Q2 2023 JFrog Ltd Earnings Call
Good afternoon, and thank you for joining.
It says we review J frog second quarter 2023 financial results.
Falling market closed today press release.
Reading the call today will be J for Oxycodone, cofounder, Shlomi, Bernhardt, and Jacob J frog CFO .
During this call we may make statements related to our business that are forward looking under federal security laws.
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 a four year of 2023.
Anticipate believe continue estimate expect intent will 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 released the results of any revision to these forward looking statements in light of new information for future events.
These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations.
A discussion 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 2022 filed with the SEC on February 9th 2023, which is available on the Investor Relations section of our website any earnings press release issued earlier today.
Additional information will be made available in our Form 10-Q.
Ended June 30th 2023, and other filings the reports that we may file from time to.
D C.
Additionally, non-GAAP financial measures will be discussed on this conference call. These non-GAAP financial measures, which are used as measures of J for all his performance.
Considered in addition to that as a substitute for or in isolation from GAAP measures.
Please refer to the tables and our earnings release for a reconciliation of those measures to their most directly comparable GAAP financial measures.
A replay of this call will be available on the J frog Investor Relations website for a limited time.
With that I'd like to turn the call over to J frogs, Shlomi Bernhardt slump.
<unk>. Thank you Jeff Good afternoon, everyone and thank you for joining us I'm happy to report the Jayhawks second quarter revenue exceeded our pilot guidance driven by Chris cloud consumption expansion of our security solutions and continued to adoption of the J Fox after supply chain platform.
2023 second quarter revenue was $84.2 million, reflecting 24% you'll be able to go.
Claudia this continues to accelerate as we expected delivering revenues of $27.6 million, increasing 44 per cent.
We also exceeded our profitability guidance with a non profit of $12.1 million, whereas steely investing in our call teams.
Customers with over $100000 go to 813 compared to 647 in the year ago period, increasing 26% it'll be.
Customers with over 1 million dollar increase to 24 versus 17 in the second quarter of 2022.
41% compared to the year ago period.
This results reflect the J broke platform continues to be part of your time is critical infrastructure.
Three pillars of Devops security and Iot all strategic value for our customers.
Let me expand on what made cute too and now just drunk water for Jacob.
Let's begin with the ongoing adoption of J for security solutions.
Most of these nations recognized the need for multiple death pick ups capabilities, such as software composition analysis contextual analysis infrastructures security leak secret detection and containers security among other key features.
And J fog advanced security alongside other J pro golfer rings.
We noted in a previous call.
We have ambitious goals to provide and to add security across the software supply chain with a comprehensive set of capabilities bundled together as a consolidated solution.
We believe this approach will outbreak and displays point solutions in the market.
I'm pleased to report that in the shop it since the availability of J frog advance security in the market. We already gained fans of customers that have added this capability to their subscription indicated that enthusiasm for advanced security is gaining momentum and the depth of cops market not only because of the.
Advanced scanners and automation of software packages, but also the native integration without the factory that served our customers as the single fossil cycled.
On that note I'm excited dimension, our recent security product release.
We know in our industry over time, less and less software is being written as the original code.
Binary without being brought in from the outside World often open source.
Many industry estimates note that up to 90% of software is comprised of open source packages containers and more all binary <unk>.
Often cash public repositories to obtain this libraries from the Internet to speed development and at critical features why developers may be faster. These practices can unknowingly add security and compliance risks in the form of vanilla ability is entering the organization this create friction.
Between developers want to move fast and security teams, who don't want to compromise and require a clear understanding of the software is composition and dependency management impasse.
No ship with our community, we build Jay-paul X Ray and advanced security as tools integrated natively without the factory to protect the softer supply chain and everything happening within the organization.
J progress now shift is even further left to build a fence around companies to automatically and seamlessly stop malicious packages and and validated open source licenses from ever entering the organization.
I'm proud to announce the general availability of J Procuration, which was released a few weeks ago in mid July .
This solution automate stick duration of open source software entering an organization before the development process begins J.
J procuration automatically check for malicious components and policy violating software and prevents them from ever entering the organization and compromising security after software supply chain.
Policy can be defined centrally by security teams and apply at global scale across organizations. Many of our customers are already exploring J procuration and we look forward to partnering with that J folk duration is offered as the bistate add ons to the enterprise X.
Oh enterprise class subscriptions.
Our goal is to enable <unk> to gain the highest level of visibility and control over the software development lifecycle.
<unk> Ah consolidated solution that focuses on all of and I'm Gonna invitations binaries, we will continue to bring innovative security solutions to the market and capital them without the factory, which are really serve millions as the database of Devops J for curation joins the security suite of products.
Offered by J for.
All of which are available in Ivory and Multicloud versions next I want to address customers expansion and cooling consolidation on the J for platform.
That completes up to supply chain flow is the flow of binary which uniquely proficient J Prague admission critical for every enterprise.
Customers continued 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 company made a decision in queue for 2022 to migrate away from Google container management cloud services and solid that Nexus binary repositories to the <unk> platform consolidating the <unk>.
Package management development pipeline solution.
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 the multiple security point solution.
As a result of this proof of concept the customer decided to move away from snake to J Prague to cover the software composition analysis needs and I will now exploring J prompt other security capabilities as part of its strategic consolidation and standardization around J Fox platform.
We believe tooling consolidation will continue to be both the macro trend and a depth ops fooling imperative.
This type of consolidation an hour for our customers reflects the finding of a recent study conducted by Forrester commissions by J for the first 30 I report found that enterprises investing in the <unk> platform could expect and nearly 400% Oh I got three years and.
Some organizations could expect to save up to 156 hours does develop bill pair here when utilizing J Fox Devops and security platform and their study and enterprise with thousands of developers could potentially save tens of millions of dollars in costs over 36 months.
Yeah.
This results reflect J Fox core business value of improving efficiency and productivity across an organization throughout the nation and control of the binary flow at the same time Forester noted in another recent industry report that quote J Prague is grateful and.
[noise] surprises that place high value on software supply chain securely.
Customers are looking across the portfolios to discover ways to reduce technological and integration cough.
And the <unk> platform allows them to fulfill this vision.
I know I want to focus on ongoing adoption of the <unk> platform across our three calls and high value enterprise subscriptions when.
When J book first entered the market Devops was not even afraid.
When we used to just X ray as our first security solution a few years ago that was.
Beneath intercede.
And today, we see that developers and development organizations.
Asked with security multiple programming languages clouds Native technologies Multicloud deployment open source management software distribution and more.
With the number off connected devices that math, they updated growing into the tens of billions software truly has no boundaries.
We continue to see customers trusting Jacob with this boundless after a delivery for example, and leading biopharmaceutical companies they're into J for to help them revolutionized medical supply processes with an innovative approach.
Using a combination of software and connected devices. They M to simplify how hospital and medical staff consume and traits organic and inorganic medical inventories looking.
Looking to guarantee the security and integrity of the extensive network of Samsung driven devices in the bill. They first consider J for connect full bill over the email software update and a fleet management solution. However, upon realizing the benefits of Jay-paul Gothic factory is a universal binary repository.
And J F O X rays, and advanced security for mitigating software supply chain attacks, they decided to adopt jaycox platform is the system of records.
Partnering with J fog help them to consolidate around the single Devops and depth of Cups 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 J frog view of the potential impact of generating artificial intelligence technologies within our software supply chain platform security solutions and for individual developers.
We have previously noted from the business perspective, we believe that AI powers creation of software will drastically increase the overall god created within organizations and thus leading to an increase in the number of binary being generated by developers all machines.
Brooklyn appears to be the gold standard in enterprise artifact management, we look forward to helping companies scale without a softer supply chain platform alongside their AI driven advances.
Code equaled mobile mobile equals more binaries, which create a huge opportunity for Jacob.
We also see J frog is an AI enabler for our customers, we already observed J Fugazi factory, serving the repository for customers machine learning Nai models machine learning models are yet another form of binary and consume empty organization as software packages.
Paul managing customers AI processes, and they'll make sure that the escape locally natively alongside other technologies generates incremental benefit from the use of the J for platinum.
The Bill goes up AI mother's William companies are often python developers and data scientists utilizing conduct all serious packages already natively supported biotic factory. This reinforces J frog as the single source of tools for companies development processes as well as pubs.
Sensually, they're AI and M L ops initiatives.
Finally regarding AIG within J for we are exploring several approaches that will enhance future versions of J vulgar Devops and security solution and we look forward to providing updates on our progress in the near future.
With that I've done the call over to our CFO , Jacob Shuman, who will provide an in depth recap of cute to financial results as well as update you on our guidance for Q3 and four fiscal year 2023 Jacob.
Thank you saw me and good afternoon, everyone. During the second quarter total revenues were $84.2 million up 24% year over year are stronger than expected revenues in the water were driven by continuous threat of our cloud business and adoption of highest subscription tears across the <unk>.
Software supply chain platform in the second quarter, our cloud business, so sequential expansion and customer usage equal and revenues of $27.6 million up 44% year over year, while we continue to see a slower pace of cloud migrations compared to the prior year, where.
Pleased with improving user strands during the first half of 2023.
Going forward, we believe cloud optimization will remain an ongoing exercise within large enterprises as customers continued to focus on the future and the growth we reiterate our waistline cloud growth rate of mid forties during fiscal year 2023.
Self managed revenues on Bram, where $51.8 million up 17% year over year during the weather.
All real expansion and revenue growth within our self cost of business remains constrained relative to prior years as customer transition towards cloud and hybrid deployment, which cause reduced organizational focus on future expansion within itself goes to deployment.
Okay I've received positive feedback from customers regarding gay broke advanced security and unusual interest in J procuration with many of these engagements being self caused the deployment will remain optimistic that our security solutions can be a potential catalyst to re accelerates revenue growth and customary expansion.
Within our self close of business.
Net dollar attention for the portray like waters was hundred 20 per cent of decline of four points sequentially due to ongoing microcards wins and lower it dashing within ourselves close of business.
Okay I've started seeing the stabilization of Andy are around this levels and continue to expect or any other already dashing for the year to be around 120 per cent.
Grocery fashion continued to be 97% with no change in overall customer churn trends.
<unk>, 245% of our total revenue came from anti price plus subscriptions.
From 36% into two of 2022, an increase in revenue contribution or 56% year over year.
Now, let me discuss our income statement in more detail gross profit and the water was $70.4 million, representing the gross margin of 83.6% essentially flat with a year ago period and in line with expectations as economies of scale and cost control of set high clouds revenue contribution.
Ah Braden expenses for the second quarter, whereas $62.2 million down $1 million sequentially equal in 73.9% of revenues compared with $58.8 million or 86.8% of revenues in the year ago period.
In the second quarter benefited from time in a certain expenses being pushed into the third quarter will continue to remain focused on expense discipline, while continuing to strategically invest and go to market initiatives and technology innovation.
Or a greater profit inky too was $8.2 million or at 9.7% of the break in margin compared to an operating loss of $2 million or negative 3% operating margin in the prior year due to better than expected cost efficiencies second quarter of net income equal 12.1 million.
Or 11 cents per diluted share based on 108 million diluted shares outstanding versus a year ago net loss of $2.2 million equating to a loss of two cents per diluted share.
Turning to the balance sheet and cash flow, we entered the June quarter with $470 million in cash and short term investments.
From $443 million as of December 31st 2022.
Cash flow from a durations, who was $16.7 million in the quarter.
After taken into consideration capex.
Cash flow was $16.2 million generated in 19.3 free cash flow margin.
Reiterate our expectations for low double digit free cash flow margins in fiscal 2023.
As of June 30th 2023.
Remaining performance obligations totaled $213.6 million.
Now I'd like to speak about our guidance for the third quarter and full year 2023.
Or a full year 20, twenty-three expectations continuing to estimate strong growth in our cloud business, an ongoing expense discipline for Q3, we expect revenue to be between $87 million to $88 million with non-GAAP operating profit between $6 million to $7 million and non-GAAP earnings per diluted share.
Care of 829 cents.
<unk> sure account of approximately 110 million shares.
I would note that third quarter operating expenses will include costs related to our employee merit increases an arris won't pop user confidence, which will cause a sequential step up.
For the full year of 2023, we anticipate total revenue in a range between 348 $3.5 million to $345.5 million non-GAAP operating income is expected to be between $24 million and $25 million and non-GAAP earnings per diluted share of two.
26 cents to 28 cents is human assured counter for proximately 110 million shares.
Now, let me turn to call back to Shlomi for some closing remarks before we take your questions.
Thank you Jacob we continue to believe that J program, well positioned to achieve our plan golf in the coming quarters, and our customers ongoing commitment and partnership alongside US validate the mission critical nature of our platform.
Before we close I want to thank the entire jape of team Paul a strong quarter yoga resilience and passion is stronger than any macro headwinds and the results speak for themselves Q2 success belongs to you.
I also want to invite everyone to attend our annual swamp up Devops and that's the cops user conference in San Jose on September 13th I'm looking forward to updating the community on our major product and strategy announcements alongside amazing industry and J four cats.
M as stories from companies like Fidelity, Bryan games, Netflix and others.
Thank you all for joining us for our Q2 earnings call and made a frog be with you know we'd be happy to take your questions operator.
Thank you Sir.
If you have a question today. Please press star one on your telephone keypad.
We'll take our first question today.
<unk> J P Morgan.
Hey, guys. This is a no on for Africa, and you don't think thanks for taking our questions just wanted to double click a bit on the recent curation add on feature you you. Just recently rolled out can you just maybe elaborate on file. Please help me ship more left in the dark.
Lifecycle, then or you know targeting a potential different buyer.
<unk>. Thanks.
Hi brings your name, yes, and if we are very excited about the release of J for curation actually that was part of the plan of extending over their pickups solution and shift even further laughs I've mentioned the.
Byers offered J fog duration.
Actually a combination of <unk>.
Office and the Seesaw office, the developers would like to have an automated way to enforce policies that are coming from diseases and by that to avoid having each of the catching some public herbs of.
Up to a binary is to get into the organization and to automate. This food process. So basically it's a partnership between <unk>.
And still this demand came from the Devops in the depths of Cups engineers.
Yet really up you security stakeholder, but a combination of both.
Got it thank you.
The next question comes from <unk>.
Hey, this is a Christian tarot on for Sanjay Congrats on the results and thanks for taking our questions I wanted to ask around the disparity between the slower I kind of wanted your K customer adds versus the.
1 million plus customer ads I think was your best at ourselves.
Square both of those will be it will be very helpful.
Yes, I will take this question. So our goal is to expand all customers and we see diversification of the customers.
Different segments, so specifically to expansion of million customers, what was happy to see that these customers actually diamond from industries that are kind of outside of our traditional Ah Ah strong segments technology and banking those came in from other industries and it just shows.
The devops in depth, the cops capabilities that we offer important.
Across multiple industries, we also see that our enterprise plus blood forming subscription continues to provide a lot of value you also derived that in absolute.
Number of into three we added less than Brian water. However, we see a lot of engagements over the last two Australian months, it's comparable to pry periods. So.
We really don't see any any change in the trans here, it's probably just the more like a timing issues.
Got it makes sense and then I also want to ask around can I have the optimizations that you're seeing around J fraud cloud sign from customers any kind of you know.
Barkley or you can get there and kind of where we are in terms of the timing and maybe what what can we are with that with those optimizations.
Yes, as we know that on our prepared remarks. So we continued to see expansion the curb usage Barack by our customers. Previously we noted that we started the year like Jenny.
January was very slow and steal subject optimizations them in March we did see the pick up in usage, which strength continues in April antibiotic water. So we we believe that those unusual headwinds optimization behind us we're going forward would do expect that.
Customers will continue to put emphasis on this issue and growth, but in terms of usage, we do our customers are using more power platform and therefore, we expect.
Revenues will continue to grow in mid forties or the year.
Thank you.
Next up is Kingsley K can accord.
Hi, Thanks for taking my question, so I'd like to ask you about.
Duration I think one of the most interesting aspects of it is.
Its focus surround developer velocity, obviously your platform appeals to all kinds of stakeholders, but I think in terms of an individual product. This is one of the more exciting ones for developers. So how do you think that will play out in terms of.
Encouraging adoption and then are you thinking this a little more drive up selling the premium bundles or gain more revenue, replacing all the card.
Yeah. So thank you Kingsley duration in terms of the adoption will increase the usage of J Fox security solutions, they're always sticks up to supply to insecurity comes.
As an option is an add on to the enterprise accent, the enterprise plus subscription.
And it's a as mentioned Ah by <unk> by year.
<unk> <unk> <unk> model. So we are expecting to see the expansion coming from <unk>.
The adoption of J for curation as well not only by the number of enterprise, perhaps an enterprise excuses, but also by the number of developers in the organization, India Enterpriser can use.
Okay. Thanks for me, that's really helpful. And then one on the financial so when I talk about in our our so I think that 120 per cent is a great number.
But if in our our as a trailing 12 months metric.
I think declining four percentage.
Percentage points and one quarter is significant so I think that would suggest that <unk> performance was well below so I guess.
Dot imply a reacceleration or a higher and are in the back half of it in order to reach 120 for the full year.
Yeah, So you're absolutely right <unk> another retention rates Ah declines for 4% from break water. This was actually in line with our expectations. If recall when we when we got it the year, we did expect <unk>.
To go down to around this levels currently with seeing civilization around this levels and expect to to finalize finished the year with and there are around this levels.
Okay fair enough very helpful. Thank you.
Grabbed me back from Stifel is that next.
Great. Thanks, very much take upon the cloud consumption.
July to look a lot like June or did it actually you continue to accelerate.
Bread I don't have the date of birth July I cannot comment during the months, we continue to see a strong performance, but I don't have final numbers would you like it.
Got it no problem and then just for me.
Last quarter, you talked about the global partner network and the momentum you were sitting there and I don't not sure if I missed it earlier in the prepared remarks, but any commentary answer the rest of the world would be great. Thanks.
Yes, that's a good point, our partners and alliances program continue to accelerate actually Uhm I mentioned swamp a power user confidence happening on September 13th.
The first time, we are also having a partner the day before to celebrate and to enable the over 100.
In the past year, we build the program with a side of that <unk> and co marketing notion of walking with all three clouds AWS <unk> is also accelerating through the marketplace. So we are very pleased to see it not only by.
Clouds girls, but also sell faster partners and not only <unk>, but also by region by geography, and not just the Devops, but also new security partners that are joined the portfolio.
Great. Thank you very much.
<unk> company has the next question.
Hey, guys. Thanks for getting me on here I, just wanted to cycle back to to Jacob's earlier comment around the N O. R. R. I figured we said we expect to finish the year around at this current level and really where I'm going with this he said I'd just like to see what what gives you the confidence to CJ Prague, finishing the year at these levels.
Is it based on maybe.
Tony conversations with customers that the renewal base that you have coming due just anything there would would really be incremental.
Yeah. So when we think about the Nether redemption forecasts first of all we're looking at the renewal with our customers and obviously talking to them and evaluate and their plans will also seen continue the consumption.
<unk> on sauce and commitments of our annual customers on sauce.
And finally, we're looking at the.
Overall economic environment in demand environments, and we see is the duration and and in that regard and that's what gives us the kind of analysis of the pipeline analysis of the opportunities that in front of us for the second half of the year that what gives us confidence <unk> will stay around this level.
Yeah.
Great and also and I appreciate the commentary around the the customers that are adopting advanced security as well I took a lot of us are excited about that offering.
Could you help us through how <unk>.
<unk> you go to market at for is driving awareness within your existing customer base to to drive adoption and I guess.
<unk>.
What has been some of the early findings from those customers, who are who have adopted at least you'd think about feedback and building up those cause customer testimonials.
To drive additional success around and being security.
This is Mike So just as you. We are also very excited about the results to remind the the public we announced J for advanced security.
Cool hybrid availability in the first quarter of this year and and to see so many of our customers are showing interest in some of them tens of them already paid.
Faithful additional subscription obviously this ah great news for us.
The the main thing that I will.
Go to market team is focusing on is to map. The renewal is that we have ahead of us and see who are the X ray customers that already uses J for pier, one security X Ray software composition analysis, and also them, obviously the capability <unk> security suite.
Offer and the second therefore goes to the market education, so attracting new customers. Some of them were mentioned in the in the call today that.
Coming to J frog, mainly because of the consolidation so the want to stop and see one softer supply chain does not only provide one capability to capability to secure your devops in depth <unk>, but also the repository the distribution process and everything around that so.
These are the main two catalyst for the adoption. The fact that is also available in the cloud and on Prime gives us obviously the freedom to operate in different deployments environment, So that the plus as well and the last thing is that.
Since we are very transparent with our roadmap. We are speaking about X Ray and J forget van security is available in the market in the in the last quarter, but now we added curation. So really what we see from our customers is a demand for a holistic.
One stop shop for the software supply insecurity that also includes future roadmap items that also help us to build a pipeline.
That's great to hear I I really appreciate the the commentary shlomi. Thank you very much guys.
Thank you.
Your next question <unk> <unk>.
Yeah. Thank you.
Jacob question for you I'm just trying to.
Figure out what's going on in queue for with your guidance.
Cause you're guided 220 26 to 28 for the full year.
So you're at if I my numbers are correct you're right.
Basically.
25 for the first three quarters based on your guidance for two three so.
That implies Q4 would have like you know three cents of earnings and and that would be the lowest of the year can you talk us through what's going on there.
So our actual results for the year for the for the first six months.
Or about the 17 seven.
And 17 cents.
Plus about 9829 cents. So it's about 24 so.
I think.
If you look at the parade and profitability.
We expect the <unk> to for to be comparable.
Slightly higher than in Q3, and I expect that the.
The E P S four Q for <unk>.
Probably gonna be in the same.
Same levels comparable to three so.
I hope that.
Doesn't work I mean, because if you say 27 cents since the mid point for the four year.
And you just said twenty-five sent through the first three quarters right and that would imply two cents.
For Q4, so so maybe there's something going on below the line in queue for but I get the operating income trans and it looks like that's continuing to be pretty healthy about Q4, EPS looks like it would be quite a bit below.
Whereas the rest of the year is done so we we we can move that offline. If you want but I just wanted a flag that.
Thank you for your note and I don't expect any outstanding items below the line and two four.
Okay Alright.
And then maybe for me I wanted to follow up on the last question just on the go to market shy for security.
I guess I guess, what are you guys learning about the go to market side for security and how that might be different.
For some of these packages that you are now offering for security that.
It's different than what you've had to do in the past in terms of go to market.
Yes, so regarding security what we see is that it's a bit different first of all when when it comes to Devops. There's bottom up mechanism is very popular usually it's being adopted by developers or perhaps engineers and scale up by the size of the P O.
To the city or the C. I O N and so on may be strategic decisions are being taken down.
Down like let's say migration to the cloud, but most of what we've seen in what part of what most of what we are billed was from the ground up insecurity. It's a it's a bit different the decision is first being taken by the security leaders.
And then apply in the different and the different groups of of the company.
What we also see.
And this is quite interesting we start to see a partnership between the C. I O in D. C. So when it comes to software supply chain security on one hand, the CIA Oh the V P R&D they want to be Super fast.
The security guys are trying to catch up with it so any kind of automation that applies into the software supply chain is obviously, helping those two breached.
So we usually meet more than one person over one P O. When it comes to security most of it would be top down and most of it most of these opportunities will take more than the average a quota or four month cycle to complete.
Great and that is the budget I use.
Usually the city or the sea so has its own budget.
Pool versus the C.
C I O and and the developer teams. So is that is that creating friction with because you have to actually tap.
Tap into two different budget pools.
So the strategy. We chose is it is a strategy of consolidating all the security solution.
Into not all of them, but the majority of the security solutions from the gate scanning to the binary scanning to the distribution to consolidated with the capabilities like secret detection like a software composition analysis, we discussed in the call the displacement of snake.
The the placements of cyanotype those were displaced by consolidation to a platform usually when when this is happening there is a budget already marked by the seashore and it's been compared to a security too. They already have if there is a new capability like J for curation obviously.
It will be discussed.
To start with the C. I O and then they would probably bring the security stakeholders.
Okay. So just to clarify that's very helpful. So just to clarify the the the security tools that are sold into the devops tool chain or those.
Part of what kind of budget are those part of the sea so budget.
Or is that just depends on the company.
Exactly it's depends on the company and the enterprise most of what we sow over 80% of the policy is that that we deal with a combination of a discussion with both the seesaw face in this area.
And we were also very pleased to see that in some organization big one, including leading financial institutes.
Retail <unk> in the sea so officers were already merge into one.
Okay, great. Thanks, very much good luck. Thank you.
Your next question is cozy I can't think of America.
Hey, guys. Thanks for taking the questions a couple from me.
Just kind of gone back to curation, you mentioned earlier accuracy base model. So so how do you think about the Tan for curation is it all the developers out there security folks ops folks I mean is it all of them you know how do you think about the Tan and then the second part of the question on curation is because it's C pace.
Where's it going to show up and the revenue recognition is is it going to be in.
Subscription self managed to start and eventually break it out just trying to understand where it will fit so we could begin to understand words contributing to growth.
[noise], Yeah, Squashy high and I'll I'll take the first part of the question then Jacob can elaborate more about where it will be recognized.
The time of J punctuation is very much a line with with with them off sick ops market.
Actually we are after the opportunity to cover all the developers from outside the organization. So the reason that there is an alignment between the value and the way we price. It is that it goes by the number of developers that consumes software packages from outside the organization. So let.
Say that you go to a public repository and you want your software supply chain to be to wait it from the get go it will be multiplied by the number of developers data consuming. This this service and obviously with a combination of Poppy factory and J poke advanced security that sits on top of the factory and.
Securely all sorts of supply chain from inside the organization. There is an alignment between the mother's so it's basically all organizations are now using Oh based on researchers 90 per cent of the software that is being made in the world is coming from from open source initiatives.
Uhm Uhm software that is being cashed from outside the organization and therefore, it's relevant to all the organizations by the number of developers and so on so we are looking at the same time. The second thing. So it's the same damn with a bigger market share the second thing.
That is.
Obviously, the fact that.
The competition.
With this solution is completely different than the depths of golf's market that is very fragmented there are not so many situations solution out there that are putting a fence between the organization and the public up and preventing you from bringing the logs for J. The next up for.
From from the get go so it's not just the time. It is also what is the size of the market share that we can grab by having this solution embedded to our platform.
And with regards to the sleep between the <unk> <unk> since it's an add on to existing subscription. So it will be dependent on the main subscription to the customer subscribed for if it's a if it's.
Self management will be reports of malice, if it's <unk>.
By state in both cases it Sir.
Got it now that that's super helpful and then.
One follow up here, if I may want wanted to ask about the million dollar customers in 100, K plus customers. You added 3 million dollar are our customers, which is the most I think you've ever added and a quarter sequentially. So congratulations there, but the hunter K, maybe a little bit light versus recent quarters. So just trying to understand that dynamic between the 1 million.
And 100 K.
Yeah. So cause you when when we are looking at it obviously, we are very pleased not only because of the size of the appeal, but also the subscription that these guys are upgrading to in the amount of.
Capabilities from the J for platform that they are actually using while we are monitoring it in the last six quarters. We added at least 1 million dollar customers to this group, which also demonstrate an adoption or going adoption.
Platform regarding the over $100000 customers.
813, I'm looking at it if I may in a in a.
Different perspective to add over 150 customers to this group in the in the last you during the recession with all the new technologies that are coming in all the changes that we've seen the market I actually I'm pleased with the with the goal and I'm expecting it.
To go even even higher than that.
When I'm looking at the at the pipeline and hoping to see the changes in the market.
Got it. Thanks, so much guys. Thanks, so much for taking the questions.
Your next question is Michael <unk>, keeping capital market.
Hey, Jacob good job <unk>, you said that your.
Optimization is largely behind you.
Can get Microsoft and some others I've talked about there being several quarters still to go on optimization. So can you maybe describe what might be different in terms of your cycle randomization with some of the Hyperscalers and.
This could be.
Overlapping question.
What's going on in terms of.
New projects and what are the <unk>.
Two down.
Software development projects.
Michael I will take this question I think big Hyperscalers provides multiple different.
Types of different workloads, and it's hard for me to comment what kind of work was impacted by optimization, what what's not what we see is that the devops needs to be can you spell infrastructure and we see that in terms of data transfer of storage.
Continued to see growth sequentially.
Sequentially.
In on our systems. So three maybe the difference between what we see in in what Hyperscaler C is that the fact that they provide garages with different workloads, maybe that's what the impacts they're kind of picture.
Mmm.
So just qualitatively then why why does it makes sense Europeanization would have troughed if he wants her to rebound earlier than theirs.
Then again I'm just gonna ask you to comment on.
Their business, but that's a broad business, where you are seeing it seems like an earlier read that.
Yeah.
<unk> previously discussed remonetize or sauce departments by data processing and storage and storage more low hanging fruit, which we did see dose optimization. Therefore, it's accelerated about in Q3 and Q4 last year those were kind of more shorter time.
Two two <unk>.
Optimization data transfer optimization, typically more longer kind of airports required sometime it doesn't even make sense to for customers to focus on that because it requires significant engineering effort. So what we what we believe is that customers will continue.
Used to monitor their users they will continue to strive to grow efficiently.
But the the initial impact of optimizations will do it behind Mike.
<unk> I'll add to it it's showing me here.
There is just much that you can dry out your infrastructure as of walls with everything that comes in.
Security automation software supply chain is getting enraged and also need to deal with the AI as we mentioned some of our customers already started to use I will infrastructure is the infrastructure for a.
This can be optimized up to a limit and is Jacob mentioned not necessarily can be compared to the to the big cloud companies and we hit our customers telling us some of them are also on the pending mode waiting for budget to be released so so they.
We'll be able to migrate to the cloud and go even faster.
Great. Thanks very much.
[noise] next step is Jonathan <unk> Cantor Fitzgerald.
Yeah, you guys Uhm. Thank you for getting me again, so uhm.
Get have recently claimed that approximately 46 per cent of this customer's code is already written by a co pilot.
They actually you said expect that to go to 80 per cent sooner.
Later, it a lot.
<unk> the co pilot is accelerating customer growth and is making get get have more competitive around managing get repository now to your comments earlier.
It seems fairly obvious that L L.
Dry increasing market need for artifacts management broadly, but how do you see the competitive impact cleaned out to L. L y.
What is your strategy there.
Okay.
Yeah, well, that's a great question and as you know there are a lot of discussions around the eye and the regulations are on the eye and the panic around the eye and the potential of <unk>, but let's kind of take it to to the level that everybody understand more code whether it's made.
My co pilot all by developers.
Create small binaries and more binaries create more opportunities for J Prague, because we are the the standup makers into binary storage of the organizations today not only that the most exciting thing about managing AI mothers and MLR ups mothers.
Is the fact that they are yet another form of binary so whether you handle it all you build it inside the organization or you bring it from outside your organization.
Factory can be the only tools that support you unless you just want to dump it on on on a regular file server.
Last thing that I would say is that this.
<unk> that you mentioned that are using co pilot to build a I basically python developers.
Data scientists that are using packages like <unk> all three of them are already natively supported in the factory so for them.
Just a familiar place that they are going to to fetch the model and not just not just the AI model, but also the model that are coming with the eye to train the machine. So we see big opportunities around that as we mentioned in our call we all.
Looking forward to share with the with the industry, what we build natively to support this demand and as it goes back to the previous question infrastructure optimization will get to a limit that you know from that point on it will get back to what we used to see in the previous year.
Okay. So I think what you're saying call me is you know the opportunity is really around the the ability of uhm artifact I need to support all these AI models, which are just another form of Ah binaries and that that that is broad with the opportunity for for <unk>.
At the factory is is almost Ah Ah Ah default solution. So that you know when when I asked <unk> about it. That's the question I got so that's the most authentic way for me to validate that and the other thing is X Ray because you don't just.
Want to have a dummy storage you also want to have the right to to enforce the policy before you bring any type of small bills from public repositories of AI. So you want to like X Ray that would say that if this model is coming with the wrong licenses.
It cannot get into the organization and thus.
Beck Joseph to supply chain, you need those like duration to block it from from the get go so the proxy will not be subject to any type of malicious code Oh.
Oh open source license violations, so the solution of Jay Paul.
Is set to grab the fruits of this opportunity.
Yeah, Okay very helpful. Thank you.
Next step is Rob Allen's paper Sandler.
Great. Thanks for taking my question and want to drill down a little bit again into the cloud optimization being behind you and I don't know if you've ever broken out for us the difference in gross retention rates between self hosted in subscriptions and or.
Is there something in those trends that May show you that a lot of the optimizations behind you at this point either from a gross or net retention perspective, because I guess that might play into some of those questions around net retention for the back half of the year.
Yes, we the only.
Information of Black color that will provide this on the difference between the sauce on the <unk> and and self goes with is lower than corporate.
Again, we believe that the storage optimization is kind of low hanging fruit and those who wanted to do that most likely to have done that.
We start with your first optimization efforts, but four quarters ago.
And and that sufficient time for for customers to look at their storage environments and make necessary steps.
For for the data transfer optimization.
It's <unk> gonna be ongoing ongoing efforts and that's what we said that the first first wave of the optimization is behind us and going forward will be just seeing more efficient growth of our of our customers.
Alright, Thank you very much.
There are no further questions at this time I'll turn the call back touched on me for closing remarks.
Thank you all for joining us some this quarter earnings call and thank you for your questions. We're looking forward to keep executing and delivering more news from the swamp joined us at Swamp up September 13, and San Jose and by then made a frog be with you.
Thank you.
This concludes today's call. Thank you for attending you may now disconnect.
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