOps. JFrog’s universal, multi-cloud DevOps platform is available as open-source, self-managed, and SaaS services on AWS, Microsoft Azure, and Google Cloud. JFrog is trusted by millions of users and thousands of customers, including a majority of the Fortune 100 companies that depend on JFrog solutions to manage their mission-critical software delivery pipelines. Learn more at jfrog.com.

Forward-Looking Statements:

This press release and the earnings call referencing this press release contain “forward-looking” statements, as that term is defined under the U.S. federal securities laws, including but not limited to statements regarding JFrog’s future financial performance, including our outlook for the first quarter and for the full year of 2021, our leadership position in the markets in which we participate, and our ability to meet market demands. These forward-looking statements are based on JFrog’s current assumptions, expectations and beliefs and are subject to substantial risks, uncertainties, assumptions and changes in circumstances that may cause JFrog’s actual results, performance or achievements to differ materially from those expressed or implied in any forward-looking statement.

There are a significant number of factors that could cause actual results to differ materially from statements made in this press release, including but not limited to: risks associated with managing our rapid growth; our history of losses; our limited operating history; our ability to retain and upgrade existing customers our ability to attract new customers; our ability to effectively develop and expand our sales and marketing capabilities; risk of a security breach; risk of interruptions or performance problems associated with our products and platform capabilities; our ability to adapt and respond to rapidly changing technology or customer needs; our ability to compete in the markets in which we participate; general market, political, economic, and business conditions; and the duration and impact of the COVID-19 pandemic. Our actual results could differ materially from those stated or implied in forward-looking statements due to a number of factors, including but not limited to, risks detailed in our filings with the Securities and Exchange Commission, including in our prospectus filed with the SEC pursuant to Rule 424(b), dated September 16, 2020, our quarterly report on Form 10-Q for the quarter ended September 30, 2020, and other filings and reports that we may file from time to time with the SEC. Forward-looking statements represent our beliefs and assumptions only as of the date of this press release. We disclaim any obligation to update forward-looking statements.

About Non-GAAP Financial Measures:

JFrog discloses the following non-GAAP financial measures in this release and the earnings call referencing this press release: non-GAAP operating income (loss), non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses (research and development, sales and marketing, general and administrative), non-GAAP operating margin, non-GAAP net income (loss), non-GAAP net income (loss) per diluted share, non-GAAP net income (loss) per basic share, and free cash flow. JFrog uses each of these non-GAAP financial measures internally to understand and compare operating results across accounting periods, for internal budgeting and forecasting purposes, for short- and long-term operating plans, and to evaluate JFrog’s financial performance. JFrog believes they are useful to investors, as a supplement to GAAP measures, in evaluating its operational performance, as further discussed below. JFrog’s non-GAAP financial measures may not provide information that is directly comparable to that provided by other companies in its industry, as other companies in its industry may calculate non-GAAP financial results differently, particularly related to non-recurring and unusual items. In addition, there are limitations in using non-GAAP financial measures because the non-GAAP financial measures are not prepared in accordance with GAAP and may be different from non-GAAP financial measures used by other companies and exclude expenses that may have a material impact on JFrog’s reported financial results.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information prepared in accordance with GAAP.

A reconciliation of the historical non-GAAP financial measures to their most directly comparable GAAP measures has been provided in the financial statement tables included below in this press release. A reconciliation of non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis without unreasonable effort due to the uncertainty regarding, and the potential variability of, reconciling items that may be incurred in the future such as share-based compensation, the effect of which may be significant.

JFrog defines non-GAAP gross profit, non-GAAP operating expenses (research and development, sales and marketing, general and administrative), non-GAAP gross margin, non-GAAP operating margin, non-GAAP operating income (loss) and non-GAAP net income (loss) as the respective GAAP balances, adjusted for, as applicable: (1) share-based compensation expense; (2) the amortization of acquired intangibles; (3) acquisition related costs and (4) income tax effects. JFrog defines free cash flow as Net cash provided by (used in) operating activities, minus capital expenditures. Investors are encouraged to review the reconciliation of these historical non-GAAP financial measures to their most directly comparable GAAP financial measures.

Management believes these non-GAAP financial measures are useful to investors and others in assessing JFrog’s operating performance due to the following factors:

Share-based compensation. JFrog utilizes share-based compensation to attract and retain employees. It is principally aimed at aligning their interests with those of its shareholders and at long-term retention, rather than to address operational performance for any particular period. As a result, share-based compensation expenses vary for reasons that are generally unrelated to financial and operational performance in any particular period.

Amortization of acquired intangibles. JFrog views amortization of acquired intangible assets as items arising from pre-acquisition activities determined at the time of an acquisition. While these intangible assets are evaluated for impairment regularly, amortization of the cost of acquired intangibles is an expense that is not typically affected by operations during any particular period.

Acquisition related costs. Acquisition related costs include expenses related to acquisitions of other companies. JFrog views acquisition related costs as expenses that are not necessarily reflective of operational performance during a period.

Income tax effects. JFrog’s non-GAAP financial results are adjusted for income tax effects related to these non-GAAP adjustments and changes in our assessment regarding the realizability of our deferred tax assets, if any. Excluding income tax effects of non-GAAP adjustments provides a more accurate view of JFrog’s operating results.

Non-GAAP weighted average share count. JFrog defines non-GAAP weighted-average shares used to compute non-GAAP net income (loss) per share, basic and diluted, as GAAP weighted average shares used to compute net income (loss) per share attributable to common shareholders, basic and diluted, adjusted to reflect the ordinary shares issued in connection with the IPO that are outstanding as of the end of the period as if they were outstanding as of the beginning of the period for comparability.

Additionally, JFrog’s management believes that the non-GAAP financial measure free cash flow is meaningful to investors because management reviews cash flows generated from operations after taking into consideration capital expenditures due to the fact that these expenditures are considered to be a necessary component of ongoing operations.

Operating Metrics

JFrog’s number of customers with annual recurring revenue (“ARR”) of $100,000 or more is based on the ARR of each customer, as of the last month of the quarter. JFrog’s number of customers with ARR of $1 million or more is based on the ARR of each customer, as of the last month of the quarter. JFrog defines 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 JFrog generates revenue from these customers. JFrog annualizes its monthly subscriptions by taking the revenue it would contractually expect to receive from such customers in a given month and multiplying it by 12.

JFrog’s net dollar retention rate compares its ARR from the same set of customers across comparable periods. JFrog calculates 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”). JFrog then calculates 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. JFrog then divides total Comparison Quarter ARR by total Base Quarter ARR for Base Customers. JFrog’s 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.

Investor Contact:
JoAnn Horne
jhorne@marketstreetparnters.com

 
 
JFrog LTD.
Condensed Consolidated Statements of Operations
(In thousands, except per share data; unaudited)
                 
    Three Months Ended   Year Ended
    December 31,   December 31,
      2020       2019       2020       2019  
Revenue                
Subscription--self-managed and SaaS   $ 38,806     $ 27,856     $ 137,978     $ 94,606  
License--self-managed     3,883       2,901       12,849       10,110  
Total subscription revenue     42,689       30,757       150,827       104,716  
Cost of revenue (1) (3)                
Subscription--self-managed and SaaS     7,907       5,881       27,619       19,201  
License--self-managed     190       232       832       834  
Total cost of revenue--subscription     8,097       6,113       28,451       20,035  
Gross profit     34,592       24,644       122,376       84,681  
Operating expenses                
Research and development (1) (2)     11,661       7,966       41,113       29,730  
Sales and marketing (1) (2) (3)     18,192       12,304       60,936       44,088  
General and administrative (1) (2)     12,771       4,809       34,519       17,800  
Total operating expenses     42,624       25,079       136,568       91,618  
Operating loss     (8,032 )     (435 )     (14,192 )     (6,937 )
Interest and other income, net     523       714       2,045       3,171  
Income (loss) before income taxes     (7,509 )     279       (12,147 )     (3,766 )
Income tax expense (benefit)     (3,795 )     490       (2,742 )     1,628  
Net loss   $ (3,714 )   $ (211 )   $ (9,405 )   $ (5,394 )
Net loss per share - basic and diluted   $ (0.04 )   $ (0.01 )   $ (0.20 )   $ (0.20 )
Weighted average shares used in calculating net income (loss) per share:                
Basic and Diluted     91,547       27,875       46,488       27,130  
                 
(1) Includes share-based compensation expense as follows:              
Cost of revenue: subscription--self-managed and SaaS   $ 463     $ 114     $ 1,129     $ 536  
Research and development     1,121       752       3,903       3,642  
Sales and marketing     1,849       612       4,882       3,089  
General and administrative     6,020       351       13,938       2,103  
Total share-based compensation expense:   $ 9,453     $ 1,829     $ 23,852     $ 9,370  
                 
(2) Includes acquisition-related costs as follows:                
Research and development   $ 352     $ 345     $ 1,403     $ 1,223  
Sales and marketing     25       129       367       420  
General and administrative     -       -       -       342  
Total acquisition-related costs   $ 377     $ 474     $ 1,770     $ 1,985  
                 
(3) Includes amortization of acquired intangibles as follows:              
Cost of revenue: license--self-managed   $ 190     $ 232     $ 832     $ 834  
Sales and marketing     182       182       729       695  
Total amortization expense of acquired intangible assets $ 372     $ 414     $ 1,561     $ 1,529  
                 

 

 
JFrog LTD.
Condensed Consolidated Balance Sheets
(In thousands; unaudited)
         
    December 31,   December 31,
      2020       2019  
         
ASSETS        
CURRENT ASSETS        
Cash and cash equivalents   $ 164,461     $ 39,150  
Short-term investments     433,595       127,331  
Accounts receivable, net     37,048       24,736  
Deferred contract acquisition costs     3,247       2,348  
Prepaid expenses and other current assets     14,210       5,364  
Total current assets     652,561       198,929  
Property and equipment, net     4,963       3,532  
Deferred contract acquisition costs, noncurrent     4,949       3,641  
Intangible assets, net     4,047       5,608  
Goodwill     17,320       17,320  
Other assets, noncurrent     5,391       9,010  
TOTAL ASSETS   $ 689,231     $ 238,040  
         
LIABILITIES, CONVERTIBLE PREFERRED SHARES AND        
SHAREHOLDERS' EQUITY (DEFICIT)        
CURRENT LIABILITIES        
Accounts payables   $ 9,911     $ 4,990  
Accrued expenses and other current liabilities     21,039       8,335  
Deferred revenue     91,750       72,676  
Total current liabilities     122,700       86,001  
Deferred revenue, noncurrent     11,087       9,629  
Other liabilities, noncurrent     1,550       -  
Total liabilities     135,337       95,630  
         
Convertible preferred shares     -       175,844  
         
SHAREHOLDERS' EQUITY (DEFICIT)        
Share capital     257       80  
Additional paid-in capital     628,054       31,835  
Accumulated other comprehensive income     372       35  
Accumulated deficit     (74,789 )     (65,384 )
Total shareholders' equity (deficit)     553,894       (33,434 )
TOTAL LIABILITIES, CONVERTIBLE PREFERRED SHARES AND        
SHAREHOLDERS' EQUITY (DEFICIT)   $ 689,231     $ 238,040  
         

 

 
JFrog LTD.
Condensed Consolidated Statements of Cash Flow
(In thousands; unaudited)
                   
      Three Months Ended   Year Ended
      December 31,   December 31,
        2020       2019       2020       2019  
CASH FLOWS FROM OPERATING ACTIVITIES:                
Net loss   $ (3,714 )   $ (211 )   $ (9,405 )   $ (5,394 )
Adjustments to reconcile net loss to net cash provided by operating activities:            
  Depreciation and amortization     977       767       3,660       2,810  
  Share-based compensation expenses     9,453       1,829       23,852       9,370  
  Net amortization of premium or discount on investments     893       (7 )     1,905       (374 )
Changes in operating assets and liabilities:                
  Accounts receivable.     (11,505 )     (5,240 )     (12,312 )     (4,927 )
  Prepaid expenses and other assets     (2,712 )     1,164       (6,997 )     (4,117 )
  Deferred contract acquisition costs     (1,213 )     (653 )     (2,207 )     (2,399 )
  Accounts payables     2,648       486       4,921       1,792  
  Accrued expenses and other liabilities     1,446       277       5,509       1,108  
  Deferred revenue     16,543       6,193       20,532       12,135  
  Net cash provided by operating activities     12,816       4,605       29,458       10,004  
CASH FLOWS FROM INVESTING ACTIVITIES:                
  Purchases of short-term investments     (214,961 )     (70,953 )     (450,734 )     (203,479 )
  Maturities of short-term investments     32,004       25,102       137,827       47,397  
  Sales of short-term investments     2,035       -       4,633       29,160  
  Purchases of property and equipment     (911 )     (420 )     (3,522 )     (1,803 )
  Payments related to business combination, net of cash acquired     -       -       -       (20,860 )
  Net cash used in investing activities     (181,833 )     (46,271 )     (311,796 )     (149,585 )
CASH FLOWS FROM FINANCING ACTIVITIES:                
  Proceeds from initial public offering, net of underwriting discounts and commissions and other issuance costs     (1,730 )     (192 )     393,481       (192 )
  Proceeds from exercise of share options     1,744       112       3,467       1,221  
  Proceeds from employee equity transactions to be remitted to tax authorities     9,186       -       9,186       -  
  Payments related to prior year business or asset acquisition     -       (293 )     -       (293 )
  Net cash provided by (used in) financing activities     9,200       (373 )     406,134       736  
Net increase (decrease) in cash, cash equivalents, and restricted cash     (159,817 )     (42,039 )     123,796       (138,845 )
Cash, cash equivalent, and restricted cash                
Beginning of period     324,556       82,982       40,943       179,788  
Cash, cash equivalent, and restricted cash                
End of period   $ 164,739     $ 40,943     $ 164,739     $ 40,943  
                   
Reconciliation of cash, cash equivalents and restricted cash within the consolidated balance Sheets to the amounts shown in the statements of cash flows above:                
Cash and cash equivalents   $ 164,461     $ 39,150     $ 164,461     $ 39,150  
Restricted cash included in prepaid expenses and other current assets     14       14       14       14  
Restricted cash included in other assets, noncurrent     264       1,779       264       1,779  
Total cash, cash equivalents, and restricted cash   $ 164,739     $ 40,943     $ 164,739     $ 40,943  
                   

 

 
JFrog LTD.
Reconciliation from GAAP to Non-GAAP Results
(In thousands, except per share data; unaudited)
                   
      Three Months Ended   Year Ended
      December 31,    December 31,
        2020       2019       2020       2019  
Reconciliation of gross profit and gross margin                
GAAP gross profit   $ 34,592     $ 24,644     $ 122,376     $ 84,681  
  Plus: Share-based compensation expense     463       114       1,129       536  
  Plus: Amortization of acquired intangibles     190       232       832       834  
Non-GAAP gross profit   $ 35,245     $ 24,990     $ 124,337     $ 86,051  
GAAP gross margin     81.0 %     80.1 %     81.1 %     80.9 %
Non-GAAP gross margin     82.6 %     81.2 %     82.4 %     82.2 %
                   
Reconciliation of operating expenses                
GAAP research and development   $ 11,661     $ 7,966     $ 41,113     $ 29,730  
  Less: Share-based compensation expense     (1,121 )     (752 )     (3,903 )     (3,642 )
  Less: Acquisition-related costs expenses     (352 )     (345 )     (1,403 )     (1,223 )
Non-GAAP research and development   $ 10,188     $ 6,869     $ 35,807     $ 24,865  
                   
GAAP sales and marketing   $ 18,192     $ 12,304     $ 60,936     $ 44,088  
  Less: Share-based compensation expense     (1,849 )     (612 )     (4,882 )     (3,089 )
  Less: Acquisition-related costs expenses     (25 )     (129 )     (367 )     (420 )
  Less: Amortization of acquired intangibles     (182 )     (182 )     (729 )     (695 )
Non-GAAP sales and marketing   $ 16,136     $ 11,381     $ 54,958     $ 39,884  
                   
GAAP general and administrative   $ 12,771     $ 4,809     $ 34,519     $ 17,800  
  Less: Share-based compensation expense     (6,020 )     (351 )     (13,938 )     (2,103 )
  Less: Acquisition-related costs expenses     -       -       -       (342 )
Non-GAAP general and administrative   $ 6,751     $ 4,458     $ 20,581     $ 15,355  
                   
Reconciliation of operating income (loss) and operating margin                
GAAP operating loss   $ (8,032 )   $ (435 )   $ (14,192 )   $ (6,937 )
  Plus: Share-based compensation expense     9,453       1,829       23,852       9,370  
  Plus: Acquisition-related costs expenses     377       474       1,770       1,985  
  Plus: Amortization of acquired intangibles     372       414       1,561       1,529  
Non-GAAP operating income   $ 2,170     $ 2,282     $ 12,991     $ 5,947  
GAAP operating margin     (18.8 %)     (1.4 %)     (9.4 %)     (6.6 %)
Non-GAAP operating margin     5.1 %     7.4 %     8.6 %     5.7 %
Reconciliation of net income (loss)                
GAAP net loss   $ (3,714 )   $ (211 )   $ (9,405 )   $ (5,394 )
  Plus: Share-based compensation expense     9,453       1,829       23,852       9,370  
  Plus: Acquisition-related costs expenses     377       474       1,770       1,985  
  Plus: Amortization of acquired intangibles     372       414       1,561       1,529  
  Less: Income tax effects (1)     (4,261 )     -       (4,261 )     -  
Non-GAAP net income   $ 2,227     $ 2,506     $ 13,517     $ 7,490  
  Net income per share - basic   $ 0.02     $ 0.03     $ 0.15     $ 0.08  
  Net income per share - diluted   $ 0.02     $ 0.03     $ 0.13     $ 0.08  
Shares used in non-GAAP per share calculations:                
GAAP weighted-average shares used to compute net income per share- basic     91,547       27,875       46,488       27,130  
Add:                  
Non-GAAP unweighted adjustment for ordinary shares issued in connection with IPO   -       61,937       44,167       61,937  
Non-GAAP weighted-average shares used to compute net income per share - basic     91,547       89,812       90,655       89,067  
                   
GAAP weighted-average shares used to compute net income per share - diluted     91,547       27,875       46,488       27,130  
Add:                  
Non-GAAP unweighted adjustment for ordinary shares issued in connection with IPO   -       61,937       44,167       61,937  
Dilutive ordinary share equivalents     12,053       9,412       10,604       9,157  
Non-GAAP weighted-average shares used to compute net income per share - diluted   103,600       99,224       101,259       98,224  
                   
(1) Income tax effects of non-GAAP adjustments in the three months and the year ended December 31, 2019 were immaterial.
                 
                   

 

JFrog LTD.
Reconciliation of GAAP Cash Flow from Operating Activities to Free Cash Flow
(In thousands; unaudited)
                 
    Three Months Ended   Year Ended
    December 31,   December 31,
      2020       2019       2020       2019  
Net cash provided by operating activities   $ 12,816     $ 4,605     $ 29,458     $ 10,004  
Less: Purchases of property and equipment     (911 )     (420 )     (3,522 )     (1,803 )
Free cash flow   $ 11,905     $ 4,185     $ 25,936     $ 8,201  
                 

 

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