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JFrog (NASDAQ:FROG) Surprises With Q4 Sales, Large Customer Wins Accelerate

FROG Cover Image

Software development tools maker JFrog (NASDAQ: FROG) reported Q4 CY2024 results beating Wall Street’s revenue expectations, with sales up 19.4% year on year to $116.1 million. The company expects next quarter’s revenue to be around $117 million, close to analysts’ estimates. Its non-GAAP profit of $0.19 per share was 36.7% above analysts’ consensus estimates.

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JFrog (FROG) Q4 CY2024 Highlights:

  • Revenue: $116.1 million vs analyst estimates of $114.3 million (19.4% year-on-year growth, 1.6% beat)
  • Adjusted EPS: $0.19 vs analyst estimates of $0.14 (36.7% beat)
  • Adjusted Operating Income: $20.95 million vs analyst estimates of $14.61 million (18% margin, 43.4% beat)
  • Management’s revenue guidance for the upcoming financial year 2025 is $501 million at the midpoint, in line with analyst expectations and implying 16.9% growth (vs 22.6% in FY2024)
  • Management’s adjusted operating profit guidance for the upcoming financial year 2025 is $74 million at the midpoint, above analyst expectations of $71 million
  • Operating Margin: -21.9%, down from -15.8% in the same quarter last year
  • Free Cash Flow Margin: 41.8%, up from 24.5% in the previous quarter
  • Customers: 1,018 customers paying more than $100,000 annually
  • Net Revenue Retention Rate: 116%, down from 117% in the previous quarter
  • Market Capitalization: $4.12 billion

Company Overview

Named after the founders' affinity for frogs, JFrog (NASDAQ: FROG) provides a software-as-a-service platform that makes developing and releasing software easier and faster, especially for large teams.

Developer Operations

As Marc Andreessen says, "software is eating the world" which means the volume of software produced is exploding. But building software is complex and difficult work which drives demand for software tools that help increase the speed, quality, and security of software deployment.

Sales Growth

A company’s long-term sales performance can indicate its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, JFrog’s 27.5% annualized revenue growth over the last three years was solid. Its growth beat the average software company and shows its offerings resonate with customers, a helpful starting point for our analysis.

JFrog Quarterly Revenue

This quarter, JFrog reported year-on-year revenue growth of 19.4%, and its $116.1 million of revenue exceeded Wall Street’s estimates by 1.6%. Company management is currently guiding for a 16.6% year-on-year increase in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 16.4% over the next 12 months, a deceleration versus the last three years. Still, this projection is commendable and indicates the market sees success for its products and services.

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Customer Retention

One of the best parts about the software-as-a-service business model (and a reason why they trade at high valuation multiples) is that customers typically spend more on a company’s products and services over time.

JFrog’s net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 117% in Q4. This means JFrog would’ve grown its revenue by 17.2% even if it didn’t win any new customers over the last 12 months.

JFrog Net Revenue Retention Rate

Despite falling over the last year, JFrog still has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.

Key Takeaways from JFrog’s Q4 Results

We enjoyed seeing JFrog accelerate its new large contract wins this quarter. We were also happy its revenue and operating profit outperformed Wall Street’s estimates, the latter by a very convincing amount. While revenue guidance for the full year was in line with Wall Street’s estimates, full-year operating income guidance was ahead, showing better profitability. Zooming out, we think this was a decent quarter featuring some areas of strength for the stock. The stock traded up 4.7% to $39.50 immediately after reporting.

So should you invest in JFrog right now? When making that decision, it’s important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it’s free.

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