JFrog's (NASDAQ:FROG) Q1 Sales Top Estimates, Provides Optimistic Full Year Guidance

Adam Hejl /
2022/05/09 4:15 pm EDT

Software development tools maker JFrog (NASDAQ:FROG) reported Q1 FY2022 results beating Wall St's expectations, with revenue up 41.2% year on year to $63.6 million. Guidance for next quarter's revenue was $65.5 million at the midpoint, which is 1.13% above the analyst consensus. JFrog made a GAAP loss of $19.7 million, down on its loss of $7.89 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) Q1 FY2022 Highlights:

  • Revenue: $63.6 million vs analyst estimates of $61.1 million (4.16% beat)
  • EPS (non-GAAP): $0, in line with analyst estimates
  • Revenue guidance for Q2 2022 is $65.5 million at the midpoint, above analyst estimates of $64.8 million
  • The company lifted revenue guidance for the full year, from $274 million to $277.5 million at the midpoint, a 1.27% increase
  • Free cash flow of $3.88 million, down 76.6% from previous quarter
  • Net Revenue Retention Rate: 131%, in line with previous quarter
  • Customers: 599 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 78.2%, down from 81.3% same quarter last year

“JFrog demonstrated a solid start to 2022, as Q1 was yet another strong quarter. We’re excited to see the growing number of customers transitioning to the cloud, securing their software supply chain, and powering their DevOps pipelines with the JFrog Platform,” said Shlomi Ben Haim, JFrog Co-founder and CEO.

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 $45 million, to $63.6 million.

JFrog Total Revenue

And unsurprisingly, this was another great quarter for JFrog with revenue up 41.2% year on year. But the growth did slow down a little compared to last quarter, as JFrog increased revenue by $4.46 million in Q1, compared to $5.53 million revenue add in Q4 2021. We'd like to see revenue increase by a greater amount each quarter, but a one-off fluctuation is usually not concerning.

Guidance for the next quarter indicates JFrog is expecting revenue to grow 34.6% year on year to $65.5 million, in line with the 33.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 29.6% over the next twelve months.

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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 131% in Q1. That means even if they didn't win any new customers, JFrog would have grown its revenue 31% year on year. That is 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 Q1 Results

With a market capitalization of $1.99 billion JFrog is among smaller companies, but its more than $427.6 million in cash and positive free cash flow over the last twelve months give us confidence that JFrog has the resources it needs to pursue a high growth business strategy.

We enjoyed seeing JFrog’s impressive revenue growth this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. On the other hand, there was a slight slowdown in new contract wins. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. The company is up 1.67% on the results and currently trades at $18.77 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.