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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Commission File Number:
(Exact name of Registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification Number) |
(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Accelerated filer |
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☐ |
Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of July 31, 2024, the registrant had
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TABLE OF CONTENTS
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PAGE |
PART I. |
FINANCIAL INFORMATION |
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Item 1. |
3 |
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Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 |
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4 |
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5 |
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6 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 |
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9 |
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Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
34 |
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Item 4. |
35 |
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PART II. |
OTHER INFORMATION |
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Item 1. |
36 |
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Item 1A. |
36 |
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Item 2. |
71 |
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Item 3. |
71 |
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Item 4. |
71 |
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Item 5. |
71 |
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Item 6. |
72 |
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73 |
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
1
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.
In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
2
PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JFROG LTD.
CONDENSED Consolidated Balance SheetS
(in thousands, except share and per share data)
(unaudited)
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As of |
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June 30, 2024 |
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December 31, 2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Accounts receivable, net |
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Deferred contract acquisition costs |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Deferred contract acquisition costs, noncurrent |
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Operating lease right-of-use assets |
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Intangible assets, net |
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Goodwill |
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Other assets, noncurrent |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses and other current liabilities |
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Operating lease liabilities |
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Deferred revenue |
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Total current liabilities |
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Deferred revenue, noncurrent |
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Operating lease liabilities, noncurrent |
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Other liabilities, noncurrent |
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Total liabilities |
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(Note 10) |
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Shareholders’ equity: |
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Preferred shares, NIS |
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Ordinary shares, NIS |
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Additional paid-in capital |
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Accumulated other comprehensive income (loss) |
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Accumulated deficit |
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( |
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( |
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Total shareholders’ equity |
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Total liabilities and shareholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
JFROG LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Revenue: |
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Subscription—self-managed and SaaS |
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$ |
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$ |
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$ |
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$ |
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License—self-managed |
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Total subscription revenue |
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Cost of revenue: |
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Subscription—self-managed and SaaS |
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License—self-managed |
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Total cost of revenue—subscription |
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Gross profit |
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Operating expenses: |
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Research and development |
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Sales and marketing |
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General and administrative |
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Total operating expenses |
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Operating loss |
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( |
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( |
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( |
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Interest and other income, net |
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Loss before income taxes |
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( |
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( |
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( |
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( |
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Income tax expense |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Net loss per share, basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Weighted-average shares used in computing net loss per share, basic and diluted |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
JFROG LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(in thousands)
(unaudited)
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Three Months Ended June 30, |
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Six Months Ended June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Net loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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Other comprehensive loss, net of tax: |
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Net change in unrealized losses on available-for-sale marketable securities, net of tax |
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( |
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( |
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( |
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( |
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Net change in unrealized losses on derivative instruments, net of tax |
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( |
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( |
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( |
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( |
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Other comprehensive loss, net of tax |
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( |
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( |
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( |
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( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
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Three Months Ended June 30, 2024 |
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Ordinary Shares |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance as of March 31, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Issuance of ordinary shares upon exercise of share options |
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— |
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— |
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Issuance of ordinary shares upon release of restricted share units |
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( |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net of tax |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of June 30, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Three Months Ended June 30, 2023 |
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Ordinary Shares |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance as of March 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
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$ |
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Issuance of ordinary shares upon exercise of share options |
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— |
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— |
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Issuance of ordinary shares upon release of restricted share units |
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( |
) |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net of tax |
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— |
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— |
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— |
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( |
) |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
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Balance as of June 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
) |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
JFROG LTD.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
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Six Months Ended June 30, 2024 |
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Ordinary Shares |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Equity |
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Balance as of December 31, 2023 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Issuance of ordinary shares upon exercise of share options |
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— |
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— |
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Issuance of ordinary shares upon release of restricted share units |
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( |
) |
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— |
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— |
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— |
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Issuance of ordinary shares under the employee share purchase plan |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net of tax |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of June 30, 2024 |
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$ |
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$ |
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$ |
( |
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$ |
( |
) |
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$ |
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Six Months Ended June 30, 2023 |
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Ordinary Shares |
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Additional |
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Accumulated Other |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance as of December 31, 2022 |
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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Issuance of ordinary shares upon exercise of share options |
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— |
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— |
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Issuance of ordinary shares upon release of restricted share units |
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( |
) |
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— |
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— |
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— |
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Issuance of ordinary shares under the employee share purchase plan |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Other comprehensive loss, net of tax |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Net loss |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance as of June 30, 2023 |
|
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$ |
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$ |
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$ |
( |
) |
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$ |
( |
) |
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$ |
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||||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
JFROG LTD.
CONDENSED Consolidated StatementS of Cash Flows
(in thousands)
(unaudited)
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Six Months Ended June 30, |
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2024 |
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2023 |
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Cash flows from operating activities: |
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|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
|
|
|
||
Depreciation and amortization |
|
|
|
|
|
|
||
Share-based compensation expense |
|
|
|
|
|
|
||
Non-cash operating lease expense |
|
|
|
|
|
|
||
Net amortization of premium or discount on investments |
|
|
( |
) |
|
|
( |
) |
Losses (gains) on foreign exchange |
|
|
|
|
|
( |
) |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
||
Accounts receivable |
|
|
( |
) |
|
|
( |
) |
Prepaid expenses and other assets |
|
|
( |
) |
|
|
( |
) |
Deferred contract acquisition costs |
|
|
( |
) |
|
|
( |
) |
Accounts payable |
|
|
( |
) |
|
|
( |
) |
Accrued expenses and other liabilities |
|
|
|
|
|
|
||
Operating lease liabilities |
|
|
( |
) |
|
|
( |
) |
Deferred revenue |
|
|
|
|
|
|
||
Net cash provided by operating activities |
|
|
|
|
|
|
||
Cash flows from investing activities: |
|
|
|
|
|
|
||
Purchases of short-term investments |
|
|
( |
) |
|
|
( |
) |
Maturities and sales of short-term investments |
|
|
|
|
|
|
||
Purchases of property and equipment |
|
|
( |
) |
|
|
( |
) |
Net cash provided by (used in) investing activities |
|
|
|
|
|
( |
) |
|
Cash flows from financing activities: |
|
|
|
|
|
|
||
Proceeds from exercise of share options |
|
|
|
|
|
|
||
Proceeds from employee share purchase plan |
|
|
|
|
|
|
||
Proceeds from employee equity transactions, net of payments to tax authorities |
|
|
( |
) |
|
|
|
|
Net cash provided by financing activities |
|
|
|
|
|
|
||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
|
|
( |
) |
|
|
|
|
Net increase in cash, cash equivalents, and restricted cash |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash—beginning of period |
|
|
|
|
|
|
||
Cash, cash equivalents, and restricted cash—end of period |
|
$ |
|
|
$ |
|
||
Reconciliation of cash, cash equivalents, and restricted cash within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows above: |
|
|
|
|
|
|
||
Cash and cash equivalents |
|
$ |
|
|
$ |
|
||
Restricted cash included in prepaid expenses and other current assets |
|
|
|
|
|
|
||
Total cash, cash equivalents, and restricted cash |
|
$ |
|
|
$ |
|
||
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
JFROG LTD.
NOTES TO CONDENSED Consolidated StatementS
(unaudited)
1. Organization and Description of Business
JFrog Ltd. (together with its subsidiaries, “JFrog”, or the “Company”) was incorporated under the laws of the State of Israel in 2008. JFrog provides an end-to-end, hybrid, universal Software Supply Chain Platform that enables organizations to continuously and securely create and deliver software updates across any system. This platform is the critical bridge between software development and deployment of that software, paving the way for modern software supply chain management and software release processes. The Company enables organizations to build and release software faster and more securely while empowering developers, security teams and machine learning operations teams to be more efficient. The Company’s solutions are designed to run on-premise, in public or private clouds, or in hybrid environments.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting, and include the accounts of JFrog Ltd. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
The condensed consolidated balance sheet as of December 31, 2023 was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures, including certain notes required by GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 15, 2024.
In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of June 30, 2024, the Company’s consolidated results of operations and shareholders’ equity for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023. The results for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the full year ending December 31, 2024 or any other future interim or annual period.
Use of Estimates
Significant Accounting Policies
The Company’s significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to these policies during the six months ended June 30, 2024.
9
Interest and Other Income, Net
Interest and other income, net primarily consists of income earned on cash equivalents and short-term investments and foreign exchange gains and losses. Interest income was $
Geographical Information
Revenue by geographical region can be found in Note 3, Revenue Recognition.
|
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
|
|
(in thousands) |
|
|||||
United States |
|
$ |
|
|
$ |
|
||
Israel |
|
|
|
|
|
|
||
India |
|
|
|
|
|
|
||
Rest of world |
|
|
|
|
|
|
||
Total long-lived assets |
|
$ |
|
|
$ |
|
||
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standard Board (“FASB”) issued ASU 2023-07, Segment Reporting (Topic 280), Improvements to Reportable Segment Disclosures, which expands annual and interim disclosure requirements for reportable segments, primarily through enhanced disclosures about significant segment expenses. In addition, it provides new segment disclosure requirements for entities with a single reportable segment. The guidance will be effective for the Company for annual periods beginning January 1, 2024 and for interim periods beginning January 1, 2025. Early adoption is permitted. The Company is currently evaluating the impact on its financial statement disclosures.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740), Improvements to Income Tax Disclosures, which requires disaggregated information about the effective tax rate reconciliation as well as information on income taxes paid. The guidance will be effective for the Company for annual periods beginning January 1, 2025, with early adoption permitted. The Company is currently evaluating the impact on its financial statement disclosures.
3. Revenue Recognition
Disaggregation of Revenue
The following table presents revenue by category:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||||
|
|
Amount |
|
|
Percentage |
|
|
Amount |
|
|
Percentage |
|
|
Amount |
|
|
Percentage |
|
|
Amount |
|
|
Percentage |
|
||||||||
|
|
(in thousands, except percentages) |
|
|||||||||||||||||||||||||||||
Self-managed subscription |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
Subscription |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
||||||||
License |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
SaaS |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Total subscription revenue |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
10
The following table summarizes revenue by region based on the shipping address of customers:
|
|
Three Months Ended June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||||||||||||||||||
|
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||||||||||||||||||
|
|
Amount |
|
|
Percentage |
|
|
Amount |
|
|
Percentage |
|
|
Amount |
|
|
Percentage |
|
|
Amount |
|
|
Percentage |
|
||||||||
|
|
(in thousands, except percentages) |
|
|||||||||||||||||||||||||||||
United States |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
|
$ |
|
|
|
% |
||||||||
Israel |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Rest of world |
|
|
||||||||||||||||||||||||||||||