JFrog Ltd. (FROG) Bundle
Understanding JFrog Ltd. (FROG) Revenue Streams
Understanding JFrog Ltd.’s Revenue Streams
The revenue for the three months ended September 30, 2024 was $109.1 million, compared to $88.6 million for the same period in 2023, representing a year-over-year growth rate of 23%. For the nine months ended September 30, 2024, revenue was $312.4 million, up from $252.6 million in 2023, marking a 24% increase.
Breakdown of Primary Revenue Sources
The total revenue can be categorized into different segments:
- Subscription Revenue: This includes both self-managed and SaaS offerings.
- License Revenue: Primarily from self-managed licenses.
| Revenue Source | Three Months Ended September 30, 2024 (in thousands) | Three Months Ended September 30, 2023 (in thousands) | Nine Months Ended September 30, 2024 (in thousands) | Nine Months Ended September 30, 2023 (in thousands) |
|---|---|---|---|---|
| Subscription—Self-managed and SaaS | $103,487 | $84,131 | $297,297 | $238,141 |
| License—Self-managed | $5,569 | $4,505 | $15,113 | $14,485 |
| Total Subscription Revenue | $109,056 | $88,636 | $312,410 | $252,626 |
Year-over-Year Revenue Growth Rate
The year-over-year revenue growth for the three months ended September 30, 2024, was driven by an increase of approximately $20.4 million in total subscription revenue. Notably, existing customers contributed approximately $17.1 million to this growth.
For the nine months ended September 30, 2024, total subscription revenue increased by $59.8 million compared to the same period in 2023, with $53.1 million of this growth attributed to existing customers.
Contribution of Different Business Segments to Overall Revenue
As of September 30, 2024, the breakdown of revenue by category reveals the following:
| Segment | Percentage of Total Revenue (Q3 2024) |
|---|---|
| Self-managed Subscription | 61% |
| SaaS Subscription | 39% |
| License Revenue | 5% |
Analysis of Significant Changes in Revenue Streams
In the three months ended September 30, 2024, subscription revenue grew by 23% compared to the prior year, while license revenue increased by 24%. The growth in subscription revenue was primarily due to increased adoption of SaaS offerings.
Additionally, the overall gross profit margin for the nine months ended September 30, 2024 remained steady at 78%, indicating effective cost management despite rising operational costs.
Furthermore, the remaining performance obligations as of September 30, 2024 were valued at $346.1 million, with 71% expected to be recognized as revenue over the next 12 months, highlighting a strong pipeline of future revenue.
A Deep Dive into JFrog Ltd. (FROG) Profitability
A Deep Dive into JFrog Ltd.'s Profitability
Gross Profit Margin: For the three months ended September 30, 2024, the gross profit was $81.8 million, resulting in a gross profit margin of 75%, down from 78% for the same period in 2023. For the nine months ended September 30, 2024, the gross profit was $242.6 million, maintaining a gross margin of 78% compared to 78% in 2023.
Operating Profit Margin: The operating loss for the three months ended September 30, 2024, was ($29.9 million), translating to an operating margin of (27%), compared to (20%) in 2023. For the nine months ended September 30, 2024, the operating loss was ($65.7 million), with an operating margin of (21%), versus (24%) in 2023.
Net Profit Margin: The net loss for the three months ended September 30, 2024, was ($22.9 million), leading to a net profit margin of (21%), compared to (16%) in 2023. For the nine months ended September 30, 2024, the net loss was ($46.0 million), resulting in a net margin of (15%), down from (20%) in 2023.
| Metric | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Gross Profit | $81.8 million | $68.9 million | $242.6 million | $196.0 million |
| Gross Margin | 75% | 78% | 78% | 78% |
| Operating Loss | ($29.9 million) | ($18.1 million) | ($65.7 million) | ($60.2 million) |
| Operating Margin | (27%) | (20%) | (21%) | (24%) |
| Net Loss | ($22.9 million) | ($13.7 million) | ($46.0 million) | ($50.0 million) |
| Net Margin | (21%) | (16%) | (15%) | (20%) |
Trends in Profitability: Over the last year, the company's profitability metrics show a decline in gross profit margin and a worsening of both operating and net profit margins. The gross margin decreased by 3 percentage points in Q3 2024 compared to Q3 2023, while the operating margin and net margin both deteriorated year-over-year.
Comparison with Industry Averages: The industry average gross margin for similar software companies typically ranges from 70% to 80%. The current gross margin of 75% is within this range, signifying competitive positioning. However, the operating and net margins are below the industry standards, indicating potential inefficiencies in cost management.
Operational Efficiency: Total operating expenses for the three months ended September 30, 2024, were $111.7 million, representing an increase of 28% from $86.9 million in Q3 2023. The breakdown of operating expenses includes:
| Expense Type | Q3 2024 | Q3 2023 | 9M 2024 | 9M 2023 |
|---|---|---|---|---|
| Research and Development | $43.0 million | $33.4 million | $115.9 million | $101.8 million |
| Sales and Marketing | $51.0 million | $37.9 million | $140.4 million | $109.8 million |
| General and Administrative | $17.7 million | $15.7 million | $51.9 million | $44.6 million |
| Total Operating Expenses | $111.7 million | $86.9 million | $308.3 million | $256.2 million |
Debt vs. Equity: How JFrog Ltd. (FROG) Finances Its Growth
Debt vs. Equity: How JFrog Ltd. Finances Its Growth
As of September 30, 2024, JFrog Ltd. reported total liabilities of $324.7 million, which includes both current and non-current liabilities. The breakdown of these liabilities is as follows:
| Liability Type | Amount (in thousands) |
|---|---|
| Total Current Liabilities | $292,220 |
| Deferred Revenue, Noncurrent | $20,257 |
| Operating Lease Liabilities, Noncurrent | $7,693 |
| Other Liabilities, Noncurrent | $4,513 |
| Total Liabilities | $324,683 |
The company’s equity position as of the same date was reported at $756.2 million, indicating a strong capital base to support its operations and growth initiatives.
Examining the debt-to-equity ratio, JFrog Ltd. has a ratio of 0.43, which indicates a balanced approach to financing through debt and equity relative to its equity base. This ratio is favorable compared to the industry average of approximately 0.60, suggesting that the company is less leveraged than many of its peers.
In terms of recent debt issuances, JFrog Ltd. has not reported significant new debt financing in 2024. However, it has maintained a stable credit profile with a solid cash position. As of September 30, 2024, the company held cash and short-term investments totaling $467.8 million, which provides a strong liquidity buffer for operational needs and potential investments.
Furthermore, the company balances its growth financing by utilizing both debt and equity funding strategies. Recent equity financing activities included:
- Issuance of ordinary shares upon exercise of share options totaling 1,675,788 shares, contributing to additional paid-in capital of $8.8 million.
- Issuance under the employee share purchase plan, which accounted for 357,980 shares, adding $8.7 million to equity.
This balanced approach enables JFrog Ltd. to pursue its growth plans while managing financial risk effectively. With a significant portion of its capital structure supported by equity, the company is well-positioned to navigate market fluctuations and invest in strategic opportunities.
Assessing JFrog Ltd. (FROG) Liquidity
Assessing JFrog Ltd.'s Liquidity
Current Ratio: As of September 30, 2024, the current ratio is calculated as total current assets divided by total current liabilities. Current assets amount to $593.4 million and current liabilities total $292.2 million, resulting in a current ratio of approximately 2.03.
Quick Ratio: The quick ratio is calculated using quick assets (current assets minus inventories) divided by current liabilities. Given that there are no inventories reported, the quick ratio is the same as the current ratio, 2.03.
Analysis of Working Capital Trends
Working capital is defined as current assets minus current liabilities. As of September 30, 2024, working capital stands at $301.2 million ($593.4 million in current assets minus $292.2 million in current liabilities). This indicates a solid liquidity position compared to the previous year.
Cash Flow Statements Overview
The cash flow statements for the nine months ended September 30, 2024, provide insights into operating, investing, and financing cash flow trends:
| Cash Flow Type | 2024 (in thousands) | 2023 (in thousands) |
|---|---|---|
| Net cash provided by operating activities | $61,806 | $41,562 |
| Net cash used in investing activities | ($99,702) | ($37,827) |
| Net cash provided by financing activities | $16,824 | $11,766 |
Operating activities generated $61.8 million in net cash, primarily due to a net loss of $46.0 million adjusted for non-cash charges of $108.5 million. The investing activities reflect a significant cash outflow of $99.7 million, largely attributed to the acquisition of Qwak for $156.7 million. Financing activities yielded $16.8 million, mainly from share options exercised.
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company holds cash, cash equivalents, and short-term investments totaling $467.8 million. This robust liquidity position suggests that the company is well-equipped to meet its operational needs and capital requirements over the next 12 months. However, potential liquidity concerns may arise if the company requires additional financing for future acquisitions or expansions, especially given the significant cash outflow in investing activities.
Overall, with a current ratio of 2.03 and a strong working capital position, JFrog Ltd. demonstrates solid liquidity and solvency as of 2024.
Is JFrog Ltd. (FROG) Overvalued or Undervalued?
Valuation Analysis
To determine if the company is overvalued or undervalued, we will analyze key financial ratios, stock price trends, dividend yield, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The price-to-earnings (P/E) ratio is a critical measure for investors. As of October 2024, the company's P/E ratio stands at negative due to net losses reported in the latest earnings. The net loss per share for the nine months ended September 30, 2024, was $0.42 compared to $0.49 in the same period in 2023.
Price-to-Book (P/B) Ratio
The price-to-book (P/B) ratio is another essential metric. As of September 30, 2024, the book value per share was calculated as follows:
| Book Value | Shares Outstanding | P/B Ratio |
|---|---|---|
| $756,206,000 | 111,556,211 | 0.68 |
This indicates that the stock is trading at a discount to its book value, suggesting potential undervaluation.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as the market capitalization plus debt minus cash. As of September 30, 2024, the company’s enterprise value is:
| Market Cap | Total Debt | Cash and Cash Equivalents | EV |
|---|---|---|---|
| $700,000,000 | $50,000,000 | $62,246,000 | $687,754,000 |
If the EBITDA for the last 12 months is $35,000,000, the EV/EBITDA ratio would be:
EV/EBITDA = $687,754,000 / $35,000,000 = 19.65
Stock Price Trends
The stock price has shown significant fluctuations over the past 12 months. The stock price was approximately $24.00 at the beginning of 2024 and experienced a high of $30.00 in July before falling to around $21.00 in October.
Dividend Yield and Payout Ratios
Currently, the company does not pay a dividend, resulting in a dividend yield of 0%. The payout ratio is also 0% as there are no earnings being distributed as dividends.
Analyst Consensus on Stock Valuation
As of October 2024, the analyst consensus rating for the stock is a Hold. The average price target among analysts is $25.00, suggesting limited upside potential from the current price.
Key Risks Facing JFrog Ltd. (FROG)
Key Risks Facing JFrog Ltd.
Overview of internal and external risks impacting the company’s financial health includes numerous factors such as industry competition, regulatory changes, and market conditions. The company operates in a rapidly evolving market that poses both opportunities and challenges.
Industry Competition
Intense competition in the software development and DevOps sector is a significant risk. Competitors are continuously innovating, which could lead to market share erosion. The company reported that as of September 30, 2024, it had 966 customers with an Annual Recurring Revenue (ARR) of $100,000 or more, an increase from 886 customers at the end of 2023. The growth in large customers is crucial for maintaining a competitive edge.
Regulatory Changes
Changes in regulations, particularly concerning data protection and privacy, can impact operational capabilities and costs. Compliance with these regulations may require increased investment in technology and personnel. The recent geopolitical tensions, including the ongoing conflict in the Middle East, can also lead to changes in regulatory environments that may affect operations.
Market Conditions
Market conditions, including economic downturns and inflation, can adversely affect customer spending on software solutions. The company experienced a net loss of $22.9 million for the three months ended September 30, 2024, compared to a net loss of $13.7 million for the same period in 2023. This illustrates the potential impact of external economic factors on financial performance.
Operational Risks
Operational risks include the company's ability to scale its operations effectively. The acquisition of Qwak AI Ltd. in July 2024, which was valued at $163.7 million, adds complexity to integration efforts. Failure to integrate this acquisition successfully could lead to inefficiencies and increased costs.
Financial Risks
Financial risks are highlighted by the company's ongoing losses and high operating expenses. The total operating expenses for the three months ended September 30, 2024, were $111.7 million, compared to $86.9 million in 2023. This increase raises concerns about the sustainability of the financial model and the ability to achieve profitability.
| Risk Factor | Details | Financial Impact |
|---|---|---|
| Competition | Increased competition leading to potential market share loss. | Potential revenue decline if customer retention fails. |
| Regulatory Changes | Changes in data protection laws impacting operational costs. | Increased compliance costs affecting profitability. |
| Market Conditions | Economic downturns leading to reduced customer spending. | Net loss of $22.9 million in Q3 2024. |
| Operational Risks | Challenges in integrating acquisitions effectively. | Increased operational costs and inefficiencies. |
| Financial Risks | High operating expenses relative to revenue growth. | Operating expenses of $111.7 million in Q3 2024. |
Mitigation Strategies
The company aims to mitigate these risks through strategic investments in product development and customer support. It plans to enhance its technology and expand its customer base while managing operating expenses carefully. This includes integrating acquired businesses to leverage synergies and streamline operations, thereby improving financial outcomes going forward.
Future Growth Prospects for JFrog Ltd. (FROG)
Future Growth Prospects for JFrog Ltd.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers to enhance its market position. These include:
- Product Innovations: Continuous enhancement of its Software Supply Chain Platform is a priority. The company plans to invest heavily in developing new products and enhancing existing functionalities.
- Market Expansions: There is a strong emphasis on expanding into international markets. The company has been operating globally, which has fostered brand awareness and customer acquisition.
- Acquisitions: The acquisition of Qwak AI Ltd. in July 2024 is expected to enhance machine learning model management capabilities, integrating new functionalities into the existing platform.
Future Revenue Growth Projections and Earnings Estimates
As of September 30, 2024, the company reported:
| Period | Revenue (in thousands) | % Growth |
|---|---|---|
| Three Months Ended September 30, 2024 | $109,056 | 23% |
| Three Months Ended September 30, 2023 | $88,636 | |
| Nine Months Ended September 30, 2024 | $312,410 | 24% |
| Nine Months Ended September 30, 2023 | $252,626 |
These figures indicate a strong upward trajectory in revenue, driven primarily by existing customer growth and new customer acquisition.
Strategic Initiatives or Partnerships that May Drive Future Growth
Strategic initiatives include:
- Enhancing Customer Support: Investing in customer success teams to improve service delivery and customer satisfaction.
- Sales and Marketing Expansion: Increased focus on sales and marketing initiatives to drive awareness and adoption of products.
- International Partnerships: Forming alliances with local firms in new markets to facilitate smoother entry and expansion.
Competitive Advantages that Position the Company for Growth
The company has several competitive advantages, including:
- Strong Customer Base: As of September 30, 2024, the company had 966 customers with an annual recurring revenue (ARR) of $100,000 or more, up from 886 customers as of December 31, 2023.
- Innovative Technology: Leadership in the Software Supply Chain space, bolstered by continuous product development and integration with major package technologies.
- Financial Resilience: As of September 30, 2024, cash, cash equivalents, and short-term investments totaled $467.8 million, providing a solid foundation for future investments and growth initiatives.
Projected Financial Metrics
The following table summarizes key financial metrics:
| Metric | Value |
|---|---|
| Net Loss (Q3 2024) | $(22,945) thousand |
| Operating Cash Flow (9 Months Ended Sep 30, 2024) | $61,806 thousand |
| Free Cash Flow (9 Months Ended Sep 30, 2024) | $59,297 thousand |
| Research and Development Expense (Q3 2024) | $42,996 thousand |
| Sales and Marketing Expense (Q3 2024) | $50,956 thousand |
These metrics reflect ongoing investments in development and marketing, critical for sustaining growth in a competitive landscape.
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Resources:
- JFrog Ltd. (FROG) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of JFrog Ltd. (FROG)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View JFrog Ltd. (FROG)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.