JFrog Ltd.

Ladies and gentlemen, thank you for joining us and welcome to JFrog's fourth quarter and fiscal 2022 results. I'll hand the conference over today to Jeff Schreiner, VP of Investor Relations. Jeff, please go ahead.

Good afternoon and thank you for joining us as we review JFrog's fourth quarter and full year fiscal 2022 financial results, which were announced following market close today via press release. Leading the call today will be JFrog's CEO and co-founder, Shlomi Ben-Haim, and Jacob Schulman, JFrog's CFO. During this call, we may make statements related to our business that are forward-looking under the federal securities laws and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our future financial performance, including our outlook for Q1 and the full year of 2023. The words anticipate believe continue estimate expect intend will and similar expressions are intended to identify forward looking statements or similar indications of future expectations. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our views only as of today and not as of any subsequent date. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to our Form 10-K for the year ended December 31st, 2021, filed with the SEC on February 11th, 2022, and our most recent report on Form 10-Q, which is available on the investor relations section of our website and the earnings press release issued earlier today. Additional information will be made available in our Form 10-K for the year ended December 31st, 2022 and other filings and reports that we may file from time to time with the SEC. Additionally, non-GAAP financial measures will be discussed on this conference call. These non-GAAP financial measures, which are used as a measure of JFROG's performance, should be considered in addition to, not as a substitute for, or in isolation from, GAAP measures. Please refer to the tables in our earnings release for reconciliation of those measures to their most directly comparable GAAP financial measures. A replay of this call will be available on the JFROG Investor Relations website for a limited time. With that, I'd like to turn the call over to JFROG CEO, Shlomi Benhaim. Shlomi?

Thank you, Jeff. Good afternoon to you all, and thank you for joining the call. I'm happy to report that we ended fiscal year 2022 with annual results in line with our guidance range, despite that 2022 was a challenging year from a macroeconomic and geopolitical perspective with moderated growth in the IT market. Nevertheless, DevOps, security software, and cloud computing remained among the most resilient IT projects. I'm happy to see that JFrog not only performed well with revenue growth of 35% year over year, in line with our guidance range, but also exceeded our commitment to break even, wrapping up Q4 with non-GAAP EPS of $0.04, more than double the range we communicated in Q3. 2022 included hyper growth in our cloud business, significant growth in the number of customers that subscribed to our full software supply chain platform, powered by advanced DevOps and DevSecOps end-to-end solutions and a higher lending ASP with customers who invested more in digital transformation. For the fiscal year 2022, revenue was $280 million, up 35% year-over-year. J-Frog finished the year with over 7,200 customers, compared to 6,650 in the prior year, choosing us as their DevOps and DevSecOps partner of choice. Allow me now to elaborate more on our fourth quarter results. Our 2022 fourth quarter revenue was $76.5 million, reflecting 29% year-over-year growth. Our cloud revenues delivered continued momentum, equaling $22.6 million and increasing 53% year-over-year. Our growth in the quarter was driven by continued increases in end-to-end JPEG platform subscriptions, as well as ongoing customers' migration to multi-cloud and hybrid environments. Customers with ARR over $100,000 grew to 736 compared to 696 in the previous quarter, increasing 37% year-over-year. Customers with ARR over $1 million increased to 19, up from 18 in the previous quarter, and up 27% year-over-year. We are pleased with this result, especially in light of the market dynamics we witnessed in the last few weeks of the quarter. On today's calls, we'll share an update on how the latest macroeconomic changes are impacting our business, how we are adjusting for it, and how we continue to drive growth alongside cost efficiency to capture the massive DevOps and security market opportunities ahead. Let me start by expanding on the top three themes that drove customers acquisition and expansion throughout the year and specifically in Q4. First, Overall adoption of our end-to-end software supply chain platform, showing increasing maturity and tooling consolidation by the enterprise. Second, growing demand for security solutions that are fully integrated into the DevOps workflow and available as part of a full platform. Third, cloud and multi-cloud migration and adoption. Let's begin with the end-to-end JFrog platform scope. The growing adoption of our complete platform by new and existing customers showcases the broad need for scalable, end-to-end, fully integrated, hybrid solutions. Our holistic platform approach drove continuous sales momentum in Q4. For example, one of the world's most recognizable payment processing companies completed a standardization on the JFOG platform as their system of records. They chose JFrog over the prior solution, Sonotype Nexus, as they needed a highly available solution that scales efficiently and supports hybrid environments to meet the needs of thousands of developers. In another example, a leading commercial bank in EMEA chose JFrog as their enterprise DevOps system of records. Due to the high level of complexity, they presented requirements for universality, full binary lifecycle management, integrated security, large scale, and efficient replication and distribution between development sites. Already utilizing GitLab for source code management, these banks turned to JFrog to complete their software supply chain coverage with an advanced solution for binary management and software supply chain security. We saw this trend throughout 2022 as customers are telling us that both from a technology and business perspective, platform consolidation and standardization will be a key theme in 2023, not only for DevOps or DevSecOps, but for complete software supply chain management. Second, to our security pillar. In mid-October, we launched an industry-destructive set of advanced tools, introducing J-PROG Advanced Security as the first DevOps-centric security solution. While we continue to build and expand this offering, we were excited to see initial customers who purchased J-PROG Advanced Security subscriptions quickly taking advantage of these capabilities. J-PROG's meaningful investment in security over the past years is beginning to bear fruit. We strongly believe that the holistic JFOG platform powered by JFOG Artifactory, the database of DevOps and the de facto standard in the software package management combined with our best of breed security solution into a single platform will drive adoption among our install base and attract new users. This is reflective of the sea change we saw in 2022 of security being embedded across the software supply chain. and companies discovering that if they don't control and secure their binaries in their organization, they are finding it nearly impossible to secure their software assets and remediate security issues. Modern security technology is automated, requires less human intervention, manages software package dependencies, and set policies that protect and remediate an organization's software supply chain. We build JFrog Advanced Security with this understanding and we believe it will displace legacy security solutions attracting new customers to JFrog as this market continues to mature. In just over a year since our acquisition of Vidoo, JFrog has released a half dozen capabilities that can consolidate security point solutions currently in the market. As some competitors cobble together open source tooling to appeal to the market demands, JFrog delivers a comprehensive DevOps and DevSecOps solution for enterprises who are looking to consolidate their tool stack into a single platform. Let me share with you how we differentiate in security. Development teams are using security point solutions that generate too many results requiring allowing them to inefficiently fix all vulnerabilities, not allowing them to prioritize remediation based on context. This is why our contextual analysis capability was released. With JFrog Advanced Security, we allow teams to prioritize safe development hours and focus on what matters. Also, companies want to ensure that no software is shipped with an accidentally included secrets or access keys. This is why secrets detection in our advanced security solution is so important, as it discovers inadvertent revealing of secrets and where they live in both code and hardcoded into binaries. JFOG is helping companies and development teams focus these holistic security efforts with our solutions, alleviating teams' workloads, decreasing risk and covering the entire software supply chain, which is impossible by scanning source code alone. We believe this approach will help drive growth in existing customers in 2023, upgrading many into higher JFOX subscription types that incorporate security solutions alongside core artifact management. Security budgets remain one of the most defensible areas of technology spend. as enterprises prioritize investing in end-to-end solutions to secure their growing digital attack surface. For example, in Q4, one of the Nordic region's most prominent banks turned to JFrog to incorporate security across their software supply chain. Looking for a multi-cloud-based solution to streamline their operation, they partnered with JFrog and Google Cloud via their marketplace to enhance the bank's security posture and displays legacy on-premise solutions. In another Q4 example, one of France's most recognizable luxury brands turned to JFrog for complete visibility and security across the software supply chain, saying they could now build once and run everywhere securely across multiple cloud providers. Looking to consolidate and standardize their DevSecOps tools long-term, this company is illustrative of what we are hearing from thousands of JFOC customers. They want to get control of their security tools and associate costs. We'll keep investing in JFOC security solutions as one of our R&D cores and look forward to more advancement and innovation in software supply chain security in 2023. We believe proven, powerful, holistic security solutions coupled with end-to-end binary management is antidote to modern software supply chain security threats. Now, I want to address our cloud business. Cloud, multi-cloud, and hybrid infrastructures continues to be the desired end state of many companies. Our enterprise customers tell us that cloud migrations are often a multi-year effort and that the hybrid capabilities of JFrog allow them to move over time at their own pace with limited disruption to the business. As such, we've been pleased throughout the year to see growth in the cloud business across all subscription types. A Fortune 100 pharmacy brand chose JFrog's software supply chain platform due to the immediate need to consolidate DevOps and DevSecOps solutions. JFrog replaced multiple existing on-premise and cloud offerings, including container registry tools from AWS and Google Cloud, to manage the full software supply chain on one platform. This $500,000 Enterprise Plus bill was driven by the need for universality, scalability, consolidation of tools, and JFOGS out-of-the-box integrations across the ecosystem. Recent CIO surveys validated by analysts and our customers tell us that while from short-term budgets, may be tightening annual investment in DevOps and security platforms in 2023, specifically in multi-cloud form, are expected to go over 2022. Next, I want to address the ongoing macroeconomic challenges. J4's overall win rate and customers' preservation remains robust, consistent with the historical trends, and we have been able to close substantial amounts of Enterprise Plus deals that show us the enterprise demand for JFOG solutions. However, the macroeconomic headwinds, such as elongated sales cycles and customers' pushouts, increased significantly in the fourth quarter, impacting the overall growth of our business. During the month of December, we witnessed a further slowdown in deal closing and increased customers' optimization efforts in cloud usage. As we close the quarter, we saw our customers exercise caution in this uncertain environment. This is evident in the number of deals that pushed from Q4 into 2023 and that now require C-level budget sign-offs. This impacted our growth and net retention rate in the fourth quarter. It is further evident that self-hosted customers who are considering migration to the cloud are expanding their on-prem system at a slower pace in favor of the cloud migration strategies that are pending further budget approvals. We would expect this pattern to continue in 2023 and have included them in our forward outlook. Despite these challenges, we see growing need for DevOps security and edge solutions across the software supply chain in 2023 and beyond. Continuing to believe JFrog Software Supply Chain Platform sets industry standards and delivers unmatched value to the market. As we step into 2023, we see opportunities to leverage investments we have made within our solutions in prior years. allowing us to expand our profitability while still delivering top-line goals as we will share in our guidance. JFOG was founded in a recession, has built a solid business across a decade, and we believe remains well-positioned and well-equipped to deliver in uncertain times. With that, I'll turn the call over to our CFO, Jacob Schulman, who will provide an in-depth recap of Q4 financial results and update you on our outlook for both Q1 and fiscal year 2023. Jacob?