JFrog (NASDAQ:FROG) Surprises With Q4 Sales, Provides Optimistic Full Year Guidance

Adam Hejl /
2022/02/10 4:31 pm EST
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Software development tools maker JFrog (NASDAQ:FROG) beat analyst expectations in Q4 FY2021 quarter, with revenue up 38.7% year on year to $59.2 million. The company expects that next quarter's revenue would be around $61.3 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. JFrog made a GAAP loss of $22.6 million, down on its loss of $3.71 million, in the same quarter last year.

Is now the time to buy JFrog? Access our full analysis of the earnings results here, it's free.

JFrog (FROG) Q4 FY2021 Highlights:

  • Revenue: $59.2 million vs analyst estimates of $58 million (2.06% beat)
  • EPS (non-GAAP): -$0.01 vs analyst estimates of $0.00 (-$0.01 miss)
  • Revenue guidance for Q1 2022 is $61.3 million at the midpoint, above analyst estimates of $60.9 million
  • Management's revenue guidance for upcoming financial year 2022 is $274 million at the midpoint, beating analyst estimates by 2.36% and predicting 32.5% growth (vs 39.3% in FY2021)
  • Free cash flow of $16.6 million, up from negative free cash flow of $18.6 million in previous quarter
  • Net Revenue Retention Rate: 130%, in line with previous quarter
  • Customers: 537 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 78.2%, down from 81% same quarter last year

With the name chosen due to the founders' fondness for frogs, JFrog (NASDAQ:FROG) provides software as a service platform that makes developing and releasing software easier and faster, especially for large teams.

As Marc Andreessen say, "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

As you can see below, JFrog's revenue growth has been very strong over the last year, growing from quarterly revenue of $42.6 million, to $59.2 million.

JFrog Total Revenue

And unsurprisingly, this was another great quarter for JFrog with revenue up 38.7% year on year. On top of that, revenue increased $5.53 million quarter on quarter, a solid improvement on the $5.04 million increase in Q3 2021, and even a sign of slight re-acceleration of growth.

Guidance for the next quarter indicates JFrog is expecting revenue to grow 35.9% year on year to $61.3 million, in line with the 37.3% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $274 million at the midpoint, growing 32.5% compared to 39.3% increase in FY2021.

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Product Success

One of the best things about software as a service businesses (and a reason why they trade at such high multiples) is that customers tend to spend more with the company over time.

JFrog Net Revenue Retention Rate

JFrog's net revenue retention rate, an important measure of how much customers from a year ago were spending at the end of the quarter, was at 130% in Q4. That means even if they didn't win any new customers, JFrog would have grown its revenue 30% year on year. Despite it going down over the last year this is still a great retention rate and a clear proof of a great product. We can see that JFrog's customers are very satisfied with their software and are using it more and more over time.

Key Takeaways from JFrog's Q4 Results

With a market capitalization of $2.61 billion JFrog is among smaller companies, but its more than $421.1 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We enjoyed seeing JFrog’s strong acceleration in new contract wins this quarter. And we were also excited to see the really strong revenue growth. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 4.25% on the results and currently trades at $27.95 per share.

Should you invest in JFrog right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.