UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2022

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-39492

JFrog Ltd.

(Exact name of Registrant as specified in its charter)

Israel	98-0680649
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

270 E. Caribbean Drive

Sunnyvale, California 94089

(408) 329-1540

(Address, including zip code, and telephone number, including area code, of Registrant’s principal executive offices)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Ordinary Shares, NIS 0.01 par value	FROG	The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

☒	Large accelerated filer	☐	Accelerated filer
☐	Non-accelerated filer	☐	Smaller reporting company
☐	Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of April 29, 2022, the registrant had 98,799,956 ordinary shares, NIS 0.01 par value per share, outstanding.

TABLE OF CONTENTS

		PAGE
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)	2
	Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021	2
	Condensed Consolidated Statements of Operations for the three months ended March 31, 2022 and 2021	3
	Condensed Consolidated Statements of Comprehensive Loss for the three months ended March 31, 2022 and 2021	4
	Condensed Consolidated Statements of Shareholders’ Equity for the three months ended March 31, 2022 and 2021	5
	Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	29
Item 4.	Controls and Procedures	29
PART II.	OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	38
Item 3.	Default Upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
	Signatures	40

NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,” “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans, or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

• our future financial performance, including our expectations regarding our revenue, cost of revenue, gross profit, operating expenses, operating cash flow and free cash flow, and our ability to achieve, and maintain, future profitability;

• market acceptance of our products;

• anticipated trends, growth rates and challenges in our business and in the markets in which we operate;

• the effects of increased competition in our markets and our ability to compete effectively;

• our ability to maintain and expand our customer base, including by attracting new customers;

• our ability to successfully expand in our existing markets and into new markets;

• our ability to maintain the security and availability of our software;

• our ability to maintain or increase our net dollar retention rate;

• our ability to develop new products, or enhancements to our existing products, and bring them to market in a timely manner;

• our business model and our ability to effectively manage our growth and associated investments;

• our ability to integrate and realize anticipated synergies from acquisitions of complementary businesses;

• beliefs and objectives for future operations, including regarding our market opportunity;

• our relationships with third parties, including our technology partners and cloud providers;

• our ability to maintain, protect, and enhance our intellectual property rights;

• our ability to successfully defend litigation brought against us;

• our ability to attract and retain qualified employees and key personnel;

• sufficiency of cash to meet cash needs for at least the next 12 months;

• our ability to comply with laws and regulations that currently apply or become applicable to our business in Israel, the United States and internationally;

• our expectations about the impact of natural disasters, public health epidemics, such as COVID-19, protests or riots, and geopolitical tensions or war, such as the war in Ukraine, on our business, results of operations and financial condition; and

• the future trading prices of our ordinary shares.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, or investments we may make.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

1

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

JFROG LTD.

CONDENSED Consolidated Balance SheetS

(in thousands, except share and per share data)

(unaudited)

	As of
	March 31, 2022			December 31, 2021
Assets
Current assets:
Cash and cash equivalents	$	59,577		$	68,284
Short-term investments		368,073			352,844
Accounts receivable, net		49,389			50,483
Deferred contract acquisition costs		5,949			5,271
Prepaid expenses and other current assets		24,363			22,140
Total current assets		507,351			499,022
Property and equipment, net		7,377			6,689
Deferred contract acquisition costs, noncurrent		10,499			9,120
Operating lease right-of-use assets		24,235			25,999
Intangible assets, net		45,138			47,980
Goodwill		247,955			247,776
Other assets, noncurrent		13,841			15,942
Total assets	$	856,396		$	852,528
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable	$	12,050		$	10,868
Accrued expenses and other current liabilities		28,891			27,954
Operating lease liabilities		7,205			7,293
Deferred revenue		134,611			129,149
Total current liabilities		182,757			175,264
Deferred revenue, noncurrent		17,772			17,957
Operating lease liabilities, noncurrent		17,943			20,014
Other liabilities, noncurrent		1,406			712
Total liabilities		219,878			213,947
Commitments and contingencies (Note 10)
Shareholders’ equity:
Preferred shares, NIS 0.01 par value per share; 50,000,000 shares authorized; 0 issued and outstanding as of March 31, 2022 and December 31, 2021		—			—
Ordinary shares, NIS 0.01 par value per share, 500,000,000 shares authorized; 98,641,858 and 97,312,040 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively		276			272
Additional paid-in capital		795,808			776,690
Accumulated other comprehensive income (loss)		(870	)		611
Accumulated deficit		(158,696	)		(138,992	)
Total shareholders’ equity		636,518			638,581
Total liabilities and shareholders’ equity	$	856,396		$	852,528

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

2

JFROG LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)

	Three Months Ended March 31,
	2022			2021
Revenue:
Subscription—self-managed and SaaS	$	59,069		$	41,338
License—self-managed		4,627			3,749
Total subscription revenue		63,696			45,087
Cost of revenue:
Subscription—self-managed and SaaS		13,643			8,236
License—self-managed		220			191
Total cost of revenue—subscription		13,863			8,427
Gross profit		49,833			36,660
Operating expenses:
Research and development		27,101			13,836
Sales and marketing		29,180			19,765
General and administrative		12,691			13,671
Total operating expenses		68,972			47,272
Operating loss		(19,139	)		(10,612	)
Interest and other income, net		273			360
Loss before income taxes		(18,866	)		(10,252	)
Income tax expense (benefit)		838			(2,357	)
Net loss	$	(19,704	)	$	(7,895	)
Net loss per share, basic and diluted	$	(0.20	)	$	(0.09	)
Weighted-average shares used in computing net loss per share, basic and diluted		97,883,814			92,679,756

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

3

JFROG LTD.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2022			2021
Net loss	$	(19,704	)	$	(7,895	)
Other comprehensive loss, net of tax:
Unrealized losses on available-for-sale marketable securities, net		(717	)		(30	)
Unrealized losses on derivative instruments, net		(764	)		(611	)
Other comprehensive loss		(1,481	)		(641	)
Comprehensive loss	$	(21,185	)	$	(8,536	)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4

JFROG LTD.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

	Three Months Ended March 31, 2022
	Ordinary Shares				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Shareholders’
	Shares		Amount		Capital		Income (loss)			Deficit			Equity
Balance as of December 31, 2021		97,312,040	$	272	$	776,690	$	611		$	(138,992	)	$	638,581
Issuance of ordinary shares upon exercise of share options		1,017,669		3		1,792		—			—			1,795
Issuance of ordinary shares upon release of restricted share units		109,416		—		—		—			—			—
Issuance of ordinary shares under the employee share purchase plan		154,550		1		3,252		—			—			3,253
Issuance of ordinary shares related to business combination		48,183		—		—		—			—			—
Share-based compensation expense		—		—		14,074		—			—			14,074
Other comprehensive loss, net of tax		—		—		—		(1,481	)		—			(1,481	)
Net loss		—		—		—		—			(19,704	)		(19,704	)
Balance as of March 31, 2022		98,641,858	$	276	$	795,808	$	(870	)	$	(158,696	)	$	636,518

	Three Months Ended March 31, 2021
	Ordinary Shares				Additional Paid-in		Accumulated Other Comprehensive			Accumulated			Total Shareholders’
	Shares		Amount		Capital		Income (Loss)			Deficit			Equity
Balance as of December 31, 2020		92,112,447	$	257	$	628,054	$	372		$	(74,789	)	$	553,894
Issuance of ordinary shares upon exercise of share options		1,305,571		4		2,286		—			—			2,290
Issuance of ordinary shares related to business combination		49,823		—		—		—			—			—
Share-based compensation expense		—		—		11,750		—			—			11,750
Other comprehensive loss, net of tax		—		—		—		(641	)		—			(641	)
Net loss		—		—		—		—			(7,895	)		(7,895	)
Balance as of March 31, 2021		93,467,841	$	261	$	642,090	$	(269	)	$	(82,684	)	$	559,398

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5

JFROG LTD.

CONDENSED Consolidated StatementS of Cash Flows

(in thousands)

(unaudited)

	Three Months Ended March 31,
	2022			2021
Cash flows from operating activities:
Net loss	$	(19,704	)	$	(7,895	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		3,519			1,006
Share-based compensation expense		14,074			11,750
Non-cash operating lease expense		1,806			1,278
Net amortization of premium or discount on investments		1,628			1,343
Changes in operating assets and liabilities:
Accounts receivable		1,094			(14,375	)
Prepaid expenses and other assets		(889	)		(2,386	)
Deferred contract acquisition costs		(2,057	)		(1,384	)
Accounts payable		960			(954	)
Accrued expenses and other liabilities		1,524			3,658
Operating lease liabilities		(2,201	)		(1,367	)
Deferred revenue		5,277			18,137
Net cash provided by operating activities		5,031			8,811
Cash flows from investing activities:
Purchases of short-term investments		(92,211	)		(88,580	)
Maturities and sales of short-term investments		74,637			61,825
Purchases of property and equipment		(1,143	)		(1,135	)
Payments related to business combination		(179	)		—
Net cash used in investing activities		(18,896	)		(27,890	)
Cash flows from financing activities:
Proceeds from exercise of share options		1,795			2,290
Proceeds from employee share purchase plan		3,253			—
Proceeds from employee equity transactions, net of payments to be remitted to tax authorities		107			(1,008	)
Net cash provided by financing activities		5,155			1,282
Net decrease in cash, cash equivalents, and restricted cash		(8,710	)		(17,797	)
Cash, cash equivalents, and restricted cash—beginning of period		68,540			164,739
Cash, cash equivalents, and restricted cash—end of period	$	59,830		$	146,942
Reconciliation of cash, cash equivalents, and restricted cash within the Condensed Consolidated Balance Sheets to the amounts shown in the Condensed Consolidated Statements of Cash Flows above:
Cash and cash equivalents	$	59,577		$	146,676
Restricted cash included in prepaid expenses and other current assets		13			14
Restricted cash included in other assets, noncurrent		240			252
Total cash, cash equivalents, and restricted cash	$	59,830		$	146,942

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

6

JFROG LTD.

NOTES TO CONDENSED Consolidated StatementS

(unaudited)

1. Organization and Description of Business

JFrog Ltd. (together with its subsidiaries, “JFrog”, or the “Company”) was incorporated under the laws of the State of Israel in 2008. JFrog provides an end-to-end, hybrid, universal DevOps Platform that powers the software supply chain, enabling organizations to continuously deliver software updates across any system. JFrog’s platform is the critical bridge between software development and deployment of that software, paving the way for the modern DevOps paradigm. The Company enables organizations to build and release software faster and more securely while empowering developers to be more efficient. The Company’s solutions are designed to run on-premise, in public or private clouds, or in hybrid environments.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting, and include the accounts of JFrog Ltd. and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated balance sheet as of December 31, 2021 was derived from the audited consolidated financial statements as of that date, but does not include all of the disclosures, including certain notes required by GAAP on an annual reporting basis. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on February 11, 2022.

In management’s opinion, the unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments necessary for the fair presentation of the Company’s financial position as of March 31, 2022 and the Company’s consolidated results of operations, shareholders’ equity, and cash flows for the three months ended March 31, 2022 and 2021. The results for the three months ended March 31, 2022 are not necessarily indicative of the results to be expected for the full year ending December 31, 2022 or any other future interim or annual period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of revenue and expenses during the reporting periods and accompanying notes. Significant items subject to such estimates and assumptions include, but are not limited to, the allocation of transaction price among various performance obligations, the estimated customer life on deferred contract acquisition costs, the allowance for credit losses, the fair value of financial assets and liabilities, including the fair value of derivatives, the fair value of acquired intangible assets and goodwill, the useful lives of acquired intangible assets and property and equipment, the incremental borrowing rate for operating leases, loss contingency, the fair value of share purchase rights granted under the Company’s employee share purchase plan, and the valuation of deferred tax assets and uncertain tax positions. The Company bases these estimates on historical and anticipated results, trends and various other assumptions that it believes are reasonable under the circumstances, including assumptions as to future events. Actual results could differ from those estimates.

Significant Accounting Policies

The Company’s significant accounting policies are discussed in Note 2, Summary of Significant Accounting Policies, in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no significant changes to these policies during the three months ended March 31, 2022.

7

Geographical Information

Revenue by geographical region can be found in the revenue recognition disclosure in Note 3 below. The following table presents the Company’s long-lived assets by geographic region, which consists of property and equipment, net and operating lease right-of-use assets:

	March 31, 2022		December 31, 2021
	(in thousands)
United States	$	10,516	$	10,845
Israel		17,564		18,165
Rest of world		3,532		3,678
Total long-lived assets	$	31,612	$	32,688

3. Revenue Recognition

Disaggregation of Revenue

The following table presents revenue by category:

	Three Months Ended March 31,
	2022					2021
	Amount		Percentage of Revenue			Amount		Percentage of Revenue
	(in thousands, except percentages)
Self-managed subscription	$	46,922		74	%	$	34,823		77	%
Subscription		42,295		67			31,074		69
License		4,627		7			3,749		8
SaaS		16,774		26			10,264		23
Total subscription revenue	$	63,696		100	%	$	45,087		100	%

The following table summarizes revenue by region based on the shipping address of customers:

	Three Months Ended March 31,
	2022					2021
	Amount		Percentage of Revenue			Amount		Percentage of Revenue
	(in thousands, except percentages)
United States	$	39,717		62	%	$	28,292		63	%
Israel		1,623		3			893		2
Rest of world		22,356		35			15,902		35
Total subscription revenue	$	63,696		100	%	$	45,087		100	%

Contract Balances

Of the $147.1 million and $102.8 million of deferred revenue recorded as of December 31, 2021 and 2020, respectively, the Company recognized $47.9 million and $32.9 million as revenue during the three months ended March 31, 2022 and 2021, respectively.

Remaining Performance Obligation

The Company’s remaining performance obligations are comprised of product and service revenue not yet delivered. As of March 31, 2022, the aggregate amount of the transaction price allocated to remaining performance obligations was $172.1 million, which consists of billed considerations of $152.4 million and unbilled considerations of $19.7 million, that the Company expects to recognize as revenue. As of March 31, 2022, the Company expects to recognize 83