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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2022

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-39492

JFrog Ltd.

(Exact name of Registrant as specified in its charter)

Israel

 

98-0680649

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

270 E. Caribbean Drive

Sunnyvale, California 94089

(408) 329-1540

(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

Ordinary Shares, NIS 0.01 par value

FROG

The Nasdaq Global Select Market

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. Yes ☒ No ☐

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). Yes ☒ No ☐

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.

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

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 29, 2022, the registrant had 99,312,863 ordinary shares, NIS 0.01 par value per share, outstanding.

 

 

 


Table of Contents

 

TABLE OF CONTENTS

 

 

PAGE

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

2

 

Condensed Consolidated Balance Sheets as of June 30, 2022 and December 31, 2021

2

 

Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2022 and 2021

3

 

Condensed Consolidated Statements of Comprehensive Loss for the three and six months ended June 30, 2022 and 2021

4

 

Condensed Consolidated Statements of Shareholders’ Equity for the three and six months ended June 30, 2022 and 2021

5

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2022 and 2021

7

 

Notes to Condensed Consolidated Financial Statements

8

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

32

Item 4.

Controls and Procedures

33

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

41

Item 3.

Default Upon Senior Securities

41

Item 4.

Mine Safety Disclosures

41

Item 5.

Other Information

41

Item 6.

Exhibits

42

 

Signatures

43

 

 


Table of Contents

 

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:

our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses, operating cash flow and free cash flow, and our ability to achieve, and maintain, future profitability;
market acceptance of our products;
anticipated trends, growth rates and challenges in our business and in the markets in which we operate;
the effects of increased competition in our markets and our ability to compete effectively;
our ability to maintain and expand our customer base, including by attracting new customers;
our ability to successfully expand in our existing markets and into new markets;
our ability to maintain the security and availability of our software;
our ability to maintain or increase our net dollar retention rate;
our ability to develop new products, or enhancements to our existing products, and bring them to market in a timely manner;
our business model and our ability to effectively manage our growth and associated investments;
our ability to integrate and realize anticipated synergies from acquisitions of complementary businesses;
beliefs and objectives for future operations, including regarding our market opportunity;
our relationships with third parties, including our technology partners and cloud providers;
our ability to maintain, protect, and enhance our intellectual property rights;
our ability to successfully defend litigation brought against us;
our ability to attract and retain qualified employees and key personnel;
sufficiency of cash to meet cash needs for at least the next 12 months;
our ability to comply with laws and regulations that currently apply or become applicable to our business in Israel, the United States and internationally;
our expectations about the impact of natural disasters, public health epidemics, such as COVID-19, protests or riots, geopolitical tensions or war, such as the war in Ukraine, and global economic conditions on our business, results of operations and financial condition; and
the future trading prices of our ordinary shares.

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, except as required by law. 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.

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Table of Contents

 

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JFROG LTD.

CONDENSED Consolidated Balance SheetS

(in thousands, except share and per share data)

(unaudited)

 

 

 

As of

 

 

 

June 30, 2022

 

 

December 31, 2021

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

55,194

 

 

$

68,284

 

Short-term investments

 

 

374,957

 

 

 

352,844

 

Accounts receivable, net

 

 

53,004

 

 

 

50,483

 

Deferred contract acquisition costs

 

 

6,643

 

 

 

5,271

 

Prepaid expenses and other current assets

 

 

20,390

 

 

 

22,140

 

Total current assets

 

 

510,188

 

 

 

499,022

 

Property and equipment, net

 

 

7,650

 

 

 

6,689

 

Deferred contract acquisition costs, noncurrent

 

 

11,354

 

 

 

9,120

 

Operating lease right-of-use assets

 

 

25,585

 

 

 

25,999

 

Intangible assets, net

 

 

42,296

 

 

 

47,980

 

Goodwill

 

 

247,955

 

 

 

247,776

 

Other assets, noncurrent

 

 

12,649

 

 

 

15,942

 

Total assets

 

$

857,677

 

 

$

852,528

 

Liabilities and Shareholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

13,332

 

 

$

10,868

 

Accrued expenses and other current liabilities

 

 

34,641

 

 

 

27,954

 

Operating lease liabilities

 

 

7,035

 

 

 

7,293

 

Deferred revenue

 

 

138,721

 

 

 

129,149

 

Total current liabilities

 

 

193,729

 

 

 

175,264

 

Deferred revenue, noncurrent

 

 

18,346

 

 

 

17,957

 

Operating lease liabilities, noncurrent

 

 

18,034

 

 

 

20,014

 

Other liabilities, noncurrent

 

 

2,144

 

 

 

712

 

Total liabilities

 

 

232,253

 

 

 

213,947

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

Shareholders’ equity:

 

 

 

 

 

 

Preferred shares, NIS 0.01 par value per share; 50,000,000 shares authorized; 0 issued and outstanding as of June 30, 2022 and December 31, 2021

 

 

 

 

 

 

Ordinary shares, NIS 0.01 par value per share, 500,000,000 shares authorized; 99,282,527 and 97,312,040 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively

 

 

278

 

 

 

272

 

Additional paid-in capital

 

 

811,961

 

 

 

776,690

 

Accumulated other comprehensive income (loss)

 

 

(4,346

)

 

 

611

 

Accumulated deficit

 

 

(182,469

)

 

 

(138,992

)

Total shareholders’ equity

 

 

625,424

 

 

 

638,581

 

Total liabilities and shareholders’ equity

 

$

857,677

 

 

$

852,528

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2


Table of Contents

 

JFROG LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Subscription—self-managed and SaaS

 

$

63,679

 

 

$

45,312

 

 

$

122,748

 

 

$

86,650

 

License—self-managed

 

 

4,128

 

 

 

3,345

 

 

 

8,755

 

 

 

7,094

 

Total subscription revenue

 

 

67,807

 

 

 

48,657

 

 

 

131,503

 

 

 

93,744

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Subscription—self-managed and SaaS

 

 

15,024

 

 

 

8,881

 

 

 

28,667

 

 

 

17,117

 

License—self-managed

 

 

220

 

 

 

190

 

 

 

440

 

 

 

381

 

Total cost of revenue—subscription

 

 

15,244

 

 

 

9,071

 

 

 

29,107

 

 

 

17,498

 

Gross profit

 

 

52,563

 

 

 

39,586

 

 

 

102,396

 

 

 

76,246

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

28,945

 

 

 

16,688

 

 

 

56,046

 

 

 

30,524

 

Sales and marketing

 

 

31,991

 

 

 

22,026

 

 

 

61,171

 

 

 

41,791

 

General and administrative

 

 

14,037

 

 

 

15,103

 

 

 

26,728

 

 

 

28,774

 

Total operating expenses

 

 

74,973

 

 

 

53,817

 

 

 

143,945

 

 

 

101,089

 

Operating loss

 

 

(22,410

)

 

 

(14,231

)

 

 

(41,549

)

 

 

(24,843

)

Interest and other income, net

 

 

517

 

 

 

346

 

 

 

790

 

 

 

706

 

Loss before income taxes

 

 

(21,893

)

 

 

(13,885

)

 

 

(40,759

)

 

 

(24,137

)

Income tax expense (benefit)

 

 

1,880

 

 

 

(736

)

 

 

2,718

 

 

 

(3,093

)

Net loss

 

$

(23,773

)

 

$

(13,149

)

 

$

(43,477

)

 

$

(21,044

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.24

)

 

$

(0.14

)

 

$

(0.44

)

 

$

(0.23

)

Weighted-average shares used in computing net loss per share, basic and diluted

 

 

98,955,711

 

 

 

93,665,527

 

 

 

98,422,723

 

 

 

93,175,364

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

 

JFROG LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(23,773

)

 

$

(13,149

)

 

$

(43,477

)

 

$

(21,044

)

Other comprehensive income (loss), net of tax:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on available-for-sale marketable securities, net

 

 

(192

)

 

 

66

 

 

 

(909

)

 

 

36

 

Unrealized gains (losses) on derivative instruments, net

 

 

(3,284

)

 

 

212

 

 

 

(4,048

)

 

 

(399

)

Other comprehensive income (loss)

 

 

(3,476

)

 

 

278

 

 

 

(4,957

)

 

 

(363

)

Comprehensive loss

 

$

(27,249

)

 

$

(12,871

)

 

$

(48,434

)

 

$

(21,407

)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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Table of Contents

 

JFROG LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

 

 

Three Months Ended June 30, 2022

 

 

 

Ordinary Shares

 

 

Additional
Paid-in

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit

 

 

Equity

 

Balance as of March 31, 2022

 

 

98,641,858

 

 

$

276

 

 

$

795,808

 

 

$

(870

)

 

$

(158,696

)

 

$

636,518

 

Issuance of ordinary shares upon exercise of share options

 

 

438,577

 

 

 

1

 

 

 

1,077

 

 

 

 

 

 

 

 

 

1,078

 

Issuance of ordinary shares upon release of restricted share units

 

 

202,092

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

15,077

 

 

 

 

 

 

 

 

 

15,077

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(3,476

)

 

 

 

 

 

(3,476

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(23,773

)

 

 

(23,773

)

Balance as of June 30, 2022

 

 

99,282,527

 

 

$

278

 

 

$

811,961

 

 

$

(4,346

)

 

$

(182,469

)

 

$

625,424

 

 

 

 

Three Months Ended June 30, 2021

 

 

 

Ordinary Shares

 

 

Additional
Paid-in

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of March 31, 2021

 

 

93,467,841

 

 

$

261

 

 

$

642,090

 

 

$

(269

)

 

$

(82,684

)

 

$

559,398

 

Issuance of ordinary shares upon exercise of share options

 

 

520,435

 

 

 

1

 

 

 

1,315

 

 

 

 

 

 

 

 

 

1,316

 

Share-based compensation expense

 

 

 

 

 

 

 

 

14,104

 

 

 

 

 

 

 

 

 

14,104

 

Other comprehensive income, net of tax

 

 

 

 

 

 

 

 

 

 

 

278

 

 

 

 

 

 

278

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,149

)

 

 

(13,149

)

Balance as of June 30, 2021

 

 

93,988,276

 

 

$

262

 

 

$

657,509

 

 

$

9

 

 

$

(95,833

)

 

$

561,947

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

5


Table of Contents

 

JFROG LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

 

 

 

Six Months Ended June 30, 2022

 

 

 

Ordinary Shares

 

 

Additional
Paid-in

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2021

 

 

97,312,040

 

 

$

272

 

 

$

776,690

 

 

$

611

 

 

$

(138,992

)

 

$

638,581

 

Issuance of ordinary shares upon exercise of share options

 

 

1,456,246

 

 

 

4

 

 

 

2,869

 

 

 

 

 

 

 

 

 

2,873

 

Issuance of ordinary shares upon release of restricted share units

 

 

311,508

 

 

 

1

 

 

 

(1

)

 

 

 

 

 

 

 

 

 

Issuance of ordinary shares under the employee share purchase plan

 

 

154,550

 

 

 

1

 

 

 

3,252

 

 

 

 

 

 

 

 

 

3,253

 

Issuance of ordinary shares related to business combination

 

 

48,183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Share-based compensation expense

 

 

 

 

 

 

 

 

29,151

 

 

 

 

 

 

 

 

 

29,151

 

Other comprehensive loss, net of tax

 

 

 

 

 

 

 

 

 

 

 

(4,957

)

 

 

 

 

 

(4,957

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(43,477

)

 

 

(43,477

)

Balance as of June 30, 2022

 

 

99,282,527

 

 

$

278

 

 

$

811,961

 

 

$

(4,346

)

 

$

(182,469

)

 

$

625,424

 

 

 

 

Six Months Ended June 30, 2021

 

 

 

Ordinary Shares

 

 

Additional
Paid-in

 

 

Accumulated Other
Comprehensive

 

 

Accumulated

 

 

Total
Shareholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance as of December 31, 2020

 

 

92,112,447

 

 

$

257

 

 

$

628,054

 

 

$

372