JFrog Ltd.

Ladies and gentlemen, thank you for joining us and welcome to JFrog's second quarter 2023 earnings conference call. I'll hand the conference over to Mr. Jeff Schreiner, VP of Investor Relations. Jeff, please go ahead.

Good afternoon, and thank you for joining us as we review JFrog's second quarter 2023 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 federal security 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 Q3 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 31, 2022, filed with the FCC on February 9, 2023, 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-Q for the quarter ended June 30th, 2023, and other filings and reports that we may file from time to time with the FTC. Additionally, non-GAAP financial measures will be discussed on this conference call. These non-GAAP financial measures, which are used as measures 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 send the call over to JFrog CEO, Shlomi Ben-Han. Shlomi? Thank you, Jeff.

Good afternoon, everyone, and thank you for joining us. I'm happy to report that JFrog's second quarter revenue exceeded our prior guidance driven by increased cloud consumption, expansion of our security solutions, and continued adoption of the JFOX software supply chain platform. Our 2023 second quarter revenue was $84.2 million, reflecting 24% year-over-year growth. Cloud usage continued to accelerate as we expected, delivering revenues of $27.6 million, increasing 44% year-over-year. We also exceeded our profitability guidance with a non-GAAP profit of $12.1 million while still investing in our core teams. Customers with ARR over $100,000 grew to 813 compared to 647 in the year-ago period, increasing 26% year-over-year. Customers with ARR over $1 million increased to 24% versus 17 in the second quarter of 2022, up 41% compared to the year ago period. These results reflect that the JFrog platform continues to be prioritized as critical infrastructure, and that our three pillars of DevOps, security, and IoT hold strategic value for our customers. Let me expand on what made Q2 another strong quarter for JFrog. Let's begin with the ongoing adoption of JPEG security solutions. Most organizations recognize the need for multiple DevSecOps capabilities, such as software composition analysis, contextual analysis, infrastructure as code security, leak secret detection, and container security, among other key features that are included in JPEG Advanced Security alongside other JPEG offerings. As we noted in our previous call, We have ambitious goals to provide end-to-end security across the software supply chain with a comprehensive set of capabilities bundled together as a consolidated solution. We believe this approach will outpace and displace point solutions in the market. I'm pleased to report that in the short period since the availability of JFrog Advanced Security in the market, we already gained tens of customers that have added this capability to their subscriptions, indicated that enthusiasm for advanced security is gaining momentum in the DevSecOps market. Not only because of the advanced scanners and automation of software packages, but also the native integration with Artifactory that serves our customers as the single source of record. On that note, I'm excited to mention our recent security product release. As we know, in our industry, over time, less and less software is being written as original code. And instead, binaries are being brought in from the outside world, often open source. Many industry estimates know that up to 90% of software is comprised of open source packages, containers, and more, all binaries. Developers often cache public repositories to obtain these libraries from the internet to speed development and add critical features. While developers may be faster, these practices can unknowingly add security and compliance risk in the form of vulnerabilities entering the organization. This creates friction between developers who want to move fast and security teams who don't want to compromise and require a clear understanding of the software's composition and dependency management. In partnership with our community, we built J-Fog X-Ray and Advanced Security as tools integrated natively with Artifactory to protect the software supply chain and everything happening within the organization. JProg has now shifted even further left to build a fence around companies to automatically and seamlessly stop malicious packages and unvalidated open source licenses from ever entering the organization. I'm proud to announce the general availability of JProg Curation, which was released a few weeks ago in mid-July. This solution automates the curation of open source software entering an organization before the development process begins. JProc curation automatically checks for malicious components and policy-violating software and prevents them from ever entering the organization and compromising security of the software supply chain. Policies can be defined centrally by security teams and applied at global scale across organizations. Many of our customers are already exploring J-PROG Curation and we look forward to partnering with them. J-PROG Curation is offered as a by-seat add-on to the Enterprise X or Enterprise Plus subscriptions. Our goal is to enable J-PROG users to gain the highest level of visibility and control over the software development lifecycle by delivering a consolidated solution that focuses on all of an organization's binaries. We will continue to bring innovative security solutions to the market and couple them with Artifactory, which already serves millions as the database of DevOps. JFrog Curation joins the security suite of products offered by JFrog, all of which are available in hybrid and multi-cloud versions. Next, I want to address customers' expansion and tooling consolidation on the J-PROG platform. The complete software supply chain flow is the flow of binaries, which uniquely positions J-PROG as mission critical for every enterprise. As customers continue to streamline their operations with our platform, we see them consolidating tooling around the binary centric pipelines for both DevOps and security. For example, one of the Fortune 100 top five healthcare pharmaceutical and retail companies made a decision in Q4 of 2022 to migrate away from Google's container management cloud services and Sonotap Nexus binary repository to the J4 platform, consolidating the complete package management, development pipeline solutions, and container registries under one platform. Only a few months later, in Q2 of this year, they successfully completed the proof of concept with our team as they began to explore consolidation of their multiple security point solutions. As a result of this proof of concept, the customers decided to move away from Snyk to JFrog to cover the software composition analysis needs and are now exploring JFrog's other security capabilities as part of a strategic consolidation and standardization around JFrog's platform. We believe tooling consolidation will continue to be both a macro trend and a DevSecOps tooling imperative. This type of consolidation and ROI for our customers reflects the findings of a recent study conducted by Forrester. Commissioned by JFOG, the Forrester TEI report found that enterprises investing in the JFOG platform could expect a nearly 400% ROI across three years, and that some organizations could expect to save up to 156 hours per developer per year when utilizing JFOG's DevOps and security platform. In their study, An enterprise with thousands of developers could potentially save tens of millions of dollars in costs over 36 months. These results reflect J-PROG's core business value of improving efficiency and productivity across an organization through automation and control of the binary flow. At the same time, Forrester noted in another recent industry report that, quote, J-PROG is great for enterprises that place high value on software supply chain security. Customers are looking across their portfolios to discover ways to reduce technological and integration costs, and the J-PROG platform allows them to fulfill this vision. I now want to focus on ongoing adoption of the J-PROG platform across our three cores and high-value enterprise subscriptions. When JPEG first entered the market, DevOps was not even a phrase. When we introduced X-Ray as our first security solution a few years ago, DevSecOps was in its infancy. And today, we see that developers and development organizations are tasked with security, multiple programming languages, cloud-native technologies, multi-cloud deployment, open-source management, software distribution, and more. With a number of connected devices that must stay updated going into the tens of billions, software truly has no boundaries. We continue to see customers trusting JFrog with its boundless software delivery. For example, a leading biopharmaceutical company turned to JFrog to help them revolutionize medical supply processes with an innovative approach. Using a combination of software and connected devices, they aim to simplify how hospital and medical staff consume and trace organic and inorganic medical inventory. Looking to guarantee the security and integrity of their extensive network of sensor-driven devices in the field, they first considered J4 Connect for their over-the-air software update and as a fleet management solution. However, upon realizing the benefits of JFOG Artifactory as a universal binary repository and JFOG X-Ray and advanced security for mitigating software supply chain attacks, they decided to adopt JFOG's platform as their system of records. Partnering with JFrog helps them to consolidate around a single DevOps and DevSecOps platform. And we look forward to working with companies such as this moving forward to change the way every industry thinks of delivering and managing software from developers to the secure distributed edge. Now, I would like to address JFrog's view of the potential impact of generating artificial intelligence technologies within our software supply chain platform, security solutions, and for individual developers. As we have previously noted, from a business perspective, we believe that AI-powered creation of software will drastically increase the overall code created within organizations, and thus leading to an increase in the number of binaries being generated by developers or machines. As J-PROG continues to be the gold standard in enterprise artifacts management, we look forward to helping companies scale with our software supply chain platform alongside their AI-driven advances. More code equals more builds. More builds equals more binaries, which creates a huge opportunity for J-PROG. We also see J-PROG as an AI enabler for our customers. We already observed J-PoG Artifactories serving the repository for customers' machine learning and AI models. Machine learning models are yet another form of binary and consumed in the organization as software packages. Therefore, managing customers' AI processes and their metadata at scale locally, natively, alongside other technologies generates incremental benefit from the use of the J-PoG platform. The builders of AI models within companies are often Python developers and data scientists utilizing Conda or Serum packages, already natively supported by Artifactory. This reinforces J-PROG as the single source of truth for companies' development processes, as well as potentially their AI and MLOps initiatives. Finally, regarding AI within J-PROG, we are exploring several approaches that will enhance future versions of JPEG, DevOps, and security solutions. And we look forward to providing updates on our progress in the near future. With that, I'll turn the call over to our CFO, Jacob Schulman, who will provide an in-depth recap of Q2 financial results, as well as update you on our guidance for Q3 and for fiscal year 2023.