JFrog Ltd (FROG) Q3 2024 Earnings Call Highlights: Strong Revenue Growth and Cloud Expansion

GuruFocus.com11-08

Total Revenue: $109.1 million, up 23% year over year. Cloud Revenue: $42.4 million, representing 38% of total revenue, up 38% year over year. Self-Managed Revenue: $66.7 million, up 15% year over year...

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GuruFocus has detected 4 Warning Signs with FROG.\n\nRelease Date: November 07, 2024\nFor the complete transcript of the earnings call, please refer to the full earnings call transcript.\n Positive Points \n\nJFrog Ltd (NASDAQ:FROG) reported a strong Q3 with total revenue of $109.1 million, up 23% year over year.\nCloud revenue grew significantly, reaching $42.4 million, representing a 38% year-over-year increase.\nThe company saw an increase in large platform wins, driven by demand for cloud and security offerings.\nJFrog's customer base with ARR over $100,000 grew to 966, up from 848 in the previous year.\nThe company maintained a high gross retention rate of 97%, indicating strong customer loyalty.\n\n Negative Points \n\nJFrog Ltd (NASDAQ:FROG) remains cautious about large migration deals, as customer migration activity has not yet fully recovered.\nThe macroeconomic environment continues to present challenges, affecting the timing of large-scale budgetary commitments.\nGross margin decreased slightly to 82.8% from 83.7% in the previous year, due to a higher mix of cloud revenue.\nSome customers planning to migrate to the cloud have paused their investment in on-premise deployments.\nThe company is cautious about its forward outlook, derisking large-scale pipeline opportunities from current guidance.\n\n Q & A Highlights \nQ: Can you provide context on the Q3 performance and whether it was driven by closing previously delayed deals or broader market strength? A: Ed Grabscheid, CFO: The overperformance in Q3 was largely due to significant projects that were previously derisked from our forecasts. Several large deals closed in Q3, including one that was pushed from Q2, contributing to the strong results.\nQ: What gives you confidence that 2025 will see material contributions from security offerings? A: Shlomi Ben-Haim, CEO: Security was a key component in all major deals secured in Q3. The pipeline shows more opportunities combining cloud growth and security, giving us confidence in maintaining momentum into 2025.\nQ: How are customers responding to renewals of security deals that had introductory pricing? A: Ed Grabscheid, CFO: We are seeing adoption and expansion of seats as these deals come up for renewal. The focus is on large projects with significant security components, and we are seeing positive customer behavior in terms of renewals and expansions.\nQ: How is the macroeconomic environment impacting cloud usage and migration plans? A: Shlomi Ben-Haim, CEO: While some customers are planning cloud migrations, execution is slower due to the macro environment. Customers are cautious, and while they plan to move to the cloud, they are not investing heavily in self-hosted solutions in the interim.\nQ: Can you elaborate on the impact of the GitHub partnership and its influence on customer adoption and retention? A: Shlomi Ben-Haim, CEO: The partnership with GitHub is focused on co-engineering and innovation, particularly in security and AI. While it is a strong differentiator, it is not the sole reason for customer adoption. It enhances our platform's appeal and supports customer retention and acquisition.\nFor the complete transcript of the earnings call, please refer to the full earnings call transcript.This article first appeared on \nGuruFocus.","kind":"highlight","is_publish_news":true,"is_publish_highlight":false,"is_publish_live":false,"is_publish_wemedia":null,"editions":null,"column":"","sentiment":"2","news_tag":"","news_rank":0,"symbols":[],"gpt_button":1},"commentList":[],"isCommentEnd":true,"newsSizeData":{"likeSize":0,"commentSize":0,"repostSize":0,"favoriteSize":0,"likeStatus":false,"favoriteStatus":false},"APP":{"userAgent":"Mozilla/5.0 AppleWebKit/537.36 (KHTML, like Gecko; compatible; ClaudeBot/1.0; +claudebot@anthropic.com)","isDev":false,"isTTM":true,"deviceId":"web-server-community-laohu8-v3","version":"4.29.3","shortVersion":"4.29.3","platform":"web","vendor":"web","appName":"ttm","isIOS":false,"isAndroid":false,"isTiger":false,"isTHS":false,"isWeiXin":false,"isWeiXinMini":false,"isWeiBo":false,"isQQ":false,"isBaiduSwan":false,"isBaiduBox":false,"isDingTalk":false,"isToutiao":false,"isOnePlus":false,"isHuaWei":false,"isXiaomi":false,"isXiaomiWebView":false,"isOppo":false,"isVivo":false,"isSamsung":false,"isMobile":false},"href":"/m/news/2481984103"}