Q4 2023 JFrog Ltd Earnings Call

Operator: Ladies and gentlemen, thank you for joining us and welcome to JFrog's fourth quarter and fiscal 2023 financial results conference. I'll hand the conference over today to Jeffrey Schreiner, VP, Investor Relations. Jeffrey, please go ahead.

Ladies and gentlemen, thank you for joining us and welcome to J Bronx fourth quarter and fiscal 2023 financial results Conference call I'll hand, the conference over to day to Jeffery Schreiner.

D P Investor Relations Jeffrey Please go ahead.

Jeffrey Schreiner: Good afternoon, and thank you for joining us as we review JFrog's fourth quarter and full year fiscal 2023 financial results, which were announced following the market close today via press release. Leading the call today will be JFrog's CEO and co-founder, Shlomi Benhaim, and Ed Grabscheid, JFrog's CFO. During this call, we may make statements related to our business that are forward-looking under 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 2024. 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.

Good afternoon, and thank you for joining us as we review <unk> fourth quarter and full year fiscal 2023 financial results, which were announced following the market close today via press release, leading the call today will be Jay Brown, the CEO and co founder.

Shlomi behind and Ed grabbed shot <unk> CFO.

During this call we may make statements related to our business that are forward looking under 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 2024.

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.

Jeffrey Schreiner: 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.

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, and our most recent report on form.

Jeffrey Schreiner: For 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, 2022, and our most recent report on Form 10-Q, which is available in 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 31, 2023, to be filed with the SEC on February 15, 2024, 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.

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 31, 2023 to be filed with the SEC on February 15, 2024, 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 <unk> 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 a reconciliation of though.

Jeffrey Schreiner: Please refer to the tables in our earnings release for reconciliation of those measures to their most directly comparable GAAP financial benchmark. 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's CEO, Shlomi Van Heijn.

These measures to their most directly comparable GAAP financial measures.

Replay of this call will be available on the <unk> Investor Relations website for a limited time.

With that I'd like to turn the call over to <unk>, CEO shlomi bit Hi, Shlomi.

Shlomi Benhaim: Thank you, Jeff. Good afternoon to you all. And thank you for joining the call. I'm proud to report that JFrog closed fiscal year 2023 on a strong note with quarterly and annual results that exceeded our guidance. Despite macroeconomic and geopolitical headwinds, JFrog delivered on its commitments to the market, driving consistent revenue goals and profitability. We are committed to meeting extending market demand through a unified platform that integrates DevOps, security, and MLOps across the entire software supply chain, extending to the edge device, once again, both this quarter and throughout the entire year. This is evident in the significant adoption of our platform by enterprises, which will also be discussed in today's call. In fiscal year 2023, JFrog delivered total revenue of $349.9 million, up 25% year-over-year. JFrog's fourth-quarter revenue was $97.3 million, reflecting 27% year-over-year growth with a gross margin of 84.6% and $32 million in free cash.

Thank you Jeff Good afternoon to you all and thank you for joining the call.

I'm proud to report that <unk> closed fiscal year 2023 on a strong note.

With quarterly and annual results that exceeded our guidance, despite macroeconomic and geopolitical headwinds <unk> delivered on our commitments to the market driving consistent revenue growth and profitability.

Our commitment to meeting expanding market demand for our unified platform that integrates devil security and envelopes across the entire software supply chain extending to the edge device. Once again, both for this quarter and throughout the entire year.

This is evident in the significant adoption of our platform by the enterprise, which would also be discussed in today's call.

In fiscal year 2023, <unk> delivered total revenue of $349 9 million.

Up 25% year over year.

<unk> fourth quarter revenue was $97 3 million reflecting.

Reflecting 27% year over year ago, with a gross margin of 84, 6% and $32 million and free cash flow.

Shlomi Benhaim: Our cloud revenue continues to show momentum in Q4, equalling $36 million, a growth of 59% year-over-year. This growth was primarily driven by our cloud-first and multi-cloud strategy, which powers growth in cloud platform subscriptions, as well as increases in consumption. In Q4, JFrog customers with ARR greater than $100,000 grew to 886 compared to 736 in the prior year, increasing 20% year-over-year.

Our cloud revenue continues to show momentum in Q4, equaling $36 million a growth of 59%.

This growth was primarily driven by our cloud first and multi cloud strategy, which followed the growth in cloud platform subscription as well as increases in consumption.

In Q4, <unk> customers with <unk> greater than $100000.

Good to 886 compared to 736 in the prior year, increasing 20% year over year.

Shlomi Benhaim: Customers with AR greater than $1 million increased to 37, up from 19 in the year-ago period, growing 95% year-over-year, which we attribute to our strategic investment in the enterprise, top-down, go-to-market approach. Now, I will address some of the market themes we are observing and standouts set by JFrog. Developers and machines on the left, as well as production owners and hackers on the right, continue to be laser-focused on the binary as a key asset being utilized throughout the software supply chain. We believe that DevOps, DevSecOps, MLOps, and MLSecOps will continue to converge into a single system of record for the enterprise. The most important asset, binary, is at the core of every software supply chain and will need to be effectively secured and managed by every organization. As we observe in the market, a fast and trusted software supply chain flow with embedded security is a flow of binary.

Customers with <unk> greater than $1 million increased to 37 up from <unk> 19 in the year ago period, growing 95% year over year, which we attribute to our strategic investments in the enterprise dumbed down go to market approach.

Now I will address some of the market teams, we are observing and standout sets by Jay for them.

Developers and machines on the lift as well as production owners and hackers underwrite.

<unk> to be laser focused on the binary as the key asset being utilized throughout the software supply chain.

We believe the Dev ops Dev ops envelopes and <unk> will continue to converge into a single system of record for the enterprise.

The most important asset binaries.

Is that the core of every software supply chain and will need to be effectively secure and managed by every organization.

As we observed in the market at fast entrusted software supply chain flow with embedded security is a flow of binaries.

Shlomi Benhaim: This trend drove some of our customers' top priorities in Q4, as well as emerging opportunities in our market. On today's call, I will discuss cloud consumption and cloud migrations. Next, I will cover enterprise demands for modern, holistic security solutions. Then, I will cover the trend of point solution tooling consolidation around the JFrog software supply chain platform.

These trends drove some of our customers' top priorities in Q4 as well as the emerging opportunities in our markets.

On today's call I will discuss cloud consumption and cloud migrations next I will cover the enterprise demand for modern holistic security solutions.

Then the trend of point solution tooling consolidation around the <unk> software supply chain platform and finally discuss the emerging opportunities for AI and ml tooling.

Shlomi Benhaim: And finally, discuss the emerging opportunities for AI and ML tooling. First, I will address our cloud business. Early in 2023, due to macroeconomic changes and cost optimization efforts by our customers, some cloud initiatives were delayed. However, slowly into the year, we saw an improvement in the frequency of on-prem to cloud migration projects being restarted alongside extending consumption in the second half of the year, as we shared in previous calls. These are all themes of platform consolidation and modern security tool adoption together with DevOps capabilities in the cloud becoming the standard. Late in Q3, JFrog closed a large-scale deal with AT&T to become the single source of record for secure binary management and delivery, including our advanced security offerings. Walking hand-in-hand with AT&T's leadership teams, JFrog was chosen as a strategic partner to consolidate software supply chain tools on a single platform in the cloud.

First I will address our cloud business early in 2023 due to the macroeconomic changes and cost optimization efforts by our customers. Some cloud initiatives were delayed slowly into the year. We saw an improvement in the frequency of on Prem to cloud migration projects being restarted.

Alongside expanding consumption in the second half of the year as we shared in previous calls.

So themes of platform consolidation and modern security tool adoption together with Dev ops capabilities in the cloud becoming the sandbox.

Late in Q3, <unk> closed a large scale deal with AT&T to become the single source of record for secure binary management and delivery, including with our advanced security offerings.

Walking hand in hand, with At&t's leadership teams J, Paul was chosen as a strategic partner to consolidate software supply chain tools with a single platform in the cloud.

Shlomi Benhaim: AT&T's General Manager and Vice President of R&D, Renat Wilderstein, noted, quote, "With tens of thousands of developers building applications across our business, we need a single system of freckles to allow us to shift left effectively, as well as take advantage of all the benefits the cloud has to offer a modern business." We are proud to be working with JFrog as we move towards a consolidated, scalable infrastructure to build the next generation of applications to serve hundreds of millions of our customers. End quote.

AT&T is general manager and Vice President of R&D not build those time noted quote with.

With tens of thousands of developers building applications across our business, we need the single system of record to allow us to shift left effectively as well as take advantage of all of the benefits cloud has to offer a modern business.

We are proud to be working with <unk> as we move towards a consolidated scalable infrastructure to build the next generation of applications to serve hundreds of millions of our customers end quote.

Shlomi Benhaim: Platform and cloud priorities are not unique to AT&T. Recent public CIO surveys have validated that 2024 Cloud Spencer application development, DevOps, security, and machine learning are anticipated to see improving growth trends relative to the slower environment seen in 2023. JFrog is positioned to answer this exact demand, not only in a hybrid but also in a multi-cloud, robust environment.

Platform and cloud priorities are not unique to AT&T.

Public CIO surveys have validated that 2020 for cloud spend through application development Dev ops security and machine learning are anticipated to see improving growth trends relative to the slower environment seen in 2023.

<unk> is positioned to answer this exact demand not only in a hybrid but also in a multi cloud robust environment.

Shlomi Benhaim: Second, we see continued interest in holistic DevSecOps solutions as part of our platform. JFrog is partnering with enterprises across the globe to improve software development and consolidate DevSecOps solutions, including in highly regulated or compliance-driven environments like public service. IVU Traffic Technologies, a leading provider of civil engineering IT systems in Germany, recently chose JFrog to instill trust and efficiency in their software development and application security efforts. IVU has spent the last 45 years partnering with local governments to build IT systems that ensure efficient and environmentally friendly public transport.

Second we see continued interest in holistic best pickup solution as part of our platform.

J, Paul is partnering with enterprises across the globe to improve software development and consolidated desktop solutions, including in highly regulated or compliance driven environments like public service.

I view traffic technologies, a leading provider of civil engineering system in Germany recently chose <unk> to instill trust and efficiency in the software development and application security efforts I.

<unk> has spent the last 45 years partnering with local governments to build systems that ensure efficient and environmentally friendly public hospitals.

Shlomi Benhaim: To ensure top-notch service and smooth transportation for city residents, IVU partnered with JFrog to meet their holistic security needs, including investments in JFrog curation, code scanning, also known as SAS, and the prioritization of CVEs with contextual analysis for their development. IVU chose JFrog curation and JFrog advanced security to consolidate DevSecOps capabilities using one platform with a single source of record at its base In another example, we were excited to bring on board Israel's leading health care provider, Clalit. With over 5 million subscribers and a workforce of 50,000 employees, Khalid stands as one of the largest HMOs in the world.

To ensure top notch service and.

Smart transportation for city residents I view partnered with <unk> to meet the holistic security needs, including investments and Jay for curation CT scanning also known as SaaS.

And the prioritization of Cvs with contextual analysis, although developers Ivy.

I view chose Jay for curation and Jay for advanced security to consolidate Dev ops capabilities using one platform with a single source of record that in space.

In another example, we were excited to bring on board, Israel's leading health care provider clearly.

Over 5 million subscribers and the work force of 50000 employees.

<unk> stands as one of the largest hmos in the world.

Shlomi Benhaim: In the fourth quarter of 2023, Clalit, an active user of Artifactory and X-Ray, approached JFrog with a request to migrate from SNIC and incorporate JFrog Advanced Security into their system. This strategic move aims to streamline their solutions and enhance capabilities, especially in DevSecOps areas like code scanning within the JFrog software supply chain platform. Clalit Security Project Manager, Roy-Ear Aroni said, "Integrating additional security features within a single reliable source of tools like Artifactory aligns with our strategy to centralize our operations on one software supply chain platform, leading to cost savings and improved scalability and development efficiency."

In the fourth quarter of 2023, clearly an active user of power. The factory next week approached <unk> with a request to migrate from snake and incorporate <unk> advanced security into the system.

This strategic move aimed to streamline their solution and enhanced capabilities, especially in depths of golf's areas like code scanning within the <unk> software supply chain platform.

Clearly at acuity product manager or you only said quote integrating additional security features within a single reliable source of those like Aldi factory aligns with our strategy to centralize our operations on one software supply chain platform, leading to cost savings and <unk>.

<unk> scalability and development efficiency the <unk>.

Shlomi Benhaim: The JFrog platform, with Artifactory at its core, that seamlessly integrates with JFrog Advanced Security, effectively fulfills these objectives, end quote. CIOs and CISOs are seeking to streamline the complexity caused by numerous tools and point solutions, which not only duplicate each other's functions but also fail to provide end-to-end visibility across the software supply. Our customers tell us that those tools must integrate with their binary repositories like JFrog Artifactory to safeguard and effectively trace their binaries.

<unk> platform without the factory at its goal that seamlessly integrates with <unk> advanced security effectively fulfill these objectives and quote.

<unk> and <unk> are seeking to streamline the complexity caused by numerous tools and point solutions, which not only duplicate each other's sanctions, but also failed to provide end to end visibility across the software supply chain.

Our customers tell us that those tools must integrate with a binary repository like J forgot the factory to safeguard and effectively trades the binaries.

Shlomi Benhaim: We believe the trend of security tool consolidation in a single platform will continue, with JFrog uniquely providing an end-to-end solution covering from a developer's environment to production, creating a holistic DevSecOps solution. Third, I want to address growth in the enterprise adoption of the JFrog platform. The move toward a unified universal platform for the enterprise is not only a technology or tool initiative but also a change we see in how companies are being structured to streamline digital deliveries. We see roles like CIOs and CISOs becoming one, and cloud migration projects targeting multiple aspects, like tooling consolidations to achieve speed and trust throughout the software flow. One example of a visionary company is Vimeo, a leading video platform provider boasting 300 million global users.

We believe the trend of security tool consolidation in a single platform will continue with.

<unk> uniquely providing an end to end solution covering format developers environment to production, creating a holistic <unk>.

Third I want to address growth in the enterprise adoption of the <unk> platform.

The move toward a unified universal platform for the enterprise is not only a technology or total initiative, but also a change we see in how companies are being structured to streamline digital deliveries receivables like <unk> and <unk> is becoming one and cloud migration projects targeting multiple.

Assets like tooling consolidations to achieve speed and trust throughout the software flow.

One example of a visionary companies Vimeo, a leading video platform provider bolstering 300 million global users.

Shlomi Benhaim: As part of their digital transformation initiatives, Vimeo recently took a step forward in their journey, moving from a self-hosted, artifactory-only subscription to an enterprise-level cloud subscription. This upgrade positions Vimeo to effectively scale their DevOps and DevSecOps initiatives across their global teams on a single platform, ensuring the secure and timely delivery of updates to cater to their vast customer base. Mark Alter, the Chief Information Security Officer of Vimeo, emphasized their commitment to providing top-notch digital experiences to their users while prioritizing the highest levels of security in their software development pipelines.

As part of their digital transformation initiatives video recently took a step forward in their journey moving from a self hosted at the factory only subscription to an enterprise level cloud subscription.

This upgrade positions vimeo to effectively scale their dev ops and desktops initiatives across the global teams in a single platform, ensuring the secure and timely delivery of updates to cater to the vast customer base.

Mark also the Chief information Security officer of Vimeo emphasized our commitment to providing top notch digital experiences to their users while prioritizing the highest level of security in the software development pipeline.

Stated quote that Jacob platforms cloud offering empowers businesses like vimeo to rapidly expand reduced maintenance overhead and offload management costs. It meets the evolving needs of our growing audience <unk> software supply chain platform infuses confidence by serving as a single.

Shlomi Benhaim: He stated, quote, "The JFrog platform's cloud offering empowers businesses like Vimeo to rapidly expand, reduce maintenance overhead, and offload management costs. It meets the evolving needs of our growing audience." JFrog's software supply chain platform infuses confidence by serving as a single source of record without the factory at the center and providing visibility across Vimeo's DevSecOps workflow, end quote. Our portfolio contains thousands of companies like Vimeo that started with artifactory only.

Source of record without the factory at the center and providing visibility across vimeo depths hiccups workflow.

And quote.

Our portfolio contains thousands of companies like V-mail that started with our factory only they'll story gives us confidence that the adoption of an end to end software supply chain platform is not an option for the enterprise, but an imperative to support modern business needs. We look forward to assisting this portfolio of companies.

As they are maturing needs drive them towards the cloud and higher value subscriptions.

Now I want to address opportunities in MLR and Emily checkups within the <unk> platform.

Shlomi Benhaim: Their story gives us confidence that the adoption of an end-to-end software supply chain platform is not an option for the enterprise but an imperative to support modern business needs. We look forward to assisting these portfolio companies as their maturing needs drive them forward to the cloud and higher value subscriptions. Now, I want to address opportunities in MLOps and MLSecOps within the JFrog platform. As we continue to observe the rapid adoption of AI and ML technologies across the market, many of the same enterprise software pains remind us of the early days of open source. As developers are running quickly in a machine learning and AI gold rush, companies are telling us that they have similar fears from 20 years ago. What's in that artifact?

As we continue to observe the rapid adoption of AI and ml technologies across the market. Many of the same enterprise software pain remind us of the early days of all consoles.

As developers are running quickly in our machine learning and AI gold rush companies are telling us that they have similar fields from 20 years ago.

What's in that artifact how does it comply with business policies, how do we track, which model is being viewed how do we know who bought the model into the organization and more.

We believe the ml ops market is in the very early days and as it matures J, Paul is well positioned to deliver unique value that addresses this familiar pain focusing on the main MLR asset yet another binary.

Caching verging costing stowing training, securing and mall outperformed on ml models companies that blindly adopt AI technology without this binary discipline will be challenged to keep up with innovation, while possibly exposing themselves to a higher risk.

Shlomi Benhaim: How does it comply with business policies? How do we track which model is being used? How do we know who brought the model into the organization? And more. We believe the MLOps market is in the very early days, and as it matures, JFrog is well-positioned to deliver unique value that addresses these familiar pains, focusing on the main ML asset, yet another binary. Caching, versioning, hosting, storing, training, securing, and more are all performed on ML models.

And complexity at scale.

As an example, following our support for the caching malicious model scanning and license compliance features for the popular ml model repository hugging space, We recently announced a partnership with AWS to integrate the <unk> platform with a ml development and deployment solutions page me.

Shlomi Benhaim: Companies that blindly adopt AI technology without this binary discipline will be challenged to keep up with innovation while possibly exposing themselves to higher risk and complexity at scale. As an example, following our support for the caching, malicious model scanning, and license compliance features for the popular ML model repository, Hugging Face, we recently announced a partnership with AWS to integrate the JFrog platform with an ML development and deployment solution, SageMate. Our customers ask JFrog and AWS to meet two critical requirements: integrate a leading tool for building and training models from AWS and the ability to host, manage, and secure those models as part of the software supply chain flow through JFrog.

<unk>.

Our customers ask J probe and AWS to meet two critical requirements integrate a leading tool for building and training models from AWS and the ability to Horst manage and secure those models as part of the software supply chain flow Fujifilm.

We remain in the early stages of standup building around AI and ml technology and look forward to driving further Jacob platform extension into the MLR ops area.

Finally, I would like to add a few words about the enterprise go to market changes we have successfully applied.

Shlomi Benhaim: We remain in the early stages of standard building around AI and ML technologies and look forward to driving further JFrog platform extension into the MLOps area. Finally, I would like to add a few words about the enterprise go-to-market changes we have successfully applied. AT&T, Vimeo, IVU Technologies, and Clalit are all demonstrating what we have shared as our go-to-market strategy over the past few years. JFrog has not only built and expanded our technology offerings but also moved from inbound bottom-up sales processes to enterprise top-down motion. We best serve the enterprise, and we strive to build value around enterprise things. Therefore, our team is focusing in 2023 on extending our customer portfolio with companies that meet this profile and lend with a higher ASP and a higher propensity to expand faster.

AT&T Vimeo I view technology as <unk> are all demonstrating what we have shared is our go to market strategy over the past few years.

J P will not only build and expanded our technology offerings, but also moves from inbound bottom up sales processes to enterprise stopped down motion.

We best serve the enterprise and we strive to build value around enterprise things. Therefore, our team was focused in 2023 on extending our customer portfolio with companies that meet this profile and lens with a higher ASP.

And a higher propensity to expand faster.

With this approach in mind and physical 2023, we were pleased to extend our customer count to approximately 7400 versus 7200 in the prior year.

With that I will turn the call over to our CFO, Ed <unk>, who will provide an in depth recap of Q4 financial results and update you on our outlook for both Q1 and fiscal year 2020 for Ed.

Shlomi Benhaim: With this approach in mind, in fiscal 2023, we were pleased to extend our customer count to approximately 7,400 versus 7,200 in the prior year. With that, I will turn the call over to our CFO, Ed Grubscheid, who will provide an in-depth recap of Q4 financial results and update you on our outlook for both Q1 and fiscal year 2024. Thank you, Shlomi, and good afternoon, everyone.

Thank you Shlomi and good afternoon, everyone. During the fourth quarter of 2023 total revenues were $97 3 million.

Up 27% year over year.

For the full fiscal year 2023 revenues were $349 9 million up 25% year over year.

As noted by Shlomi, we saw continued reacceleration in cloud customer usage during the fourth quarter with.

With revenues equaling $36 million.

About 59% year over year, and representing 37% of total revenues versus 30% in the prior year.

Ed Grabscheid: During the fourth quarter of 2023, total revenues were $97.3 million, up 27% year over year. For the full fiscal year 2023, revenues were $349.9 million, up 25% year over year. As noted by Shlomi, we saw continued re-acceleration in cloud customer usage during the fourth quarter, with revenues equaling $36 million, up 59% year-over-year, and representing 37% of total revenues versus 30% in the prior year. For fiscal year 2023, our cloud revenues equaled $119.3 million, up 50% year-over-year, and equaled 34% of total revenues versus 28% in the prior year. During the fourth quarter, we saw six points of one-time growth year over year, or roughly $1.5 million in our cloud revenue. The majority of one-time contributions came from higher-than-typical revenue true-ups.

For fiscal year 2023, our cloud revenues equaled $119 3 million up 50% year over year and equaled 34% of total revenues versus 28% in the prior year.

During the fourth quarter, we saw six points of one time growth year over year or roughly $1 $5 million within our cloud revenues.

The majority of onetime contributions came from higher than typical revenue true ups.

The growth above our guidance of a rate in the mid <unk> for our cloud business in 2023 is driven by increasing customer usage trends and strong growth within our greater than $1 million customer cohort.

Self managed revenues are on Prem were $61 3 million.

Up 14% year over year during the fourth quarter.

For the full year 2023, self managed revenues increased 15% compared to the prior year.

We expect the trend of slower expansion within our self hosted business to continue through 2024, as more new customers land and expand and our cloud solutions.

Net dollar retention for the four trailing quarters has stabilized is projected at 119% a decline of nine points year over year due to macro headwinds and slower cloud migration trends.

Ed Grabscheid: The growth above our guidance of a rate in the mid 40s for our cloud business in 2023 is driven by increasing customer usage trends and strong growth within our greater than $1 million customer cohort. Self-managed revenues, or on-prem, were $61.3 million, up 14% year-over-year during the fourth quarter. For the full year 2023, self-managed revenues increased 15% compared to the prior year.

Our gross retention rate remained at 97%.

During 2023, we saw another year of strong customer adoption of the complete <unk> platform driven by customers looking to consolidate and secure their software supply chain.

In Q4, 49% of total revenues came from enterprise plus subscriptions.

Up from 43% in Q4 2022.

Ed Grabscheid: We expect the trend of slower expansion within our self-hosted business to continue through 2024 as more new customers land and expand in our cloud solution. Net dollar retention for the four trailing quarters has stabilized as projected at 119%, a decline of nine points year over year due to macro headwinds and slower cloud migration. Our gross retention rate remained at 97%.

Driven by the strong execution of our top down go to market strategy and platform consolidation revenue contribution from E plus subscriptions grew 50% year over year in 2023.

Now I'll review the income statement in more detail.

Gross profit in the quarter was $82 3 million, representing a gross margin of 84, 6% compared to 83, 7% in the year ago period.

Ed Grabscheid: During 2023, we saw another year of strong customer adoption of the complete JFrog platform, driven by customers looking to consolidate and secure their software supply chain. In Q4, 49% of total revenues came from Enterprise Plus subscriptions, up from 43% in Q4 2022. Driven by the strong execution of our top-down go-to-market strategy and platform consolidation, revenue contribution from E-Plus subscriptions grew 50% year-over-year in 2023. Now, I'll review the income statement in more detail. Gross profit in the quarter was $82.3 million, representing a gross margin of 84.6% compared to 83.7% in the year-ago period.

The increase in gross margin relative to the year ago period is attributable in part to optimization within our cloud hosting costs.

And ongoing cost discipline efforts.

We expect annual gross margins will remain between 83 and 84% in the near future and then trend towards the low eighty's aligned with our long term model as cloud revenues become a greater portion of our total revenue.

Yes.

Operating expenses for the fourth quarter were $66 1 million up.

At $3 $9 million sequentially.

Equaling, 68% of revenues up from $62 5 million or <unk>, 82% of revenues in the year ago period.

We continue to remain focused on expense discipline, while investing in scaling our enterprise sales team and channel partner ecosystem.

Ed Grabscheid: The increase in gross margin relative to the year-ago period is attributable in part to optimization within our cloud hosting costs and an ongoing cost discipline effort. We expect annual gross margins to remain between 83% and 84% in the near future and then trend towards the low 80s aligned with our long-term model as cloud revenues become a greater portion of our total revenue. Operating expenses for the fourth quarter were $66.1 million, up $3.9 million sequentially, equaling 68% of revenue, up from $62.5 million, or 82% of revenues in the year-ago period.

Our operating profit in Q4 was $16 2 million or.

Or 16, 6% operating margin compared to an operating profit of $1 6 million or two 1% operating margin in the year ago period.

A 14, 5% improvement in operating margin.

In 2023, we delivered another year of non-GAAP net income profitability with earnings per share of <unk> 51.

Based on approximately 109 million weighted average diluted shares compared to <unk> <unk> per share in the prior year and 105 million weighted average diluted shares.

Ed Grabscheid: We continue to remain focused on expense discipline while investing in scaling our enterprise sales team and channel partner ecosystem. Our operating profit in Q4 was $16.2 million, or 16.6% operating margin, compared to an operating profit of $1.6 million, or 2.1% operating margin in the year-ago period. A 14.5% improvement in operating margin. In 2023, we delivered another year of non-gap net income profitability with earnings per share of $0.51 based on approximately 109 million weighted average diluted shares compared to $0.04 per share in the prior year and 105 million weighted average diluted shares. Turning to the balance sheet and cash flow, we ended the year with $545 million in cash and short-term investments, up from $443.2 million as of December 31st, 2022. Cash flow from operations was $32.6 million in the quarter.

Turning to the balance sheet and cash flow, we ended the year with $545 million in cash and short term investments.

From $443 2 million as of December 31, 2022.

Cash flow from operations was $32 $6 million in the quarter after taking into consideration our capex requirements free cash flow was $32 million or 33% free cash flow margin, representing a quarterly record for <unk> for.

For the full fiscal year 2023, we generated $74 2 million in operating cash flow and $72 2 million and free cash flow or 21% margin a free cash flow annual record.

We remain committed to our free cash flow margin targets provided within our long term model, implying an estimated mid point of 28% over the coming years.

As of December 31, 2023, our remaining performance obligations totaled $259 $8 million.

Now I'd like to speak about our outlook and guidance for the first quarter and full year of 2024.

Our outlook for 2024 implies continued strength within our cloud business driven by expectations for increasing customer usage, along with stable growth in migrations similar to the second half of 2023.

Ed Grabscheid: After taking into consideration our CapEx requirements, free cash flow was $32 million, or 33% free cash flow margin, representing a quarterly record for JFrog. For the full fiscal year 2023, we generated $74.2 million in operating cash flow and $72.2 million in free cash flow, or 21% margin, a free cash flow annual record. We remain committed to our free cash flow margin targets provided within our long-term model, implying an estimated midpoint of 28% over the coming years. As of December 31st, 2023, our remaining performance obligation totaled $259.8 million.

We estimate fiscal 2024 baseline cloud growth around the mid <unk> for the full year.

Given the dynamics of our self hosted and cloud business in 2023, we now expect our net dollar retention ratio to be in the high teens exiting the fiscal year 2024.

We will continue to expand the operating expenses on a dollar basis during 2024.

But see continued room for operating leverage driven by ongoing cost optimization offset by investment in strategic sales and channels combined with targeted R&D spending on future growth opportunities.

For Q1, we expect revenues to be between $98 million and $99 million equaling around 23% year over year growth at the midpoint.

Ed Grabscheid: Now I'd like to speak about our outlook and guidance for the first quarter and full year of 2024. Our outlook for 2024 implies continued strength within our cloud business driven by expectations for increasing customer usage, along with stable growth and migrations similar to the second half of 2023. We estimate fiscal 2024 baseline cloud growth around the mid 40s for the full year.

With non-GAAP operating profit between 12, five to $13 5 million and non-GAAP earnings per diluted share of 13 to 15.

Assuming a share count of approximately 113 million shares.

For the full year of 2024, we anticipate a revenue range between $424 million and $428 million.

non-GAAP operating income is expected to be between $56 million and $58 million and non-GAAP earnings per diluted share of <unk> 58 to 60.

Ed Grabscheid: Given the dynamics of our self-hosted and cloud business in 2023, we now expect our net dollar retention ratio to be in the high teens exiting the fiscal year 2024. We will continue to expand operating expenses on a dollar basis during 2024. But we see continued room for operating leverage driven by ongoing costs, optimizations, offset by investment in strategic sales and channels, combined with targeted R&D spending on future growth opportunities. For Q1, we expect revenues to be between $98 million and $99 million, equaling around 23% year-over-year growth at the midpoint, with non-GAAP operating profit between $12.5-$13.5 million and non-GAAP earnings per diluted share of $0.13-$ Assuming a share count of approximately 113 million shares, for the full year of 2024, we anticipate a revenue range between $424 million and $428 million.

Assuming a share count of approximately 116 million shares.

Now I'll turn the call back to Shlomi for some closing remarks before we take your questions.

Thank you Ed.

Less than a week ago Israelis observed the annual family day or day to acknowledge and express gratitude for the family members in their lives. It has been over four months since many families will torn apart by the brutality of the Telus organization.

As we speak over 130 hostages, including intense mothers.

Individuals and civilians are still being held and underground pages in Gaza.

We pray for a fast and safe return of the hostages to their loved ones to their families and.

And we stand in solidarity with Israel opening for a peaceful future in the region.

To the <unk> team.

Youll resolve and resilience to meet these challenges are unmatched and I'm proud to represent your hard work in 2023, you exceeded our commitment to the market and delivered in a challenging macroeconomic and geopolitical environment.

<unk> you have the spirit appliance and hotter Forbes I can't wait to win 2024 with you.

Ed Grabscheid: Non-GAAP operating income is expected to be between $56 million and $58 million, and non-GAAP earnings per diluted share of $0.58 to $0.60, assuming a share count of approximately 116 million shares. Now, I'll turn the call back to Shlomi for some closing remarks before we take your questions. Less than a week ago, Israelis observed their annual family day, a day to acknowledge and express gratitude for the family members in their lives.

To our shareholders. We continue to believe that <unk> is well positioned to achieve success as we focus on sustainable growth drivers across Dev ops security and MLR ops, all delivered to the enterprise by our software supply chain platform.

We are committed to the long term model shared with you early last year and are happy to report on the solid execution in 2023.

Shlomi Benhaim: It has been over four months since many families were torn apart by the brutality of the terror organization Hamas. As we speak, over 130 hostages, including infants, mothers, every individual, and civilian, are still being held in underground cages in Gaza. We pray for a fast and safe return of the hostages to their loved ones, to their families. And we stand in solidarity with Israel, hoping for a peaceful future in the region. Your resolve and resilience amidst these challenges are unmatched, and I'm proud to represent your hard work in 2023. You exceeded our commitments to the market and delivered in a challenging macroeconomic and geopolitical environment. My team, you have the spirit of lions and the heart of frogs.

Our performance is the results of <unk>.

Thanks for attending our call today happy Valentine's day, and made the frog be with you.

Operator, we are now open to take questions.

The floor is now open for your questions to ask a question at this time simply press the star followed by the number one on your telephone keypad.

We ask that you please limit yourself to one question and one follow up question.

We will now take a moment to compile our roster.

Our first question comes from the line of <unk> Singh with Morgan Stanley. Please go ahead.

Thank you for taking the questions and I guess, one word wow spectacular quarter, particularly the cloud results. So let me start with the cloud business.

Shlomi Benhaim: I can't wait to win 2024 with you. To our shareholders, we continue to believe that JFrog is well positioned to achieve success as we focus on sustainable growth drivers across DevOps, security, and MLOps, all delivered to the enterprise by our software supply chain platform. We are committed to the long-term model shared with you early last year and are happy to report on its solid execution in 2023. Our performance is the result of your trust in us. Thanks for attending our call today. Happy Valentine's Day, and may the frog be with you.

I think I've seen acceleration in the cloud business, particularly in Q4 and a number of years and so I was hoping you could give me some.

Detail on why you saw the inflection that you did by our math that sort of incremental dollar adds are up well.

Well over 200% year over year, and so it seems like a pretty major inflection when a lot of other cloud consumption companies, you'll have a seasonally weak December those types of dynamics you guys didn't see that so would just love to better understand.

Operator: Operator, we are now open to take questions. The floor is now open to your questions. To ask a question at this time, simply press the star followed by the number one on your telephone keypad.

Underneath the covers what's what's driving the acceleration.

Yes.

Thank you Paul the current feedback.

Yes, we performed very well on the last quarter, especially in the cloud with 59% year over year.

Operator: We ask that you please limit yourself to one question and one follow-up question. We'll now take a moment to compile our raw data. Our first question comes from the line of Sanjit Singh with Morgan Stanley. Please go ahead.

And what we have seen is once we project the second half of 2023.

Unlike the freezing of momentum we had in the beginning of the year, we started to see our customers, especially the enterprise.

Sanjit Singh: Thank you for taking the questions, and I guess one word, wow, a spectacular quarter, particularly the cloud results. And so, let me start with the cloud business. I don't think I've seen acceleration in the cloud business, particularly in Q4, for a number of years. And so I was hoping if you could give me some detail on why you saw the inflection that you did by RMAS, that sort of incremental dollar ads were up well over 200% year over year. And so it seems like a pretty major inflection when a lot of other cloud consumption companies, you know, have a seasonally weak December; those types of dynamics, you guys didn't see that. So we'd just love to better understand, you know, underneath the covers, what's driving the acceleration. Yes, Shandit, thank you for the kind feedback. Yes, we put home well, very well in the last quarter, especially in the cloud. Hello,

The climb back up with the consumption.

Migration to the cloud is still coming with some hesitation consumption is back, especially around the infrastructure and especially when you bet Youll software delivery and software supply chain security and Dev ops on the cloud infrastructure, we were very happy to see this coming back as well.

<unk> and <unk>.

As we guided for the next year, we are seeing this momentum and consumption.

Happening.

I'd like to add that.

I'd like to repeat that.

Q4 is a seasonably high renewal quarter for us so some cloud customers at the end of those contract terms may require revenue true ups based on their differences between the actual data consumption and contractual commitments.

Those true ups that we discussed the majority of those are happening because of the circumstance and it hasnt been material in the past, but we thought we'd call them out in this call.

And just sort of as a follow up without any way to like quantify those true ups in those impacts in Q4, and then looking more broadly into 2024.

Shlomi Benhaim: While migration to the cloud is still coming with some hesitation, consumption is back, especially around the infrastructure, and especially when you bet your software delivery and software supply chain security and DevOps on a cloud infrastructure. We were very happy to see this coming back as projected, and as we guide it for the next year, we will see this momentum in consumption keep happening.

It seems like we're on the cusp of the new sort of innovation cycle and given the way sort of Jay frog prices. It solutions and now we have a growing cloud business.

If software development projects are coming back in a meaningful way this year.

Does that.

Sort of impact J fraud from a financial revenue top line growth perspective, you can sort of draw on improving potential budget environment suffered a bulge devolder project coming back.

Ed Grabscheid: I'd like to add that Q4 is a seasonably high renewal quarter for us. There are some cloud customers at the end of those contract terms may require revenue true-ups based on their differences between actual data consumption and contractual commitments. Those true-ups that we discussed, the majority of those are happening because of this circumstance. It hasn't been material in the past, but we thought we'd call them out in this call. And just sort of as a follow-up to that, any way to quantify those true deaths and those impacts?

How does that how do you expect that to influence the numbers going to 2024 and beyond.

Okay.

So the right now what we see is that consumption continues to to have improvements.

We saw that in the second half of this year and we anticipate that to be the same through 2020 for migrations have not.

Increased although we saw a slight increase in the second half of 2023, we anticipate stabilization of those large customer migrations in 2024, we're certainly not back to the same levels that we saw during 2022.

Sanjit Singh: in Q4, and then looking more broadly into 2024. It seems like we're on the cusp of a new sort of innovation cycle. And given the way JFrog prices its solutions, and now you have a growing cloud basis, if software development projects are coming back in a meaningful way this year, how does that sort of impact JFrog from a financial revenue, top line growth perspective? If you can sort of draw on improving potential budget environments, and software development projects coming back? How do you expect that to influence the numbers going to 2024 and beyond?

If the budgets.

See a broadening of the budgets then we may see improvements in and the large customer migrations and that could potentially.

Increase but for now we're staying tactically cautious and we're seeing our cloud.

In the mid Forty's growth.

Excellent. Thank you very much.

Okay.

Our next question comes from the line of pendulum Bora with J P. Morgan. Please go ahead.

Hi, This is the retro Bancorp Benjamin.

On the spine the puts and take about.

Ed Grabscheid: So right now, what we see is that consumption continues to improve. We saw that in the second half of this year, and we anticipate that to be the same through 2024. Migrations have not increased, although we saw a slight increase in the second half of 2023. We anticipate stabilization of those large customer migrations in 2024. We're certainly not back to the same levels that we saw during 2022.

Hello, Dave.

<unk> already under exploration and how you're thinking about that income so.

Contribution liquidity pool.

Yes, Hi, this is for me I'll take this one security.

Embedded in our platform during 2023.

We started to release quarter by quarter more in the mall.

Solutions, the depths of cop since gate to secure the software supply chain <unk> advanced security was the first Jay populations and follow them all to come and we see customers now looking to consolidate point solutions.

Sanjit Singh: If we see a broadening of the budgets, then we may see improvements in the large customer migrations, and that could potentially increase. But for now, we're staying tactically cautious, and we're seeing our cloud in the mid-40s grow. Excellent. Thank you very much.

<unk> platform.

So as we guided the market really is.

The security will become a material part of.

Revenue in 2024.

Yeah.

Thank you.

Pinjalim Bora: Our next question comes from the line of Pinjalim Bora with JP Morgan. Please go ahead. Hi, this is Vachirathorn from Pinjalim. Can you help us understand the puts and take about advanced security and the curation and how you're thinking about it in terms of the contribution for 2020? Hi, this is Swami. I'll take this one.

Our next question comes from the line of Mike <unk>.

<unk> with Needham <unk> Company. Please go ahead.

Hey, Thanks for taking the question guys. If I could come back to I think it was building or from your response to Sanjay.

Second question.

Regarding what's what's in the guidance here and so I know that you guys are saying hey consumption continues to show. These improvements we've seen in the second half of calendar 'twenty three we expect that to persist in 2000 and for that I understand I think what confused me and this might have been your comment and I really just wanted to crystallize this year, but.

Shlomi Benhaim: Security is embedded in our platform. During 2023, we started to release, quarter by quarter, more and more solutions around the DevSecOps landscape to secure the software supply chain. JFrog Advanced Security was the first JFrog curation, then followed.

Shlomi Benhaim: There are more to come, and we see customers now looking to consolidate point solutions around one platform. So, as we guide the market, we assume that security will become a material part of our revenue in 2024. Thank you. Our next question comes from Mike Seacoast of Seacoast with Needham and Company.

The comment with migration saw a slight increase in <unk> 'twenty three.

But we anticipate stabilization in 'twenty four and I just can you better contextualize that for me.

Are we expecting stabilization of that second half base, where are we just assuming that the migrations continue to remain.

Mike Seacoast: Please go ahead. Hey, thanks for taking the question guys. If I could come back to, I think it was building off of your response to Sanjit's second question regarding what's in the guidance. And so I know that you guys are saying, hey, consumption continues to show these improvements. We've seen it in the second half of calendar 23.

Almost a little bit more.

Hesitant when thinking about customers.

The propensity to go through that migration.

Yes, Hi, Mike This is Jeremy I'll take this one.

Mike Seacoast: We expect that to persist for 24 hours, as far as I can understand. I think what confused me, and this might've been your comment, and I really just want to crystallize this here, but I think the comment about migration, so a slight increase in 2HCY23, but we anticipate stabilization in 24. And I just, can you better contextualize that for me? Like, are we expecting stabilization off that second-hand base? Or are we just assuming that the migrations continue to remain almost a little bit more hesitant when we're thinking about customers' propensity to go through that migration? Hi Mike, this is Shlomi. I'll take this one.

The cloud.

As a result of two avenues of growth.

Evan you number one is the consumption more data transfer more storage.

Our customers are growing with us those that are already in the cloud what happened in the beginning of 2023 at the end of 2022 is that some of the strategic migration project.

Put on hold by the customers, our on Prem customers and prospects in the market kind of delayed.

Cloud migration to the cloud and why are we starting to see a momentum of climbing back with the consumption with those that are already in the cloud we didn't see kind.

Kind of.

The same goes on the migration projects that were released to start moving to the cloud now why is that mainly because of the fact that this is strategically took a decision to move to the cloud and you didn't stop yet you want the macro economy to stabilize and then you will kick off the project again, while if you are.

Shlomi Benhaim: What we see in the cloud is a result of two avenues of growth. Avenue number one is consumption, more data transfer, more storage, and our customers are going with us, those that are already in the cloud. What happened in the beginning of 2023, the end of 2022, was that some of the strategic migration projects were put on hold by customers, our on-prem customers and prospects in the market kind of delayed the workload migration to the cloud. And while we started to see a momentum of climbing back with the consumption of those that are already in the cloud, we didn't see the same goals on the migration projects that were released to start moving to the cloud. Now, why is that?

Already in the cloud it's easier for you to scale with the consumption. What we assume is that in 2024, we will see more projects.

Good migration happening and still the same momentum of consumption and therefore, we wanted to stay.

Conservative with how we project the growth in the in 2024 and guided to mid 40 again.

Understood. Thank you. Thank you for laying that out Shlomi I really do appreciate it and I also just wanted to come back.

In your prepared remarks, I know you cited.

The customer count, which we get on an annual basis.

Appreciate where we're at 7400 now and a year ago. We were at 7200, but I was interested there was a specific comment that you had in relation to the customer count which said.

Shlomi Benhaim: Mainly because of the fact that if you strategically take a decision to move to the cloud and you haven't started yet, you want the macroeconomy to stabilize, and then you will kick off the project again. While if you are already in the cloud, it's easier for you to scale with consumption. What we assume is that in 2024, we will see more projects of cloud migration happening and still the same momentum of consumption. And therefore, we wanted to stay conservative with how we project the growth in 2024 and guide it to the mid-40 again.

These new customers youre, adding to the portfolio.

Are coming on with with higher ASP and a higher propensity to expand.

And I wanted to get some more color on those two dynamics as well could you.

Either give some more color or detail.

According those AOSP lanes that youre seeing it makes sense intuitively just given the expansion of the platform that we have where we are today versus just a year ago, but wanted to see if we could get something.

Shlomi Benhaim: I understand. Thank you. Thank you for laying that out, Shlomi. I really do appreciate it. And I also just wanted to come back.

It's something more on that dynamic thank you.

As Mike why don't you follow up James.

For quite some while you remember the day that the bottom up inbound sales was.

Mike Seacoast: In your prepared remarks, I know you cited the customer count, which we get on an annual basis, and I appreciate that we're at 7,400 now, and a year ago, we were at 7,200. But I was interested in a specific comment that you had in relation to the customer count, which said these newer customers you're adding to the portfolio are coming on with higher ASPs and a higher propensity to expand. And I wanted to get some more color on those two dynamics as well. Could you either give some more color or detail regarding those ASP lanes that you're seeing?

90% of our revenues.

And we slowly in the past three years.

<unk> from a bottom up from developers.

Two of top down outbound mechanism part of what we have done we also identified what logos we want to go after.

And you cannot III, a $1 million of land the same as you will do with the $1000.

Logo, the blend and expense fluid. So we aimed our team towards this direction, we aimed our solution technologies and platform towards this direction, we started to work with partners in China.

Shlomi Benhaim: It makes sense intuitively, just given the expansion of the platform that we have, where we are today versus just a year ago. But I wanted to see if we could get something more on that. Thank you.

This direction and still scope 200 net new.

Customers logos and within our portfolio, what we see with this logos is that they'll not only lending with a higher ASP.

They also go faster than than the logos that started from <unk> of open source and slowly grow now this is not to say that we're dropping the ball on the smbs, but when I guided team I need to make sure that they are focused not only on what logo. We are after but also what.

Shlomi Benhaim: Yes, Mike, well, you've followed JFrog for quite some time, and you remember the day that bottom-up inbound sales was 90% of our revenue. And we slowly, in the past three years, have shifted from a bottom-up approach from developers up to a top-down, outbound mechanism. Part of what we've done, we also identified what logos we want to go after, and you cannot treat a one million dollar logo the same as you will do with a thousand dollar logo that lands and expands slower.

Value can we bring to the enterprise versus what value you bring to the Smbs. Therefore.

Therefore, I am very pleased with this result, and this would be the focus moving forward as well.

Our next question comes from the line of Koji Ikeda with Bank of America. Please go ahead.

Shlomi Benhaim: So we aimed our team toward this direction. We also aimed our solution technologies and platforms toward this direction. We started to work with partners in China toward this direction and still scored 200 net new customers logos within our portfolio. What we see with these logos is that they are not only landing with a higher SP, but they also grow faster than the logos that started from free tier or from open source and slowly grew.

Hey, guys. Thanks for taking the questions just a couple from me here.

Wanted to ask a question on optimizations in the prepared remarks in the guidance. There was a mention of optimizations I just wanted to be very clear here are.

Are you calling out that some companies might still be having optimizations is that more or less what's going on do you anticipate optimizations to continue.

Does the guidance incorporate a fair amount of optimization assumptions or did I just completely misread.

Shlomi Benhaim: Now this is not to say that we are dropping the ball on the SMB, but when I guide the team, I need to make sure that they are focused not only on what logo we are after but also on what value we can bring to the enterprise versus what value we can bring to the SMB. Therefore, I'm very pleased with this result, and this will be the focus moving forward as well. Our next question comes from the line of Koji Ikeda with Bank of America. Please go ahead. Hey guys, thanks for taking the questions. Just a couple from me here.

Here that in our optimization is more or less in the rearview mirror for you guys.

Hi, Koji this is Ed.

The comment was not about optimization from customers. This is more internal and the optimizations that we have internally to drive leverage in our P&L.

Got it no. Thank you for that clarification, and then I wanted to have a follow up on on the net revenue retention.

Nearly here at 119% it looks like it's stabilized.

Koji Ikeda: I wanted to ask a question on optimization. In the prepared remarks and the guidance, there was a mention of optimization. I just wanted to be very clear here. Are you calling out that some companies might still be having optimization problems? Is that more or less what's going on? Do you anticipate optimization to continue? Does the guidance incorporate a fair amount of optimization assumptions? Or did I just completely mishear that?

Is it safe to say it's bottomed.

And it should expand from here and just to really think through if it were to to dip again, what would be the causes of that.

Yes, so koji, we feel that net dollar retention rate has stabilized and we're saying we will be within.

The high teens, the high teens means between $1 17 to 119, but we feel like we've stabilized net dollar retention at this point.

Okay.

Our next question comes from the line of Thai Kid drawn with Oppenheimer. Please go ahead.

Ed Grabscheid: And are optimizations more or less in the rear view mirror for you guys? Hi Koji, this is Ed. No, the comment was not about optimization from customers. This is more internal in the optimizations that we have internally to drive leverage in our, got it. Now, thank you for that clarification. And then I wanted to follow up on the net revenue retention, you know, clearly here at 119%. It looks like it's stabilized. Is it safe to say it's bottom, and it should expand from here? And just to really think it through, if it were to dip again, what would the causes be?

Thanks, guys.

Thanks for your comments Shlomi at the end of your prepared remarks is important.

Had a question I'm kind of tying some of the points that are as I mentioned, another call love to get more but our understanding is the relative contribution of migrations versus new.

To your cloud business can you give us a little bit more quantitative if not qualitative.

Assessment of the relative contribution of those two the growth and related to that Shlomi I know your focus has been clear and expanding customers but.

Ed Grabscheid: So Koji, we feel that the net dollar retention rate is stabilized, and we're saying we'll be within the high teens, the high teens, between $117 to $119, but we feel like we've stabilized net dollar retention. Our next question comes from the line at Atai Kidron with Oppenheimer. Please go ahead.

But if cloud.

Self serve is there no room for better or faster new customer additions it feels like.

The technical complexity of ramping as a new customer should be significantly lowered why should not unlocked by itself faster.

New customer additions.

It is high time.

Atai Kidron: Thanks, guys. And thanks for your comments, Shlomi, at the end of your prepared remarks. Important. I had a question. I'm kind of tying in some of the points that Artisa mentioned on the call.

You have a very good question, it's not just consumption versus migration. It's also.

Migration.

And prospects into cloud so what I would say to that point is that the majority of our opex I will not even considering so far it's not the 10 years ago market that it was.

Shlomi Benhaim: I would love to get a better understanding of the relative contribution of migrations versus new customers to your cloud business. Can you give us a little bit more quantitative, if not qualitative, assessment of the relative contribution of those two to growth? Related to that, Shlomi, I know your focus has been clearly on expanding customers. But if the cloud itself is self-serve, is there no room for better or faster new customer additions? It feels like the technical complexity of ramping up as a new customer should be significantly lowered. Why should that not unlock by itself faster new customer additions? It's high time.

And debate most of our prospects will starting to cloud unless they are in a highly regulated environment and therefore, they will look for surplus and solutions. So new customers will usually land in the cloud.

We provide a multi cloud solution, we provide a hybrid solution. It gives them all the options.

Regarding the new logo accounts.

Well listen this is.

A company that build the platform and added technologies, a new persona entered new addressable markets moved from open source bottom up top down enterprise sales.

Shlomi Benhaim: You have a very good question. It's not just consumption versus migration. It's also migration and prospects in the cloud. So what I would say to that point is that the majority of our prospects are not even considering self-prospects. It's not the 10 years ago market that it was a debate about.

I committed to you guys that we will be focused on a very strong execution and deliveries of what we promised.

And in order to do that we have to choose our battles and in order to choose though about those I'm asking my team what is it that you have in your pipeline and we have to choose from the pipeline what we'll deliver on the results that would be aligned with the guidance and the long term model. So maybe in the future we will invest more.

Shlomi Benhaim: Most of our prospects will start in the cloud unless they are in a highly regulated environment and, therefore, they will look for a self-hosted solution. So new customers will usually land in the cloud. We provide a multi-cloud solution. We provide a hybrid solution. It gives them all the options.

Shlomi Benhaim: Regarding the new logo account... Well, listen, this is a company that built a platform and added technologies, a new persona, entered new addressable markets, and moved from open source bottom up to top down enterprise sales. I committed to you guys that we would be focused on a very strong execution and delivery of what we promised. And in order to do that, we have to choose our battles.

There is that much we can do without distracting the company and I think we chose that.

Okay very good and then as a follow up.

I can't help but feel somehow the tone on the call now is a little bit different than what it was in the last two three quarters in defense.

Through 23, you were very much focused on security.

And clearly rolling out advanced security and curation.

And while you did mentioned difficult currently on this earnings call.

Shlomi Benhaim: And in order to choose our models, I ask my team, what is it that you have in your pipeline? And we have to choose from the pipeline what will deliver results that are aligned with the guidance and the long-term model. So maybe in the future, we will invest more. But there is that much we can do without distracting the company. And I think we chose well.

Wasn't what you've kind of led with which was the case two or three quarters.

So I want to make sure I'm not missing anything here as I think about 'twenty, four and perhaps even a little peak into 25, when you look at your growth drivers.

Is cloud.

Slash pushing customers to the enterprise plus here.

Bigger driver to you than what security like how should we quantify how big of a contributor do you think about it.

Atai Kidron: Okay, very good. And then, as a follow-up. I can't help but feel somehow that the tone in the call now is a little bit different than what it was in the last two, three quarters in the sense that through 23, you were very much focused on security and clearly rolling out advanced security and cures. And while you did mention DevSecOps clearly on this earnest call, it wasn't what you kind of led with, which was the case two, three quarters ago. So I want to make sure I'm not missing anything here, what I think about 24 and perhaps even a little glimpse into 25.

Do you think security is for you over the next year or two is it a small driver or big driver I, just want to make sure I'm not losing focus here.

And thank you for this question.

Security was was in our focus for the past two years since we acquired <unk>, we build a full security suite.

<unk> advanced security with a population with a static analysis and started to migrate customers from point solutions to our security solution, but it was only released few quarters ago as you remember.

Now securities embedded into our platform and the main differentiator that <unk> brings to the market as a security provider is that we also bring it with the Arctic factory at the center with the single source of Brightcove video.

Shlomi Benhaim: When you look at your growth drivers, is cloud slash pushing customers into the enterprise plus tier a bigger driver for you than security? How should we qualify how big of a contributor do you think security will be for you over the next year or two? Is it a small driver or a big driver?

Youll assets from the get go.

All the way through the releases so offshore security is a very important piece.

When we are offering our customers to upgrade to higher subscriber subscription enterprise X in enterprise.

Shlomi Benhaim: I just want to make sure I'm not losing focus here. And thank you for this question. Security has been, has been our focus for the past two years since we acquired video. We built a full security suite with JFrog advanced security, with JFrog curation, with static analysis. We started to migrate customers from point solutions to our security solution. But it was only released a few quarters ago, as you remember.

Still cloud growth is it is a very important item.

The goal planning.

And having cloud going not only on <unk>, but with security I think we will see other numbers and consumptions and we might even see companies coming to <unk> because of security for.

Although.

It's still not the majority of our revenue not being 24 will not be 25, it will become material, but not the majority of our revenue.

Shlomi Benhaim: Now, security is embedded into our platform, and the main differentiator that JFrog brings to the market as a security provider is that we also bring it with the artifactory at the center with a single source of freckles. We protect your assets from the get-go all the way to the releases.

Our next question comes from the line of Miller jump with tourists. Please go ahead.

Great. Thank you for taking the question and I'll Echo my congrats on the strong results.

I guess just starting.

Customers over 1 million, an IRR really picked up steam in the second half.

Given the go to market investments that you saw driving this is this something that you all feel you actually might have the ability to accelerate with more investment there or is it a matter of customers getting more mature and demanding a full platform.

Shlomi Benhaim: So for sure, security is a very important piece when we are offering our customers to upgrade to a higher subscription, Enterprise X and Enterprise Plus. Still, cloud growth is a very important item in our growth planning, and having cloud growth not only in DevOps but with security, I think we will see other numbers in consumption, and we might even see companies coming to JFrog because of security, although it's still not the majority of our revenue, not in 2024 and not in 2025. It will become material, but not the majority of our revenue. Our next question comes from the line of Miller Jump with Truist.

Hi, Matt.

Ed.

So it's really at this point, it's difficult to know this is a customer decision and it requires commitments of budgets and resources and.

At this point.

Yes.

Unknown.

Have good line of sight in the first half of the year, but in terms of the second half we don't have as much visibility. So it's really at this point difficult for us to note that accelerates.

Miller Jump: Please go ahead. Great. Thank you for taking the question and I'll echo my congratulations on the strong results. I guess just starting, you know, customers over a million and ARR really picked up steam in the second half. Given the go-to-market investments that you saw driving this, is this something that you all feel you actually might have the ability to accelerate with more investment there, or is it a matter of customers getting more mature and demanding the full platform? Hi Miller, this is Ed.

And then I will add to that.

Miller.

Sorry. This is Saul Matt just wanted to add to it we are looking at the customers over 1 million.

Obviously outstanding results and we built this momentum throughout the year.

But there is also a growth in the over $100000 customers and these customers are slowly climbing there are still a lot of customers that are falling between half a million to 999 that we are now reporting so we.

We need to bring more value to let them.

Kind of.

Embrace the full solution from J P. Morgan Dan I think you will see this momentum.

Ed Grabscheid: So it's really at this point that it's difficult to know if this is a customer decision and it requires commitments of budget and resources, and at this point, it's unknown. We have a good line of sight for the first half of the year, but in terms of the second half, we don't have as much visibility.

Keep happening.

Definitely thats helpful and we're looking forward to the continued execution there I guess, maybe one more for Ed just on the cloud side could you just remind us what youre seeing in terms of growth characteristics from your cloud customer base versus self managed customers in terms of maybe like a net retention basis, and how that could impact the model as we get more mix shift.

Shlomi Benhaim: So it's really, at this point, difficult for us to know if that accelerates. And then I will add to it, Mr. Miller, I'm sorry, this is Shlomi. I just want to add, you know, we are looking at customers over $1 million, obviously outstanding results, and we build this momentum throughout the year. But there is also growth in the over $100,000 customers, and these customers are slowly climbing. There are still a lot of customers that are falling between half a million and 999 that we are not reporting.

The cloud.

Yes, so we have significantly higher net dollar retention rates coming from our cloud versus our self hosted.

This is the reason why we continue to invest in the cloud and the migration from self hosted the cloud because we see better outcomes in terms of our growth and.

Net dollar retention rates on the cloud side.

Yeah.

Our next question comes from the line of Mark partner with Stifel. Please go ahead.

Great. Thank you and thanks for all the detail I think so.

Miller Jump: So we need to bring more value to let them kind of embrace the full solution from JFrog, and then I think you will see this momentum keep going. Definitely, that's helpful. And we're looking forward to the continued execution there. I guess, maybe one more question for Ed, just on the cloud side, could you just remind us, you know, what you're seeing in terms of growth characteristics from your cloud customer base versus self-managed customers in terms of maybe like a net retention basis, and how that could impact the model as we get more mixed shifted to the cloud. So we have significantly higher net dollar retention rates coming from our cloud versus our self-hosted. This is the reason why we continue to invest in the cloud and the migrations from self-hosted to the cloud because we've seen better outcomes in terms of our growth and the net dollar retention rates on the cloud side. Our next question comes from a line by Mark Faulkner with Stiefel. Please go ahead.

Security you guys talked about it being material.

After.

Really saying a few quarters ago, so just hoping to get sort of a comparison on ml ops and where you guys see that.

The post the early POC activity and how you see that maturing in comparison to how security has matured over the last few quarters. Thank you.

Yes, hi, so regarding security in the world of MLR, So what we call <unk> SEC ops, what we see now.

Quarter after we released.

Thanks for having faith in debating supporting of the factory in X Ray scanning malicious models.

Is that no enterprise no enterprise ignored the revolution that AI brings.

I'll try to set some standards and policies around what is the right way to use ml models within the within the software supply chain at the factory so email.

As the package models that the package yet.

Yet another binary and therefore X rays Camden, So we know already that our customers are <unk>.

Getting the single source of critical core ml ops with what we really what you should expect in the in the future during 2025 with the extension of the MLR and ml set up solution coming from Jennifer It goes hand in hand.

Mark Faulkner: Great, thank you. And thanks for all the detail. I think on security, you guys talked about it being material after releasing it a few quarters ago. So just hoping to get sort of a comparison on MLOps and where you guys see the POC, early POC activity, and how you see that maturing in comparison to how security has matured over the last few quarters. Thank you.

<unk> and ml model ml Austin.

Uh huh.

In the platform.

<unk>.

How we plan to extend our solution for MLR and I'll just step ups.

Our next question comes from the line of Kingsley Crane with Canaccord. Please go ahead.

Shlomi Benhaim: So regarding security in the world of MLOps, what we call MLSecOps, what we see now, a quarter after we released the support for the agging phase and the native support in artifactory and x-ray for scanning malicious models, is that no enterprise, no enterprise can ignore the revolution that AI brings. So they all try to set some standards and policies around what is the right and safe way to use ML models within the software supply chain. Artifactory serves ML as a package, models as a package, yet another binary, and therefore x-ray scans them.

Hi, Congrats on a fantastic quarter. So slow me you want to start with you I appreciated your comments.

How are you helping customers build with MLR.

Within the developed space I think you are relatively unique and that you're more highly concentrated really large enterprises.

Just curious what youre seeing in terms of AI ml, all productivity, how much that has changed in the past year trying to get a better sense of how much of this is concentrated within large enterprises versus some of these newer.

Companies in the past two three years.

Shlomi Benhaim: So we know already that our customers are setting the single source of record for MLOps with what we released. What you should expect in the future during 24 and 25 is the extension of the MLOps and MLSecOps solution coming from JFrog. It goes hand in hand with security and the ML model, ML hosting in the platform. So that's how we plan to extend our solution for MLOps and not just DevOps. Our next question comes from a line by Kingsley Crane with Canaccord. Please go ahead.

Yeah. That's a great question some of it will come from our very early experience.

In the world of MLR and some of it on the surface, we are leading and customers.

Customers consultation it.

It is very clear now that the.

Therefore service providers within the organization the security service providers within the organization will also cover the service that is required to support the adoption of MLR and AMETEK ops, Therefore, RP factories, playing a key role as a repository for model N.

Kingsley Crane: Hi, congrats on a fantastic quarter. So Shlomi, I want to start with you. I appreciated your comments about how you're helping customers build with MLOps. Within the DevOps space, I think you're relatively unique in that you're more highly concentrated in really large enterprises. Just curious what you're seeing in terms of AI ML developer activity, how much that has changed in the past year, trying to get a better sense of how much of this is concentrated within large enterprises versus some of these newer found companies in the past two, three years. That's a great question.

The oxy and caching for model S and X Ray and I will security solutions.

Covering the aspects of MN setups to secure it.

While while using it.

So I think that what what we should expect.

<unk> engineers and <unk> engineers.

Becoming one to provide.

Services to to the.

Consumers with inside the organization data scientists Python developers and so on.

With regard to what we hear from the customers.

Shlomi Benhaim: Some of it will come from our very early experience in the world of MLOps, and some of it from the surveys we are leading and customer consultation. It is very clear now that the DevOps service providers within the organization, the security service providers within the organization, will also cover the service that is required to support the adoption of MLOps and MLSecOps. Therefore, Artifactory is playing a key role as a repository for models and a proxy and cache for models.

Is that they are planning AI is running.

<unk> done faster than every this option we saw in the past and they are planning to have some of these assets in production. During 2024. Therefore, we will early in 2023, starting to walk on it released it to Jay.

In the last quarter of the year and now our platform is getting more and more material to support the demand that is coming from our own customers and they have ops engineers that are now football team the MLS initiative.

Shlomi Benhaim: And X-Ray and our security solutions cover the aspects of MLSecOps to secure it while users are using it. So I think that what we should expect is DevOps engineers and ML engineers becoming one to provide services to the consumers with inside their organization, data scientists, Python developers, and so on. With regard to what we hear from the customers, they are planning AI is running a thousand times faster than any disruption we saw in the past, and they are planning to have some of these assets in production during 2024. Therefore, we started to work on it early in 2023, released it to GA in the last quarter of the year, and now our platform is getting more and more mature to support the demand that is coming from our own customers, the DevOps engineers that are now supporting the ML initiative. Thanks, Flemmy. That's really great to hear and really helpful.

Thanks for me, that's really great to hear and really helpful. So just at $1 million customers in 100 gig customers, they're both progressing really nicely in this past year.

I just want to hear more thoughts about what you think is the biggest unlock for you and then.

How much can be attributed to an increase in development activity versus just.

You know maybe vendor consolidation.

So.

As Shlomi mentioned previously on the call that we have quite a bit of customers that are sitting between that half a million to $999000 nine.

990, $900000. This really becomes an unlocked through technology, so developing technology, adding new features and then being able to increase asps to drive about $1 billion. So we see opportunity there.

In terms of driving that increase to the 1 million customer. In addition to that we talked about as we build our tops down model and we invest in the enterprise to go to market. We're landing at a much higher ASP and we're bringing in better quality customers and those customers have more durable growth that will get us to the $100 million.

Kingsley Crane: And so just like $1 million customers and 100K customers, they've both progressed really nicely in this past year. Just want to hear more thoughts about what you think is the biggest unlock for you. And then, you know, how much could we attribute to an increase in development activity versus just, you know, maybe vendor consolidation? So really, as Shlomi mentioned previously on the call, we have quite a few customers that are sitting between that half a million and $999,000 or $999,000. This really becomes an unlocking through technology.

Customer.

Acre.

Yes.

To add to it when we are building the plans for 2024 I think that the.

The momentum that we would see from one quarter to another will be similar because customers are also starting the year starting to plan their budgets not everyone jumps and spend it all on the first quarter. So we built this alongside with our product and R&D roadmap to make sure that when the value is there.

They will not hesitate to take the bet when GE programs. They did in 2023.

Ed Grabscheid: So developing technology, adding new features, and then being able to increase ASPs to drive above a million dollars. So we see opportunity there in terms of driving that increase to the million-dollar customer. In addition to that, we talked about as we build our top-down model and we invest in the enterprise and the go-to-market, we're landing at a much higher ASP, and we're bringing in better quality customers, and those customers have more durable growth. That will get us to the $100 million customer quicker. Yes, and to add to that, when we are building the plans for 2024, I think that the momentum that we will see from one quarter to another will be similar because customers are also starting the year, starting to plan their budget. Not everyone jumps in and spends it all in the first quarter.

Our next question comes from the line of <unk> Li with Cantor Fitzgerald. Please go ahead.

Thank you for taking my question and congrats on the staff initiatives 2023.

Shlomi like in terms of your cash to US great to see that you went from about 400 million to over $500 million right now any thoughts on like large M&A at all even tuck ins to like sort of enhance the platform and then I have one for Ed.

Go ahead.

That's a great question I don't know what large M&A means that every time I hear.

Got it.

Tuck ins.

M&A.

A part of our strategy, we have a whole team that set.

Set the rate for the next few years as we discuss our M&A strategy as you know Jamie Wired nine companies.

And.

In the past years, and we plan to grow Inorganically as well some areas that we're looking at obviously reinforce our security to the left and to the right and also too.

Shlomi Benhaim: So we build this alongside our product and R&D roadmap to make sure that when the value is there, they will not hesitate to take the bet with JFrog as they did in 2024. Our next question comes from the line of Yifu Li with Cancer Fitzgerald. Please go ahead.

Shortened the time to market with the MLR Chairman set ups and AI initiative, Im saying shorten the time to market because as you probably know every two days there is a new company that claimed that they are the next AI company and we wanted to make sure as we bring in is not just the talent, but also.

Yi Fu Lee: Thank you for taking my question and congratulations on the strong finish to 2023. First one for Shilomi, in terms of your cash balance, great to see that you went from about $400 million to over $500 million right now. Any thoughts on large M&As or even tuck-ins to further enhance the platform?

The technology to support our enterprise demand.

Thanks for that and then a quick follow up on the financial side with Ed.

In terms of the linearity for the quarter can you just kind of discuss like how did the quarter trended and what you are seeing so far year to date. That's it from me. Thank you and congrats.

Shlomi Benhaim: And then I have one for Ed, a quick follow-up for Ed. That's a great question. I don't know what large M&A means every time I hear it. Otakins.

Okay.

Sorry, I didn't quite understand the question that bridges the linearity.

I was wondering if you could comment on the linearity for the quarter how did it trend from October to November to December It didn't sound like there was any drop off like even though there was a holiday in December and then if you could comment on.

Shlomi Benhaim: M&A is part of our strategy. We have a full team that sets the radar for the next few years as we discuss our M&A strategy. As you know, JFrog acquired nine companies in the past years, and we plan to grow inorganically as well. Some areas that we are looking at are obviously strengthening our security to the left and to the right, and also to shorten the time to market with the MLOps, MLSecOps, and AI initiatives. I'm saying shorten the time to market because, as you probably know, every two days there is a new company that claims to be the next AI company, and we want to make sure what we bring in is not just the talent but also the technology that will support our enterprise demand.

So far year to date the performance till until early February.

Thank you for the clarification from a linearity perspective, yes, we didn't see.

First of all December seasonably is a drop off and we did see some drop off but for the most part we saw a pretty straight linearity for the quarter.

We haven't seen much change in January at this point, but we're not going to comment on Q1.

Yeah.

Our next question comes from the line of Rob Owens with Piper Sandler. Please go ahead.

Yeah, great. Thanks for taking my question just one for me curious on sales and marketing as we think about 2024, and just sales capacity additions, especially with the.

Yi Fu Lee: Thanks for that, Solomon. And a quick follow-up on the financial side with Ed. In terms of the linearity of the quarter, can you just kind of discuss how the quarter trended and what you are seeing so far year-to-date? That's it for me.

The top down selling motion just how aggressive are you going to be too to add sales staff moving forward and also what you're doing from a partnering perspective. Thanks.

Ed Grabscheid: Thank you and congrats. Sorry, I didn't quite understand the question at first: the linearity of the quarter.

Yi Fu Lee: I was wondering if you could comment on the linearity for the quarter. How did it trend from October to November to December? It didn't sound like there was any drop-off, like even though there was a holiday in December. And then if you could comment on the, you know, so far year-to-date, the performance till early February. Thank you for the clarification. From a linear perspective, yeah, we didn't see any.

Yeah. So thank you Rob.

As you remember we discussed multiple times.

We are hiring.

Enterprise experienced sales representative to go to with the right.

Executive on the marketing side customer success, it's a full cycle its not just deferral.

<unk> manager.

In addition to that we invest a lot in increasing our partners in China of the ecosystem not just our partnership with AWS TCP and Azure, but also.

Ed Grabscheid: First of all, December seasonally is a drop off, and we did see some drop off, but for the most part, we saw pretty straight linearity for the quarter. We haven't seen much change in January at this point, but we're not going to comment on Q1. Our next question comes from the line of Rob Owens with Piper Sandler. Please go ahead.

<unk> standalone companies that are promoting our solution and exited the channels.

On top of that we also.

Increasing the numbers of the number of our overlay.

Yes.

Robbie David Owens: Yeah, great. Thanks for taking my question. Just one for me curious about sales and marketing as we think about 2024 and just sales capacity additions, especially with the top-down selling motion, just how aggressive are you going to be to add sales staff moving forward, and also what you're doing from a partnering perspective.

Ken can bring.

The security experience to the market. So we'll see those expert sales representative that are coming from security background. This is these are all additions to the strategic sales team that we discussed before and to the entire enterprise sales team that we built together now.

Thank you.

Our next question comes from the line of Nick Altmann with Scotiabank. Please go ahead.

Shlomi Benhaim: Yes, so thank you, Rob. As you remember, we discussed it multiple times. We are hiring enterprise-experienced sales representatives together with the right executive on the marketing side, customer success. It's a full cycle.

Awesome. Thanks, guys.

Earlier, you guys had made some comments on our customers are landing at higher Asps.

And youre actually seeing sort of greater expansion motions from some of these customers.

Shlomi Benhaim: It's not just the sales account manager. In addition to that, we invest a lot in increasing our partners and China's ecosystem, not just our partnership with AWS, GCP, and Azure but also standalone companies that are promoting our solution and active channels. On top of that, we are also increasing the number of our overlay reps that can bring security experience to the market. So field CISOs, expert sales representatives that are coming from security backgrounds, these are all additions to the strategic sales team that we discussed before and to the entire enterprise sales team that we are building together now. Thank you. Our next question comes from the line of Nick Altman with Scotiabank. Please go ahead.

Can you just maybe talk about sort of whats driving that and when you look over the next several years, how durable is that trend or do you think it's kind.

Kind of more of a near term trend that you are just kind of seeing over the last couple of quarters here.

Yeah. Thank you Nick.

Yes.

Really drive the Ohio ESP.

Especially when you when you said two technologies technologies.

Allergic to.

Roughly five use if they are not solid and bulk rate they will not respond to it. So what really drives that is that you answered the pain and from the outside in the pain that we hear about is help me to consolidate the numerous tools that we currently use in order to one one delivery process. So.

Nick Altman: Awesome. Thanks, guys. Earlier, you guys had made some comments on how customers are landing at higher ASPs and you're actually seeing sort of greater expansion movements from some of these customers. Can you just maybe talk about sort of what's driving that? And when you look over the next several years, you know, how durable is that trend? Or do you think it's kind of more of a near-term trend that you're just kind of seeing over the last couple quarters? Thank you, Nick. What really drives the higher speed?

So having consolidations of tool in one platform is one reason for customers to lend higher. The second reason is that when they move from another tool to J. Paul there are already educated with what they want to achieve they already know how they work for our security wall.

And when they move to Jay Bob most of most cases, it will come with the expectation to scale. So they're willing to commit to higher numbers. They are willing to commit to a high volume. They know that Jay books came to infinity. Unlike the other tools and therefore, they lend higher ASP.

Shlomi Benhaim: especially when you sell to a technologist. Technologists are allergic to fluffy values. If they are not solid and concrete, they will not respond to them.

<unk> other reasons, but these are the main two and obviously when it comes with the cloud momentum the consumption and the commitment for the year is there another format, but these are the main street.

Shlomi Benhaim: So what really drives that is that you answer their pain. And from the outside in, the pain that we hear about is, help me to consolidate the numerous tools that we currently use in order to run one delivery process. So having consolidation of tools in one platform is one reason for customers to lend more. The second reason is that when they move from another tool to JFrog, they are already educated about what they want to achieve. They already know how DevOps works and how security works.

Mhm awesome.

And then just another question kind of building off of Rob's earlier question around the go to market.

I assume you guys recently had your sales kickoff and I know you're focused on some of the top down sales motion, but just coming out of the sales kickoff what was sort of the messaging what go to market tweaks are being made if any and any meaningful changes to our quota carrying reps are compensated in 2024.

Shlomi Benhaim: And when they move to JFrog, in most cases, it will come with the expectation to scale, so they are willing to commit to higher numbers. They are willing to commit to higher volumes because they know that JFrog scales to infinity, unlike the other tools. And therefore, they lend more with their ASP. There are other reasons, but these are the main two. And obviously, when it comes to cloud momentum, consumption and the commitment for the year are another parameter. But these are the main three.

Yes, well as we speak subscale Costar happening all over the world.

Our sales team what they hear is that the geography based execution coming with a full platform that includes security having a full platform that can also be hybrid.

This is how they should focus the efforts on.

Nick Altman: Mm-hmm. That's awesome. And then just another question, kind of building off of Rob's earlier question around the go-to-market. I assume you guys recently had your sales kickoff, and I know you're focused on sort of the top-down sales motion, but just coming out of the sales kickoff, what was the messaging? What go-to-market tweaks are being made, if any? And any meaningful changes to how quota-carrying reps are compensated in 2024?

To the partners in China's team, we are expanding the solution to lend higher with a full holistic solution for Dev ops and difficult, but obviously the focus of.

<unk> in 2020.

<unk> will be the joint solution of Dev ops and security together and this is what my team here.

So there are no further questions at this time I'll now turn the call back to slow me for closing remarks.

I'd like to thank you all for joining us today happy Valentine and made it probably would you take care guys.

Shlomi Benhaim: Thanks. Yes, well, as we speak, sales kickoffs are happening all over the world. Our sales team, what they hear is that geography-based execution, coming with a full platform that includes security, having a full platform that can also be hybrid, this is how they should focus their efforts. To the partners and channels team, we are expanding the solution to land higher with a full holistic solution for DevOps and DevSecOps. But obviously, the focus of JFrog in 2024 will be the joint solution of DevOps and security together. And this is what my team hears.

This concludes today's call. Thank you for attending you may now disconnect.

[music].

Operator: There are no further questions at this time. I'll now turn the call back to Shlomi for closing remarks. I'd like to thank you all for joining us today. Happy Valentine's Day and may the frog be with you. Take care, guys. This concludes today's call. Thank you for attending. You may now disconnect.