JFrog (NASDAQ:FROG) Q2 Sales Beat Estimates, Provides Encouraging Quarterly Guidance

Jabin Bastian /
2021/08/05 4:32 pm EDT

Software development tools maker JFrog (NASDAQ:FROG) reported strong growth in the Q2 FY2021 earnings announcement, with revenue up 33.5% year on year to $48.6 million. JFrog made a GAAP loss of $13.1 million, down on its profit of $1.69 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) Q2 FY2021 Highlights:

  • Revenue: $48.6 million vs analyst estimates of $48.1 million (1.06% beat)
  • EPS (non-GAAP): $0.01 vs analyst estimates of $0.01 (12.4% beat)
  • Revenue guidance for Q3 2021 is $52.5 million at the midpoint, above analyst estimates of $51.7 million
  • The company lifted revenue guidance for the full year, from $201 million to $203.5 million at the midpoint, a 1.24% increase
  • Free cash flow of $18 million, up 134% from previous quarter
  • Net Revenue Retention Rate: 129%, in line with previous quarter
  • Customers: 415 customers paying more than $100,000 annually
  • Gross Margin (GAAP): 81.3%, in line with previous quarter

“JFrog again reported a strong quarter across the business - including revenue growth, gross margin, and record cash flow - while delivering technical innovations around security, binary distribution and more,” said Shlomi Ben Haim, JFrog’s Co-Founder and CEO.

Founded in 2008, JFrog provides software as a service platform that makes developing and releasing software easier and faster, especially for large teams.

Software is eating the world and the volume of software produced is exploding. Companies like JFrog are in a good position to benefit from this trend, since they provide the tools that software developers use to do their jobs.

Sales Growth

As you can see below, JFrog's revenue growth has been very strong over the last year, growing from quarterly revenue of $36.4 million, to $48.6 million.

JFrog Total Revenue

And unsurprisingly, this was another great quarter for JFrog with revenue up an absolutely stunning 33.5% year on year. On top of that, revenue increased $3.57 million quarter on quarter, a very strong improvement on the $2.39 million increase in Q1 2021, and a sign of acceleration of growth.

Analysts covering the company are expecting the revenues to grow 32.5% over the next twelve months, although we would expect them to review their estimates once they get to read these results.

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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 129% in Q2. That means even if they didn't win any new customers, JFrog would have grown its revenue 29% 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 Q2 Results

With market capitalisation of $4.11 billion JFrog is among smaller companies, but its more than $615.2 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

It was good to see JFrog deliver strong revenue growth this quarter. And we were also glad that the revenue guidance for the next quarter exceeded analysts' expectations. On the other hand, it was unfortunate to see a slowdown in new contract wins (you can see the data in our full report). Zooming out, we think this was still a decent, albeit mixed, quarter, showing the company is staying on target. The company is down -1.05% on the results and currently trades at $45.5 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 full report which you can read here, it's free.

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