JFrog (NASDAQ:FROG) Exceeds Q3 Expectations, Stock Jumps 10.8%
Software development tools maker JFrog (NASDAQ:FROG) reported Q3 FY2023 results beating Wall Street analysts' expectations , with revenue up 23.1% year on year to $88.6 million. The company also expects next quarter's revenue to be around $93 million, in line with analysts' estimates.
Is now the time to buy JFrog? Find out by accessing our full research report, it's free.
JFrog (FROG) Q3 FY2023 Highlights:
Revenue: $88.6 million vs analyst estimates of $87.6 million (1.22% beat)
EPS (non-GAAP): $0.15 vs analyst estimates of $0.08 ($0.07 beat)
Revenue Guidance for Q4 2023 is $93 million at the midpoint, roughly in line with what analysts were expecting
Free Cash Flow of $25.4 million, up 56.7% from the previous quarter
Net Revenue Retention Rate: 119%, in line with the previous quarter
Customers: 848 customers paying more than $100,000 annually
Gross Margin (GAAP): 77.7%, in line with the same quarter last year
Named after the founders' affinity for frogs, JFrog (NASDAQ:FROG) provides a software-as-a-service platform that makes developing and releasing software easier and faster, especially for large teams.
Developer Operations
As Marc Andreessen says, "software is eating the world" which means the volume of software produced is exploding. But building software is complex and difficult work which drives demand for software tools that help increase the speed, quality, and security of software deployment.
Sales Growth
As you can see below, JFrog's revenue growth has been very strong over the last two years, growing from $53.7 million in Q3 FY2021 to $88.6 million this quarter.
This quarter, JFrog's quarterly revenue was once again up a very solid 23.1% year on year. Quarter on quarter, its revenue increased by $4.47 million in Q3, which was roughly in line with the Q2 2023 increase. This steady growth shows that the company can maintain a strong growth trajectory.
Next quarter's guidance suggests that JFrog is expecting revenue to grow 21.5% year on year to $93 million, slowing down from the 29.2% year-on-year increase it recorded in the same quarter last year. Looking ahead, analysts covering the company were expecting sales to grow 21.5% over the next 12 months before the earnings results announcement.
Our recent pick has been a big winner, and the stock is up more than 2,000% since the IPO a decade ago. If you didn’t buy then, you have another chance today. The business is much less risky now than it was in the years after going public. The company is a clear market leader in a huge, growing $200 billion market. Its $7 billion of revenue only scratches the surface. Its products are mission critical. Virtually no customers ever left the company. You can find it on our platform for free.
Product Success
One of the best parts about the software-as-a-service business model (and a reason why SaaS companies trade at such high valuation multiples) is that customers typically spend more on a company's products and services over time.
JFrog's net revenue retention rate, a key performance metric measuring how much money existing customers from a year ago are spending today, was 119% in Q3. This means that even if JFrog didn't win any new customers over the last 12 months, it would've grown its revenue by 19%.
Despite falling over the last year, JFrog still has a good net retention rate, proving that customers are satisfied with its software and getting more value from it over time, which is always great to see.
Key Takeaways from JFrog's Q3 Results
Sporting a market capitalization of $2.33 billion, JFrog is among smaller companies, but its more than $502.2 million in cash on hand and positive free cash flow over the last 12 months puts it in an attractive position to invest in growth.
It was great to see how many new large contracts JFrog won this quarter. We were also happy its revenue narrowly outperformed Wall Street's estimates. Zooming out, we think this was a decent quarter, showing that the company is staying on target. The stock is up 10.8% after reporting and currently trades at $24.95 per share.
So should you invest in JFrog right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
One way to find opportunities in the market is to watch for generational shifts in the economy. Almost every company is slowly finding itself becoming a technology company and facing cybersecurity risks and as a result, the demand for cloud-native cybersecurity is skyrocketing. This company is leading a massive technological shift in the industry and with revenue growth of 50% year on year and best-in-class SaaS metrics it should definitely be on your radar.
Join Paid Stock Investor Research
Help us make StockStory more helpful to investors like yourself. Join our paid user research session and receive a $50 Amazon gift card for your opinions. Sign up here.
The author has no position in any of the stocks mentioned in this report.
