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What changed in JFrog Ltd's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of JFrog Ltd's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+399 added−395 removedSource: 10-K (2024-02-15) vs 10-K (2023-02-09)

Top changes in JFrog Ltd's 2023 10-K

399 paragraphs added · 395 removed · 322 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

94 edited+17 added−6 removed75 unchanged
Biggest changeOur fully integrated suite of products allows our customers to compile software from source code repositories, manage the dependencies among components within software packages, move these packages to a universal repository, manage and automate the usage of open source libraries and packages, scan for vulnerabilities through various stages, distribute to endpoints, and 6 Table of Contents deploy in production, all through a single user access point.
Biggest changeOur platform is designed to be agnostic to the programming languages, source code repositories, and development technologies that our customers use, and the type of production environments to which they deploy. 6 Table of Contents Our fully integrated suite of products allows our customers to compile software from source code repositories, curate the importation of external packages, manage the dependencies among components within software packages, keep these packages under a single universal repository, manage and automate the usage of open source libraries and packages, scan for vulnerabilities through various stages and contexts, distribute to endpoints, and deploy in production, all through a single user access point.
JFrog Enterprise X customers are also able to purchase the full suite of JFrog security products. • JFrog Enterprise Plus . JFrog Enterprise Plus provides the same features as JFrog Enterprise X, with the addition of JFrog Pipelines, JFrog Insight, JFrog Distribution, and JFrog Artifactory Edge.
JFrog Enterprise X customers are also able to purchase the full suite of JFrog security products. • JFrog Enterprise+ (Enterprise Plus) . JFrog Enterprise Plus provides the same features as JFrog Enterprise X, with the addition of JFrog Pipelines, JFrog Insight, JFrog Distribution, and JFrog Artifactory Edge.
Additionally, we may compete with start-up and open source technologies across the categories described above. Many of our competitors have greater financial, technical, and other resources, greater brand recognition, larger sales forces and marketing budgets, broader distribution networks, more diverse product and services offerings, and larger and more mature intellectual property portfolios.
Additionally, we may compete with start-up and open source technologies across the categories described above. Many of our competitors have greater financial, technical, and other resources, greater brand recognition, larger sales forces and marketing budgets, broader distribution networks, diverse product and services offerings, and larger and more mature intellectual property portfolios.
They may be able to leverage these resources to gain business in a manner that discourages customers from purchasing our offerings. Furthermore, we expect that our industry will continue to attract new companies, including smaller emerging companies, which could introduce new offerings. We may also expand into new technology or geographical markets and encounter additional competitors in such markets.
They may be able to leverage these resources to gain business in a manner that discourages customers from purchasing our offerings. Furthermore, we expect that our industry will continue to attract new investments, including smaller emerging companies, which could introduce new offerings. We may also expand into new technology or geographical markets and encounter additional competitors in such markets.
Our open source, freemium, and free trial options provide low-friction entry points for customers, who often upgrade to paid and higher-tiered subscriptions as they increase their usage of our products through the identification of new use cases, the need for additional functionality, or the adoption of our products by new teams or in new geographies.
Our open source and free trial options provide low-friction entry points for customers, who often upgrade to paid and higher-tiered subscriptions as they increase their usage of our products through the identification of new use cases, the need for additional functionality, or the adoption of our products by new teams or in new geographies.
Software packages are increasingly created by both humans and machines as software build and release workflows are automated, and can also be imported from external sources, such as open source libraries and repositories. The increasingly large volumes and complexity of packages within organizations’ software development ecosystems require a new, systematic, and automated approach to the management of packages.
Software packages are increasingly created by both humans and machines as software build and release workflows are automated, and can also be imported from external sources, such as open source libraries and repositories. The increasingly large volumes and complexity of packages within organizations’ software development ecosystems require a new, systematic, and automated approach to trusted management of packages.
Through our JFrog Artifactory package management solution, software developers and IT operators are able to automatically fetch software packages from public and private repositories, ensure that packages are consistent across their organizations’ instances of JFrog Artifactory, scan for vulnerabilities and contextual errors with our security solutions, and manage dependencies among packages.
Through our JFrog Artifactory package management solution, software developers, security teams, and IT operators are able to automatically fetch software packages from public and private repositories, ensure that packages are consistent across their organizations’ instances of JFrog Artifactory, scan for vulnerabilities and contextual errors with our security solutions, and manage dependencies among packages.
Code repositories, which store and manage source code, are helpful and important developer tools, but cannot efficiently take software that was written by developers and deploy it in runtime environments because they are not purpose-built to manage and cache binary files.
Code repositories, which store and manage source code, are helpful and important developer tools, but cannot efficiently take software that was written by developers and deploy it in runtime environments because they are not purpose-built to manage, cache and secure binary files.
Software as it is written by a developer, in source code, cannot be deployed in a runtime environment. In order for software to run in production, source code is transformed into executable binary files that can be understood by and run on a server or device.
Software as it is written by a developer, in source code, cannot be deployed in a runtime environment. In order for software to run in production, source code is transformed into or packaged into executable binary files that can be understood by and run on a server or device.
We have an unwavering commitment to the software developer, security and IT operator communities, and show this commitment by offering varying forms of free access to our products in addition to the paid subscriptions described above.
We have an unwavering commitment to the software developer, security teams, and IT operator communities, and show this commitment by offering varying forms of free access to our products in addition to the paid subscriptions described above.
Our consistent product innovation, thought leadership in software supply chain management, and knowledge sharing with software developer, security and IT operator communities engender trust that fuels increased usage of our products.
Our consistent product innovation, thought leadership in software supply chain management, and knowledge sharing with software developer, security teams, and IT operator communities engender trust that fuels increased usage of our products.
Our customer support personnel provide extensive engineering-level support directly to software developers, security and IT operators, ensuring those individuals who use our products most are set up to succeed.
Our customer support personnel provide extensive engineering-level support directly to software developers, security teams, and IT operators, ensuring those individuals who use our products most are set up to succeed.
Many companies address only certain parts of the DevOps cycle and may compete with a limited set of JFrog offerings, including Microsoft’s GitHub, GitLab, Inc. and Sonatype. • Cloud providers.
Many companies address only certain parts of the DevOps cycle and may compete with a limited set of JFrog offerings, including Microsoft’s GitHub, GitLab, Inc., Cloudsmith and Sonatype. • Cloud providers.
Our products are available for self-managed, software-as-a-service (“SaaS”), and hybrid deployments. While we believe we compete successfully on the above factors, particularly with regards to the comprehensive nature of our solutions, we do experience competition in each of these categories with different vendors: • Home grown solutions.
Our products are available for self-managed, software-as-a-service (“SaaS”), multi-cloud, and hybrid deployments. While we believe we compete successfully on the above factors, particularly with regards to the comprehensive nature of our solutions, we do experience competition in each of these categories with different vendors: • Home grown solutions.
Some security-focused companies may compete with a subset of JFrog’s holistic security offerings or address only developer-level security, such as Aqua Security, Snyk, Sonatype and Synopsys. • Diversified vendors. Some diversified technology companies, such as IBM, Inc. (including Red Hat), Pivotal Software and VMware, Inc. may have offerings that compete with certain JFrog products.
Some security-focused companies may compete with a subset of JFrog’s holistic security offerings or address only developer-level security, such as Aqua Security, Snyk, Sonatype and Synopsys. • Diversified vendors. Some diversified technology companies, such as IBM, Inc. (including Red Hat), Pivotal Software and VMware, Inc. (now Broadcom Inc.) may have offerings that compete with certain JFrog products.
As of December 31, 2022, we hold a number of active patents and have filed patent applications both in the U.S. and in other countries. We cannot assure you whether any of our patent applications will result in the issuance of a patent or whether the examination process will require us to narrow our claims.
As of December 31, 2023, we hold a number of active patents and have filed patent applications both in the U.S. and in other countries. We cannot assure you whether any of our patent applications will result in the issuance of a patent or whether the examination process will require us to narrow our claims.
Our platform supports a wide variety of enterprise-scale storage capabilities and also accommodates spikes in usage without compromised performance. The JFrog Platform supports High 8 Table of Contents Availability cluster configuration, in which redundant components are created to maximize network uptime, and can therefore seamlessly serve nearly any number of concurrent users, build servers, and interactions. • Trusted and secure.
Our platform supports a wide variety of enterprise-scale storage capabilities and also accommodates spikes in usage without compromised performance. The JFrog Platform supports High Availability cluster configuration, in which redundant components are created to maximize network uptime, and can therefore seamlessly serve nearly any number of concurrent users, build servers, and interactions. • Trusted and secure.
Organizations need tools that can turn source code into binary files, store, manage, and secure these binaries, and then create software packages, or combinations of one or more binary files, that can be released and deployed to runtime environments.
Organizations need tools that can turn source code and other resources into binary files, store, manage, and secure these binaries, and then create software packages, or combinations of one or more binary files, that can be released and deployed to runtime environments.
We believe the end state of digital transformation is a non-stop, always-on, secure, continuous delivery of value to users, enabled by a world of version-less software. DevOps enables the software innovation that is driving digital transformation.
We believe the end state of digital transformation is a non-stop, always-on, secure, continuous delivery of value to users, enabled by a world of version-less software. DevOps and DevSecOps enables the software innovation that is driving digital transformation.
Additionally, we engage with prospective end-users through user-centered events, including JFrog swampUP, our annual, global DevOps and user conference, hands-on training events, and co-marketing activities with technology partners and large cloud platforms.
Additionally, we engage with prospective end-users through user-centered events, including JFrog swampUP, our annual, global DevOps and user conference, hands-on training events, persona-driven events, and co-marketing activities with technology partners and large cloud platforms.
In order to address growing customer expectations and regulatory compliance, organizations have dramatically reduced the time between releasing new features and functions and resolving security vulnerabilities, from years to months or even days.
In order to address these growing customer expectations and regulatory compliance, organizations have dramatically reduced the time between releasing new features and functions and resolving security vulnerabilities, from years to months or even days and hours.
The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is https://www.sec.gov. We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website.
The SEC also maintains an Internet website that contains reports, proxy statements and other information about issuers, like us, that file electronically with the SEC. The address of that website is https://www.sec.gov. 17 Table of Contents We webcast our earnings calls and certain events we participate in or host with members of the investment community on our investor relations website.
The core of our platform, JFrog Artifactory, stores software packages and manages the metadata from major package technologies, including Docker, OCI, Debian, RPM, Go, Helm, Kubernetes, NPM, NuGet, Python, Java and Rust.
The center of our platform, JFrog Artifactory, stores software packages and manages the metadata from major package technologies, including Docker, OCI, Debian, RPM, Go, Helm, Kubernetes, NPM, NuGet, Python, Java and Rust.
Our customer success teams are focused on enabling organizations to realize the full benefits of our platform by helping them advance DevOps practices and promoting the adoption of additional products and more advanced functionality of our platform.
Our customer success teams are focused on enabling organizations to realize the full benefits of our platform by helping them advance DevSecOps practices and promoting the adoption of additional products and more advanced functionality of our platform.
JFrog Artifactory supports the major software package technologies and can be seamlessly deployed across public clouds, multi-cloud, on-premises, private cloud, and hybrid environments. As a result, JFrog Artifactory serves as the “single source of truth” for an entire organization’s software packages, ensuring consistency and enabling trust and automation in the software release cycle.
JFrog Artifactory supports all major software package technologies and can be seamlessly deployed across public clouds, multi-cloud, on-premises, private cloud, and hybrid environments. As a result, JFrog Artifactory serves as the “single source of truth” for an entire organization’s software packages, ensuring consistency and enabling trust and automation in the software release process.
We care more; it’s the source of our “better-ness.” Recruiting, Training and Development Our human capital objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees and consultants. We attract new employees by advertising on our JFrog careers website, as well as leveraging our employee referral program.
We care more; it’s the source of our “better-ness.” 16 Table of Contents Recruiting, Training and Development Our human capital objectives include, as applicable, identifying, recruiting, retaining, incentivizing and integrating our existing and new employees and consultants. We attract new employees by advertising on our JFrog careers website, as well as leveraging our employee referral program.
This complete process is often referred to as management of the “software supply chain.” Since our initial launch of JFrog Artifactory, we have consistently innovated and added new products to expand the capabilities of our platform. Today, our platform comprises the full workflow for releasing software.
This complete process is often referred to as management and securing of the “software supply chain.” Since our initial launch of JFrog Artifactory, we have consistently innovated and added new products to expand the capabilities of our platform. Today, our platform comprises the full workflow for releasing trusted, secure software.
Each and every employee has a significant and driving impact on the success of JFrog. Everyone has a voice and everyone’s thoughts and ideas matter. • Innovation. We strive for technological excellence and innovation, stepping outside our comfort zone to achieve more and support market needs. 15 Table of Contents • Team Spirit.
Each and every employee has a significant and driving impact on the success of JFrog. Everyone has a voice and everyone’s thoughts and ideas matter. • Innovation. We strive for technological excellence and innovation, stepping outside our comfort zone to achieve more and support market needs. • Team Spirit.
Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners. 16 Table of Contents Available Information Our website address is https://www.jfrog.com, our investor relations website is https://investors.jfrog.com, our blog https://www.jfrog.com/blog and our Twitter account is @JFrog.
Other trademarks and trade names referred to in this Annual Report on Form 10-K are the property of their respective owners. Available Information Our website address is https://www.jfrog.com, our investor relations website is https://investors.jfrog.com, our blog https://www.jfrog.com/blog and our Twitter account is @JFrog.
JFrog Artifactory stores software packages and uses their metadata in a manner similar to a relational database, enabling software developers and IT operators to manage package versions, organize and track dependencies, and perform replication across geographically distributed sites. • Integrated across the development ecosystem.
JFrog Artifactory then stores software packages and uses their metadata in a manner similar to a relational database, enabling software developers and IT operators to manage package versions, organize and track dependencies, and perform replication of trusted packages across geographically distributed sites. • Integrated across the development ecosystem.
While also partners, cloud providers, such as Amazon Web Services (AWS), Microsoft Azure (including Azure DevOps) and Alphabet Inc.’s Google Cloud, may compete with a subset of JFrog functionality. • Security point solutions.
While also partners, cloud providers, such as Amazon Web Services (AWS), Microsoft Azure (including Azure DevOps) and Alphabet Inc.’s Google Cloud, may compete with a subset of JFrog functionality. 14 Table of Contents • Security point solutions.
We have demonstrated a differentiated ability to retain customers, expand existing customer usage, and cross-sell a broader set of products and features within an organization. Our net dollar retention rate (“ARR”) of 128% as of December 31, 2022 highlights the increasing value of our products to our customer base.
We have demonstrated a differentiated ability to retain customers, expand existing customer usage, and cross-sell a broader set of products and features within an organization. Our net dollar retention rate (“ARR”) of 119% as of December 31, 2023 highlights the increasing value of our products to our customer base.
For example, our workforce is diverse both in ethnicity and gender, including and up to the highest level of management, where four of our 11-member board and four of our 11-member executive management team are women. Compensation and Benefits Our compensation policy is designed to attract, retain and reward personnel.
For example, our workforce is diverse both in ethnicity and gender, including and up to the highest level of management, where three of our 9-member board and four of our 12-member executive management team are women. Compensation and Benefits Our compensation policy is designed to attract, retain and reward personnel.
The need for organizations to better serve their customers, partners, and employees through software is driving the demand for constant innovation of the software build and release workflow. As the pace and variety of software creation have increased, the domains of software “developers” and IT “operators” have converged.
The need for organizations to better serve their customers, partners, and employees through software is driving the demand for constant innovation of the software build and release workflow. As the pace and variety of software creation have increased, the domains of software “developers” and IT “operators” have converged, rapidly including “security” professionals.
All references to our customers included in this Annual Report refer to paying customers. Technology Our proprietary technology, fueled by our optimized database architecture, enables best-in-class reliability, scalability, and performance. 11 Table of Contents Our technology includes the following key attributes: • Universal package management .
All references to our customers included in this Annual Report refer to paying customers. Technology Our proprietary technology, fueled by our optimized database architecture, enables best-in-class reliability, scalability, and performance. Our technology includes the following key attributes: • Universal package management .
Our current paid subscription tiers include JFrog Pro, JFrog Pro X, JFrog Enterprise X, and JFrog Enterprise Plus. • JFrog Pro . JFrog Pro provides access to the universal version of JFrog Artifactory and ongoing updates, upgrades, and bug fixes. • JFrog Pro X .
Our current paid subscription tiers include JFrog Pro, JFrog Pro X, JFrog Enterprise X, and JFrog Enterprise Plus. • JFrog Pro . JFrog Pro provides access to the universal version of JFrog Artifactory and ongoing updates, upgrades, and bug fixes. 10 Table of Contents • JFrog Pro X .
Our Platform We built the world’s first universal software package repository, JFrog Artifactory, to fundamentally transform the way that the software release cycle is managed. Our package-based approach to releasing software allows software releases to be continuous and software to always be current.
Our Platform We built the world’s first universal software package repository, JFrog Artifactory, to fundamentally transform the way that the software supply chain is managed. Our package-based approach to releasing software allows software releases to be continuous and software to always be current.
For the year ended December 31, 2022, our 10 largest customers represented approximately 7% of our total revenue and no single customer accounted for more than 1% of our total revenue. For the year ended December 31, 2022, approximately 37% of our revenue was generated from customers outside of the United States.
For the year ended December 31, 2023, our 10 largest customers represented approximately 7% of our total revenue and no single customer accounted for more than 1% of our total revenue. For the year ended December 31, 2023, approximately 38% of our revenue was generated from customers outside of the United States.
JFrog Insight is our universal DevOps intelligence tool. JFrog Insight integrates with our other products to provide customers with powerful BI and analytics capabilities. JFrog Insight processes and collects key metrics, correlates them across diverse systems, and provides actionable insights to development managers, operations teams, and compliance officers across an organization. • JFrog Connect.
JFrog Insight integrates with our other products to provide customers with powerful BI and analytics capabilities. JFrog Insight processes and collects key metrics, correlates them across diverse systems, and provides actionable insights to development managers, operations teams, and compliance officers across an organization. • JFrog Connect.
In addition, we have 14 Table of Contents international operations and intend to continue to expand these operations, and effective patent, copyright, trademark, and trade secret protection may not be available or may be limited in foreign countries.
In addition, we have international operations and intend to continue to expand these operations, and effective patent, copyright, trademark, and trade secret protection may not be available or may be limited in foreign countries.
Once a user has decided to use our products beyond what is available in open source or freemium versions, or at the end of a free trial, they can upgrade to one of our paid subscriptions, which are priced based on number of servers or usage to align the value we deliver with our customers’ needs as they scale.
Once a user has decided to use our products 13 Table of Contents beyond what is available in open source or at the end of a free trial, they can upgrade to one of our paid subscriptions, which are priced based on number of servers or consumption to align the value we deliver with our customers’ needs as they scale.
Our free trials, freemium offerings, and open source software options provide low-friction entry points for software developers, security and IT operators. Customers often upgrade to paid and higher-tiered subscriptions as they increase their usage of our products. 9 Table of Contents o Provide best-in-class support.
Our free trials and open source software options provide low-friction entry points for software developers, security teams, and IT operators. Customers often upgrade to paid and higher-tiered subscriptions as they increase their usage of our products. o Provide best-in-class support.
This free access takes the form of freemium offerings, free trials, and open source software, and helps generate demand for our paid offerings within the software developer, security and IT operator communities. 10 Table of Contents • Freemium .
This free access takes the form of free trials and open source software, and helps generate demand for our paid offerings within the software developer, security and IT operator communities. • Free Trials .
We believe this approach gives us a competitive advantage, as software developer and IT operator communities have become integral in spreading awareness of our brand, expanding use cases, and promoting the adoption of our platform in the overall organization.
We believe this approach gives us a competitive advantage, as technical communities have become integral in spreading awareness of our brand, expanding use cases, and promoting the adoption of our platform in the overall organization.
We compete on the basis of a number of factors, including: • ability to provide an end-to-end, unified platform for the DevOps workflow; • ability to provide security solutions across software developers and enterprise workflows; • breadth of technologies we support; • breadth of technology integrations; • total cost of ownership; • extensibility across organizations, including software developers, security teams, IT operators, and IT managers; • ability to enable collaboration between software developers, security and IT operators; • ability to deploy our products in any combination of cloud, multi-cloud or on-premises environments; • performance, security, scalability, and reliability in tandem; 13 Table of Contents • quality of customer experience and satisfaction; • quality of customer support; • ease of implementation and use; and • brand recognition and reputation.
We compete on the basis of a number of factors, including: • ability to provide an end-to-end, unified platform for the DevOps and DevSecOps workflows; • ability to provide security solutions across software developers and enterprise workflows; • ability to provide machine learning operation solutions across enterprise workflows; • breadth of technologies we support; • breadth of technology integrations; • total cost of ownership; • extensibility across organizations, including software developers, security teams, AI/ML engineers, data scientists, and IT managers; • ability to enable collaboration between software developers, security teams, and IT operators; • ability to deploy our products in any combination of cloud, multi-cloud or on-premises environments; • performance, security, scalability, and reliability in tandem; • quality of customer experience and satisfaction; • quality of customer support; • ease of implementation and use; and • brand recognition and reputation.
We will continue to invest in building new capabilities and extending our platform to bring the power of software supply chain management to a broader range of use cases, including increased security solutions for DevSecOps and continuing to enable DevOps solutions for devices on the edge.
We will continue to invest in building new capabilities and extending our platform to bring the power of software supply chain management to a broader range of use cases, including maturation of security solutions for DevSecOps, expansion of AI-enabling technologies including MLOps, and continuing to enable DevOps solutions for devices on the edge.
Additionally, we have steadily grown our international presence since inception and intend to continue to expand internationally as DevOps and DevSecOps practices are increasingly adopted around the world. • Expand and develop our technology partnership ecosystem.
Additionally, we 11 Table of Contents have steadily grown our international presence since inception and intend to continue to expand regionally as DevOps and DevSecOps practices are increasingly adopted around the world. • Expand and develop our technology partnership ecosystem.
Our telephone number at this address is + 972 (9)-894-1444. Our agent for service of process in the United States is JFrog, Inc. “JFrog,” our logo, and our other registered or common law trademarks, service marks or trade names appearing in this Annual Report on Form 10-K are the property of JFrog Ltd.
Our agent for service of process in the United States is JFrog, Inc. “JFrog,” our logo, and our other registered or common law trademarks, service marks or trade names appearing in this Annual Report on Form 10-K are the property of JFrog Ltd.
We are also rapidly expanding our enterprise-level and field marketing functions to support our strategic sales team, providing an account-based approach to drive expansion to JFrog solutions amongst our largest customers and prospects.
Our enterprise-level and field marketing functions support our strategic sales team, providing an account-based approach to drive expansion of JFrog solutions amongst our largest customers and prospects.
This allows organizations to effectively and efficiently manage the full software release cycle through a single user access point. • A “blessed” repository for the organization. We designed JFrog Artifactory to be the only package repository that an organization needs.
This allows organizations to effectively and efficiently manage the full software supply chain through a single user access point. 8 Table of Contents • A “blessed” repository for the organization. We designed JFrog Artifactory to be the only package repository that an organization needs.
Scanners that analyze the actual exploit risk of a vulnerability, in-context, based on the environment under which it exists and minimize security "noise" for developers so that they can focus on fixing the impactful issues. Scanners include Contextual Analysis, Service and Application Exposures, IaC Analysis and Secrets Detection. • Hierarchical graph of software packages .
Scanners that analyze the actual exploit risk of a vulnerability, in-context, based on the environment under which it exists and minimize security "noise" for developers so that they can focus on fixing the impactful 12 Table of Contents issues. Scanners include Contextual Analysis, Service and Application Exposures, SAST, IaC Analysis and Secrets Detection. • Package Admission Filtering.
Customers As of December 31, 2022, we had a global customer base of approximately 7,200 organizations across all industries and sizes, including approximately 89% of Fortune 100 organizations.
Customers As of December 31, 2023, we had a global customer base of approximately 7,400 organizations across all industries and sizes, including approximately 83% of Fortune 100 organizations.
As of December 31, 2022, 736 of our customers had ARR of $100,000 or more, increasing from 537 customers as of December 31, 2021, accounting for 62% and 57% of our ARR, respectively. We had 19 customers with ARR of at least $1.0 million as of December 31, 2022, increasing from 15 customers as of December 31, 2021.
As of December 31, 2023, 886 of our customers had ARR of $100,000 or more, increasing from 736 customers as of December 31, 2022, accounting for 68% and 62% of our ARR, respectively. We had 37 customers with ARR of at least $1.0 million as of December 31, 2023, increasing from 19 customers as of December 31, 2022.
To keep software current in today’s environment, software updates need to be released incrementally, and with increased frequency. The proliferation of open source software, availability of newer and more efficient software development technologies, and the increasing interconnectedness of software enable organizations to produce software at an increasing rate.
To keep software current in today’s environment, software updates need to be released incrementally, securely and with increased frequency. 5 Table of Contents The proliferation of open source software, availability of newer and more efficient software development technologies such as generative artificial intelligence (AI) technologies, and the increasing interconnectedness of software enable organizations to produce software at an increasing rate.
Item 1. Business Overview JFrog’s vision is to power a world of continuously updated, version-less software – we call this Liquid Software. We provide an end-to-end, hybrid, universal DevOps Platform that powers and controls the software supply chain, enabling organizations to continuously and securely deliver software updates across any system.
Item 1. Business Overview JFrog’s vision is to power a world of continuously updated, secure, trusted software – we call this Liquid Software. We provide an end-to-end, hybrid, universal Software Supply Chain Platform that enables organizations to continuously and securely create and deliver software updates across any system.
To date, we have been primarily relying on our self-service and inbound sales model. Moving forward, we intend to continue to expand our strategic sales team to identify new use cases and drive expansion and standardization on JFrog’s Software Supply Chain Platform. • Acquire new customers.
While maintaining our self-service and inbound sales model, we intend to continue to expand our strategic sales team to identify new use cases and drive expansion and standardization on JFrog’s Software Supply Chain Platform. • Acquire new customers.
Department of Commerce, and our activities may be subject to certain trade and economic sanctions. Any failure or perceived failure to comply with laws and regulations that currently apply or become applicable to our business in Israel, the United States and internationally could have an adverse effect on our business and results of operations.
Any failure or perceived failure to comply with laws and regulations that currently apply or become applicable to our business in Israel, the United States and internationally could have an adverse effect on our business and results of operations.
Our platform is designed to manage and deploy all types of software packages within an organization, making it the system of record for an organization’s software, and is often called the “database of DevOps.” Software and the Business Environment The volume and importance of software in the business environment is exploding.
Our platform is designed to universally manage and deploy all types of software packages, including machine learning models, within an organization, making it the system of record for an organization’s secure software release processes, often called the “database of DevOps.” Software and the Business Environment The volume and importance of software in the business environment is increasing exponentially.
We are registered with the Registrar of Companies under the company number 514130491. Our main place of business in the United States is located at 270 E. Caribbean Drive, Sunnyvale, California 94089. Our telephone number at this address is (408) 329-1540. Our registered office is located at 3 HaMahshev Street, Netanya, 4250465, Israel.
Our main place of business in the United States is located at 270 E. Caribbean Drive, Sunnyvale, California 94089. Our telephone number at this address is (408) 329-1540. Our registered office is located at 3 HaMahshev Street, Netanya, 4250465, Israel. Our telephone number at this address is + 972 (9)-894-1444.
JFrog Enterprise Plus customers are also able to purchase the full suite of JFrog security products. • Additional, optional subscriptions. o JFrog Advanced Security, with functionality for Infrastructure as Code scanning, container scanning, contextual analysis and more, is available as an optional, add-on subscription for Enterprise X and Enterprise Plus subscribers, as well as through private offers in the cloud marketplaces. o JFrog Connect functionality for IoT devices is available for separate purchase while in early production phases.
JFrog Enterprise Plus customers are also able to purchase the full suite of JFrog security products. • Additional, optional subscriptions. o JFrog Advanced Security , with functionality for Infrastructure as Code scanning, container scanning, contextual analysis and more, is available as an optional, add-on subscription for Enterprise X and Enterprise Plus subscribers, as well as through private offers in the cloud marketplaces. o JFrog Curation functions as a guardian outside the software development pipeline, controlling the admission of packages into an organization, primarily from open source or public repositories. o JFrog Connect functionality for IoT devices is available for separate purchase while in early production phases.
This platform is the critical bridge between software development and deployment of that software, paving the way for the modern DevOps paradigm. We enable organizations to build and release software faster and more securely while empowering developers to be more efficient.
This platform is the critical bridge between software development and deployment of that software, paving the way for modern software supply chain management and software release processes. We enable organizations to build and release software faster and more securely while empowering developers, security teams and Machine Learning Operations (MLOps) teams to be more efficient.
All software packages on our platform are fully traceable, ensuring the accuracy and reliability of software applications. To enhance application quality while minimizing risk, our security controls offer customizable governance policies to specific software packages and complete auditing capabilities and business impact analysis. Benefits to Software Developers and IT Operators • Easy, secure, and automated package management.
To enhance application quality while minimizing risk, our security controls offer customizable governance policies to specific software packages and complete auditing capabilities and business impact analysis. Benefits to Software Developers, Security Teams, and IT Operators • Easy, secure, and automated package management.
Natively integrated with JFrog’s Artifactory binary repository and JFrog Xray’s software composition analysis solutions, JFrog Advanced Security capabilities, including secrets detection, contextual analysis, IaC scanning, container scanning and more, offer holistic coverage for software supply chain security at scale. • JFrog Distribution . JFrog Distribution provides reliable, scalable, and secure software package distribution with enterprise-grade performance.
Natively integrated with JFrog’s Artifactory binary repository and JFrog Xray’s software composition analysis solutions, JFrog Advanced Security capabilities, including source code scanning (SAST), secrets detection, contextual analysis, IaC scanning, container scanning, malicious ML model detection and more, offer holistic coverage for software supply chain security at scale. • JFrog Distribution .
Organizations need tools that can turn source code into binary files, store, manage and secure these binaries, and then create software packages, or combinations of one or more binary files, that can be released and deployed to runtime environments. In addition, the vast majority of applications are built utilizing open source software that enters organizations in the form of binaries.
Organizations need tools that can turn source code and other components into binary files, store, manage and secure these binaries, and then create software packages, or combinations of one or more binary files, that can be released and deployed to runtime environments.
Tracking and managing software at the package level enables organizations to make incremental updates to software, eliminating the need for software versions. Package management allows software releases to be continuous, and capable of handling the volume, variety, and velocity of software required today.
Tracking and managing software at the package level enables organizations to make incremental updates to software, and deliver trusted software bill of materials (SBOMs) alongside their software releases. Package management allows software releases to be continuous, and capable of handling the volume, variety, security and velocity of trusted software required today.
We enable organizations to securely store all package types in a common repository where they can be edited, tracked, and managed. Our unified platform connects all of the software release processes involved in building and releasing software, enabling continuous releases.
We enable organizations to securely store all package types in a common repository where they can be tagged, tracked, and managed. Our unified platform connects all of the software release processes involved in building and releasing software, and enables trust by offering a single source of truth for all software release inputs and outputs.
Sales We primarily employ a self-service and inbound sales model, which makes it easy for customers to try, adopt, and use our products, creating a highly efficient sales motion. Our customers can start with an open source version of JFrog Artifactory, freemium product offerings, or free trial subscription options, or land directly with one of our paid subscription tiers.
Sales Flexible self-service, inbound and strategic enterprise sales approaches make it easy for customers to try, adopt, and use our products in a way most advantageous for them, creating a highly efficient sales motion. Our customers can start with an open source version of JFrog Artifactory, free trial subscription options, or land directly with one of our paid subscription tiers.
The DevOps Workflow DevOps enables the software innovation that is driving digital transformation. As the domains of software developers and IT operators have converged, DevOps has emerged as a discipline that integrates software development and operations, shortening, automating, and improving the software build and release workflow.
As the domains of software developers and IT operators have converged, DevOps has emerged as a discipline that integrates software development and operations, shortening, automating, and improving the software build and release workflow. DevOps is a combination of technologies, methodologies, and culture that powers a continuous, fast, and secure software release cycle.
For example, we are subject to numerous laws, directives, and regulations regarding privacy, data protection, and data security and the collection, storing, sharing, use, processing, transfer, disclosure, and protection of personal information and other data. In addition, in some cases, our software is subject to export control laws and regulations, including the Export Administration Regulations administered by the U.S.
For example, we are subject to numerous laws, directives, and regulations regarding privacy, data protection, and data security and the collection, storing, sharing, use, processing, transfer, disclosure, and protection of personal information and other data.
Business Model We combine bottom-up and top-down approaches in our business model. The bottom-up approach is community focused, driving increased usage of our products, in which we focus on demonstrating the value that our products can provide to software developers, security teams and IT operators.
The bottom-up approach is community focused, driving increased usage of our products, in which we focus on demonstrating the value that our products can provide to software developers, security teams and IT operators. Once customers are of a certain size, we engage in a top-down approach for full platform adoption that focuses on enterprise values.
JFrog Artifactory Edge sits downstream from JFrog Distribution, providing reliable deployment of software packages at the actual locations where updates are executed.
JFrog Artifactory Edge is a specialized, read-only version of JFrog Artifactory, co-located close to the runtime environment. JFrog Artifactory Edge sits downstream from JFrog Distribution, providing reliable deployment of software packages at the actual locations where updates are executed.
JFrog Artifactory’s ability to search for, manage, and cache software packages from different sources enables software developers and IT operators to execute faster and take advantage of innovation throughout the broader software development ecosystem. As an organization’s development environment changes, our products automatically adjust, with little to no downtime or the need for complex migrations.
JFrog Artifactory’s ability to search for, manage, and cache software packages from different sources enables software developers and IT operators to execute faster and take advantage of innovation throughout the broader software development ecosystem.
In order for software to run in production, source code is transformed into executable binary files that can be understood by and run on a server or device.
The Importance of Software Packages Software as it is written by a developer, in source code, cannot be deployed in a runtime environment. In order for software to run in production, source code and other components are transformed or packaged into executable binary files that can be understood by and run on a server or device.
Based on the results of our annual employee surveys, we believe the CODEX will continue to support our growth and success moving forward: • Integrity. We subscribe to presenting the truth, honestly, even if it’s subjective, in order to achieve mutual well-being and transparency. We might make mistakes, but we always play fair. • Community and Customer Happiness.
We subscribe to presenting the truth, honestly, even if it’s subjective, in order to achieve mutual well-being and transparency. We might make mistakes, but we always play fair. • Community and Customer Happiness.
Our freemium product offerings, free trial subscription options, and open source version of JFrog Artifactory increase software developer, security and IT operator familiarity with our products, and allow for low-friction product adoption.
Our free trial subscription options and open source version of JFrog Artifactory increase software developer, security and IT operator familiarity with our products, and allow for low-friction product adoption. MLOps functionality may expose JFrog solutions to new audiences such as AI/ML Engineers and Data Scientists.
Community free services include a limited version of Artifactory as well as a community version for C/C++ developers (Conan). • Free Trials . We offer time-limited free trials of our platform that allow prospective customers to test the full functionality of a JFrog subscription within their environments or in the cloud.
We offer time-limited free trials of our platform that allow prospective customers to test the full functionality of a JFrog subscription within their environments or in the cloud. At the end of this trial period, prospective customers must pay for a subscription in order to continue utilizing JFrog services.
We enable organizations to analyze software packages for vulnerabilities, rapid remediation, license compliance, and quality issues in near real-time. Our fully integrated security solutions enable continuous automation of security policies. Our platform embeds security into the DevOps workflow, allowing organizations to have speed and control in the software release cycle.
We enable organizations to analyze software packages for vulnerabilities, rapid remediation, license compliance, and quality issues in near real-time. Our fully integrated security solutions enable continuous automation of security policies from before a package enters the organization through to deployment to the runtime.
We strive to make software developers, security teams and IT operators more efficient, effective, and productive, and create champions of JFrog in the process. • Our go-to-market strategy. o Make software developers, security teams, and IT operators successful.
To support growth of large strategic customers, JFrog also empowers a direct sales team supported by dedicated DevSecOps technical staff. We strive to make software developers, security teams and IT operators more efficient, effective, and productive, and create champions of JFrog in the process. • Our go-to-market strategy. o Make software developers, security teams, ML engineers, and IT operators successful.
While many software development technologies today address aspects of a particular segment of DevOps, JFrog provides the common ground for software developers, security teams and IT operators, making it integral to the DevOps and DevSecOps workflow. The Importance of Software Packages Software as it is written by a developer, in source code, cannot be deployed in a runtime environment.
While many software development technologies today address aspects of a particular segment of DevOps, JFrog provides the common ground for software developers, security teams and IT operators, making it integral to the DevOps and DevSecOps workflows to create trusted software releases.
JFrog Mission Control is our platform control panel, providing a high-level view of all the moving pieces of an organization’s software supply chain workflow. JFrog Mission Control allows users to configure and view services under administrative control, whether across any public cloud, on-premise, private cloud, or hybrid environment, or at geographically dispersed development sites. • JFrog Insight .
As part of JFrog Artifactory, JFrog Mission Control allows users to configure and view services under administrative control, whether across any public cloud, on-premise, private cloud, or hybrid environment, or at geographically dispersed development sites. • JFrog Insight . JFrog Insight is our universal DevOps intelligence tool.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeOur actual or perceived failure to comply with such obligations could harm our business. • A breach of our security measures or unauthorized access to proprietary and confidential data, or a perception that any security breach or other incident has occurred, may result in our platform or products being perceived as not secure, lower customer use or stoppage of use of our products, and significant liabilities. • Our international operations and expansion expose us to risk. • The concentration of our share ownership with insiders will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring shareholder approval. • Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations. • If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired. • The impact of the ongoing COVID-19 pandemic, the Russia-Ukraine conflict and other areas of geopolitical tension around the world, and the related global economic disruptions could continue to harm our business and results of operations.
Biggest changeOur actual or perceived failure to comply with such obligations could harm our business. • A breach of our security measures or unauthorized access to proprietary and confidential data, or a perception that any security breach or other incident has occurred, may result in our platform or products being perceived as not secure, lower customer use or stoppage of use of our products, and significant liabilities. • Our international operations and expansion expose us to risks. • Your rights and responsibilities as our shareholder are governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations. • If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable regulations could be impaired. • The impact of the war between Israel and Hamas, the war between Russia and Ukraine, and other areas of geopolitical tension around the world, including the related global economic disruptions, remains uncertain at this time, and could harm or continue to harm our business and results of operations.
If our customers renew their subscriptions, they may renew for shorter subscription terms or on other terms that are less economically beneficial to us. Furthermore, our self-managed products are sold with perpetual licenses and we depend on the deployment of material updates to such products to drive renewals.
If our customers renew their subscriptions, they may renew for shorter subscription terms or on other terms that are less economically beneficial to us. Furthermore, our self-managed products are sold with perpetual or subscription licenses and we depend on the deployment of material updates to such products to drive renewals.
We are subject to various governmental export control, trade sanctions, and import laws and regulations that could impair our ability to compete in international markets or subject us to liability if we violate these controls. In some cases, our software is subject to export control laws and regulations, including the Export Administration Regulations administered by the U.S.
We are subject to various governmental export controls, trade sanctions, and import laws and regulations that could impair our ability to compete in international markets or subject us to liability if we violate these controls. In some cases, our software is subject to export control laws and regulations, including the Export Administration Regulations administered by the U.S.
Despite our efforts, our systems and those of our vendors and service providers also are potentially vulnerable to computer malware, viruses, computer hacking, fraudulent use, social engineering attacks, phishing attacks, ransomware attacks, credential stuffing attacks, denial-of-service attacks, unauthorized access, exploitation of bugs, defects, and vulnerabilities, breakdowns, damage, interruptions, system malfunctions, power outages, terrorism, acts of vandalism, failures, security breaches and incidents, inadvertent or intentional actions by our employees, contractors, consultants, partners, and/or other third parties, and other real or perceived cyberattacks.
Despite our efforts, our systems and those of our vendors, service providers, and strategic partners also are potentially vulnerable to computer malware, viruses, computer hacking, fraudulent use, social engineering attacks, phishing attacks, ransomware attacks, credential stuffing attacks, denial-of-service attacks, unauthorized access, exploitation of bugs, defects, and vulnerabilities, breakdowns, damage, interruptions, system malfunctions, power outages, terrorism, acts of vandalism, failures, security breaches and incidents, inadvertent or intentional actions by our employees, contractors, consultants, partners, and/or other third parties, and other real or perceived cyberattacks.
A security breach could result in reputational damage, litigation, regulatory investigations and orders, loss of business, indemnity obligations, damages for contract breach, penalties for violation of applicable laws, regulations, or contractual obligations, and significant costs, fees and other monetary payments for remediation, including in connection with forensic examinations and costly and burdensome breach notification requirements.
A security breach or other incident could result in reputational damage, litigation, regulatory investigations and orders, loss of business, indemnity obligations, damages for contract breach, penalties for violation of applicable laws, regulations, or contractual obligations, and significant costs, fees and other monetary payments for remediation, including in connection with forensic examinations and costly and burdensome breach notification requirements.
The present conditions and state of the U.S. and global economies make it difficult to predict whether, when and to what extent a recession has occurred or will occur in the near future. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry.
The present conditions and state of the U.S. and global economies make it difficult to predict whether, when and to what extent a recession has occurred or will occur in the future. We cannot predict the timing, strength or duration of any economic slowdown, instability or recovery, generally or within any particular industry.
You should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Even if our revenue continues to increase, we expect our revenue growth rate to decline in future periods. For example, we have experienced slowed growth during the COVID-19 pandemic.
You should not rely on the revenue growth of any prior quarterly or annual period as an indication of our future performance. Even if our revenue continues to increase, we expect our revenue growth rate to decline in future periods. For example, we experienced slowed growth during the COVID-19 pandemic.
Consequently, investors who purchase our ordinary shares may be unable to realize a gain on their investment except by selling sell such shares after price appreciation, which may never occur. Our board of directors has sole discretion whether to pay dividends.
Consequently, investors who purchase our ordinary shares may be unable to realize a gain on their investment except by selling such shares after price appreciation, which may never occur. Our board of directors has sole discretion whether to pay dividends.
Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws against us or our non-U.S. officers or directors reasoning that Israeli is not the most appropriate forum to hear such a claim.
Israeli courts may refuse to hear a claim based on an alleged violation of U.S. securities laws against us or our non-U.S. officers or directors, reasoning that Israel is not the most appropriate forum to hear such a claim.
Any failure or perceived failure by us to comply with our posted privacy policies, our privacy-related obligations to users or other third parties, or any other legal obligations or regulatory requirements relating to privacy, data protection, or data security, may result in governmental investigations or enforcement actions, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation and business.
Any failure or perceived failure by us to comply with our posted privacy policies, our privacy-related obligations to users or other third parties, or any other actual or asserted legal obligations or regulatory requirements relating to privacy, data protection, or data security, may result in governmental investigations or enforcement actions, litigation, claims, or public statements against us by consumer advocacy groups or others and could result in significant liability, cause our users to lose trust in us, and otherwise materially and adversely affect our reputation and business.
Our future success depends on the growth and expansion of these markets and our ability to adapt and respond effectively to evolving markets. • Our results of operations are likely to fluctuate from quarter to quarter, which could adversely affect the trading price of our ordinary shares. 17 Table of Contents • If we are not able to keep pace with technological and competitive developments or fail to integrate our products with a variety of technologies that are developed by others, our products may become less marketable, less competitive, or obsolete, and our results of operations may be adversely affected. • The market for our products is nascent and highly fragmented, and we may not be able to compete successfully against current and future competitors, some of whom have greater financial, technical, and other resources than we do.
Our future success depends on the growth and expansion of these markets and our ability to adapt and respond effectively to evolving markets. • Our results of operations are likely to fluctuate from quarter to quarter, which could adversely affect the trading price of our ordinary shares. • If we are not able to keep pace with technological and competitive developments or fail to integrate our products with a variety of technologies that are developed by others, our products may become less marketable, less competitive, or obsolete, and our results of operations may be adversely affected. • The market for our products is nascent and highly fragmented, and we may not be able to compete successfully against current and future competitors, some of whom have greater financial, technical, and other resources than we do.
Changes in our relationship with any provider, the instability or vulnerability of any third-party technology, or the inability of our products to successfully integrate with third-party technology may adversely affect our business and results of operations.
Changes in our relationship with any third-party partner or third-party provider, the instability or vulnerability of any third-party technology, or the inability of our products to successfully integrate with third-party technology may adversely affect our business and results of operations.
In order to provide value for our customers, we must offer products that allow our customers to compile software from source code repositories, manage the dependencies among components within software packages, move packages to a universal repository, ingest packages from third parties, including open source libraries, scan for vulnerabilities through various stages, distribute to endpoints, and deploy in production, all through a single user access point.
In order to provide value for our customers, we must offer products that allow our customers to compile software from source code repositories, manage the dependencies among components within software packages, move packages and ML models to a universal repository, ingest packages from third parties, including open source libraries, scan for vulnerabilities through various stages, distribute to endpoints, and deploy in production, all through a single user access point.
Our substantial anticipated headcount growth and our continued operation as a public company may result in a change to our corporate culture, which could harm our business.
Our anticipated headcount growth and our continued operation as a public company may result in a change to our corporate culture, which could harm our business.
However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior. 47 Table of Contents We have received Israeli government grants for certain of our research and development activities.
However, Israeli law does not define the substance of this duty of fairness. There is little case law available to assist in understanding the implications of these provisions that govern shareholder behavior. 48 Table of Contents We have received Israeli government grants for certain of our research and development activities.
Some security-focused companies may compete with a subset of JFrog’s holistic security offerings or address only developer-level security, such as Aqua Security, Snyk, Sonatype and Synopsys. • Diversified vendors. Some diversified technology companies, such as IBM, Inc. (including Red Hat), Pivotal Software and VMware, Inc. may have offerings that compete with certain JFrog products.
Some security-focused companies may compete with a subset of JFrog’s holistic security offerings or address only developer-level security, such as Aqua Security, Snyk, Sonatype and Synopsys. • Diversified vendors. Some diversified technology companies, such as IBM, Inc. (including Red Hat), Pivotal Software and VMware, Inc. (now Broadcom Inc.) may have offerings that compete with certain JFrog products.
Certain vulnerabilities under certain circumstances could be exploited if our customers do not patch vulnerable versions of the product. In the future, we also may experience security breaches, including breaches resulting from a cybersecurity attack, phishing attack, or other means, including unauthorized access, unauthorized usage, viruses or similar breaches or disruptions.
Certain vulnerabilities under certain circumstances could be exploited if our customers do not patch vulnerable versions of the product. In the future, we also may experience security breaches, including breaches resulting from a cybersecurity attack, phishing attack, or other means, including unauthorized access, unauthorized usage, malwares or similar breaches or disruptions.
If we do not compete successfully our business, financial condition, and results of operations could be harmed. • JFrog Artifactory is at the core of our business and any decline in demand for JFrog Artifactory occasioned by malfunction, inferior performance, increased competition or otherwise, will impact our business, results of operations, and financial condition. • We recognize a significant portion of revenue from subscriptions over the term of the relevant subscription period, and as a result, downturns or upturns in sales are not immediately reflected in full in our results of operations. • A real or perceived defect, security vulnerability, error, or performance failure in our software could cause us to lose revenue, damage our reputation, and expose us to liability. • Unfavorable economic conditions may adversely affect our business and financial condition due to impacts on consumer and business spending, including reductions in information technology spending and decreased demand for our products, which could limit our ability to grow our business. • We have acquired, and may in the future acquire, complementary businesses which could require significant management attention, disrupt our business, dilute shareholder value, and adversely affect our results of operations. • We are subject to stringent and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and data security.
If we do not compete successfully our business, financial condition, and results of operations could be harmed. • JFrog Artifactory is at the center of our platform and any decline in demand for JFrog Artifactory occasioned by malfunction, inferior performance, increased competition or otherwise, will impact our business, results of operations, and financial condition. 18 Table of Contents • We recognize a significant portion of revenue from subscriptions over the term of the relevant subscription period, and as a result, downturns or upturns in sales are not immediately reflected in full in our results of operations. • A real or perceived defect, security vulnerability, error, or performance failure in our software could cause us to lose revenue, damage our reputation, and expose us to liability. • Unfavorable economic conditions may adversely affect our business and financial condition due to impacts on consumer and business spending, including reductions in information technology spending and decreased demand for our products, which could limit our ability to grow our business. • We have acquired, and may in the future acquire, complementary businesses which could require significant management attention, disrupt our business, dilute shareholder value, and adversely affect our results of operations. • We are subject to stringent and changing laws, regulations, standards, and contractual obligations related to privacy, data protection, and data security.
To the extent that users of our free trial and freemium versions do not become, or lead others not to become, paying customers, we will not realize the intended benefits of these strategies, our expenses may increase as a result of associated hosting costs, and our ability to grow our business may be harmed.
To the extent that users of our free trial do not become, or lead others not to become, paying customers, we will not realize the intended benefits of these strategies, our expenses may increase as a result of associated hosting costs, and our ability to grow our business may be harmed.
Any of these incidents or any compromise of our security or any unauthorized access to or breaches of the security of our or our service providers’ systems or data processing tools or processes, or of our platform and product offerings, as a result of third-party action, employee error, vulnerabilities, defects or bugs, malfeasance, or otherwise, could result in unauthorized or unlawful access to, misuse, disclosure, loss, acquisition, corruption, unavailability, alteration, modification or destruction of our and our customers’ data, including sensitive and proprietary information, personal data and personal information, or a risk to the security of our or our customers’ systems.
Any of these incidents or any compromise of our security or any unauthorized access to or breaches of the security of our or our service providers’ systems or data processing tools or processes, or of our platform and product offerings, as a result of third-party action, employee error, vulnerabilities, defects or bugs, malfeasance, or otherwise, could result in unauthorized or unlawful 39 Table of Contents access to, misuse, disclosure, loss, acquisition, corruption, unavailability, alteration, modification or destruction of our and our customers’ data, including sensitive and proprietary information, personal data and personal information, or a risk to the security of our or our customers’ systems.
The expansion of and our ability to penetrate, these new and evolving markets depends on a number of factors, including: the cost, performance, and perceived value associated with DevOps technologies, as well as the ability of DevOps workflows to improve critical steps in the lifecycle of software, including managing software security.
The expansion of and our ability to penetrate, these new and evolving markets depends on a number of factors, including: the cost, performance, and perceived value associated with DevOps, DevSecOps, and MLOps technologies, as well as the ability of DevOps workflows to improve critical steps in the lifecycle of software, including managing software security.
Your rights and responsibilities as our shareholder will be governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations. We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our amended and restated articles of association and the Companies Law.
Your rights and responsibilities as our shareholder are governed by Israeli law, which may differ in some respects from the rights and responsibilities of shareholders of U.S. corporations. We are incorporated under Israeli law. The rights and responsibilities of holders of our ordinary shares are governed by our amended and restated articles of association and the Companies Law.
If DevOps and software release management software do not continue to achieve market acceptance, or there is a reduction in demand caused by decreased customer acceptance, technological challenges, weakening economic conditions, privacy, data protection and data security concerns, governmental regulation, competing technologies and products, or decreases in information technology spending or otherwise, the market for our platform and products might not continue to develop or might develop more slowly than we expect, which could adversely affect our business, financial condition, and results of operations.
If DevOps, DevSecOps, and software release management software do not continue to achieve market acceptance, or there is a reduction in demand caused by decreased customer acceptance, technological challenges, weakening economic conditions, privacy, data protection and data security concerns, governmental regulation, competing technologies and products, or decreases in information technology spending or otherwise, the market for our platform and products might not 20 Table of Contents continue to develop or might develop more slowly than we expect, which could adversely affect our business, financial condition, and results of operations.
As of December 31, 2022, we hold a number of active patents and have filed patent applications both in the U.S. and in other countries. There can be no assurance that our patent applications will result in issued patents.
As of December 31, 2023, we hold a number of active patents and have filed patent applications both in the U.S. and in other countries. There can be no assurance that our patent applications will result in issued patents.
Factors that may cause fluctuations in our quarterly financial results include: • general economic, industry, and market conditions, including adverse macroeconomic conditions such as inflation; • our ability to attract and retain new customers; • the loss of existing customers; • renewals and timing of renewals; • customer usage of our products; • customer satisfaction with our products and platform capabilities and customer support; • our ability to expand sales within our existing customers; • mergers and acquisitions that might affect our customer base including the consolidation of affiliates’ multiple paid business accounts into a single paid business account; • mix of our revenue; • our ability to gain new partners and retain existing partners; • our ability to convert users of free trials, freemium offerings, and open source version of JFrog Artifactory into subscribing customers; • increases or decreases in the number of elements of our subscriptions or pricing changes upon any renewals of customer agreements; • fluctuations in share-based compensation expense; • decisions by potential customers to purchase alternative solutions; • decisions by potential customers to develop in-house DevOps technologies as alternatives to our products; • the amount and timing of operating expenses related to the maintenance and expansion of our business and operations, including investments in research and development, sales and marketing, and general and administrative resources; 20 Table of Contents • network outages; • actual or perceived breaches of, or failures relating to, privacy, data protection, or data security; • the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies; • the impact of the COVID-19 pandemic or other global health crises on our business and the related global economic disruptions; • the impact of political uncertainty or unrest, including the Russia-Ukraine conflict, other areas of geopolitical tension around the world, or the worsening of that conflict or tensions and the related global economic disruptions; • changes in our pricing policies or those of our competitors; • fluctuations in the growth rate of the overall market that our products address; • the budgeting cycles and purchasing practices of customers; • the business strengths or weakness of our customers; • our ability to collect timely on invoices or receivables; • the cost and potential outcomes of future litigation or other disputes; • future accounting pronouncements or changes in our accounting policies; • our overall effective tax rate, including impacts caused by any reorganization in our corporate tax structure and any new legislation or regulatory developments; • our ability to successfully expand our business in the U.S. and internationally; • fluctuations in the mix of our revenue between self-managed subscriptions and SaaS subscriptions; • fluctuations in foreign currency exchange rates; and • the timing and success of new products introduced by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or partners.
Factors that may cause fluctuations in our quarterly financial results include: • general economic, industry, and market conditions, including adverse macroeconomic conditions such as inflation; • our ability to attract and retain new customers; • the loss of existing customers; • renewals and timing of renewals; • customer usage of our products; • customer satisfaction with our products and platform capabilities and customer support; • our ability to expand sales within our existing customers; • mergers and acquisitions that might affect our customer base including the consolidation of affiliates’ multiple paid business accounts into a single paid business account; • our ability to gain new partners and retain existing partners; • our ability to convert users of free trials and open source version of JFrog Artifactory into subscribing customers; • increases or decreases in the number of elements of our subscriptions or pricing changes upon any renewals of customer agreements; • fluctuations in share-based compensation expense; • decisions by potential customers to purchase alternative solutions; • decisions by potential customers to develop in-house DevOps and DevSecOps technologies as alternatives to our products; • the amount and timing of operating expenses related to the maintenance and expansion of our business and operations, including investments in research and development, sales and marketing, and general and administrative resources; • network outages; • actual or perceived breaches of, or failures relating to, privacy, data protection, or data security; • the timing of expenses related to the development or acquisition of technologies or businesses and potential future charges for impairment of goodwill from acquired companies; • the impact of political uncertainty or unrest, including the Russia-Ukraine war, and the Israel-Hamas war, other areas of geopolitical tension around the world, or the worsening of that conflict or tensions and the related global economic disruptions; • changes in our pricing policies or those of our competitors; 21 Table of Contents • fluctuations in the growth rate of the overall market that our products address; • the budgeting cycles and purchasing practices of customers; • the business strengths or weakness of our customers; • our ability to collect timely on invoices or receivables; • the cost and potential outcomes of future litigation or other disputes; • future accounting pronouncements or changes in our accounting policies; • our overall effective tax rate, including impacts caused by any reorganization in our corporate tax structure and any new legislation or regulatory developments; • our ability to successfully expand our business in the U.S. and internationally; • fluctuations in the mix of our revenue between self-managed subscriptions and SaaS subscriptions; • fluctuations in foreign currency exchange rates; and • the timing and success of new products introduced by us or our competitors or any other change in the competitive dynamics of our industry, including consolidation among competitors, customers or partners.
In addition, if a breach of data security were to occur or to be alleged to have occurred, if any violation of laws and regulations 34 Table of Contents relating to privacy, data protection or data security were to be alleged, or if we had any actual or alleged defect in our safeguards or practices relating to privacy, data protection, or data security, our solutions may be perceived as less desirable and our business, prospects, financial condition, and results of operations could be materially and adversely affected.
In addition, if a breach of data security were to occur or to be alleged to have occurred, if any violation of laws and regulations relating to privacy, data protection or data security were to be alleged, or if we had any actual or alleged defect in our safeguards or practices relating to privacy, data protection, or data security, our solutions may be perceived as less desirable and our business, prospects, financial condition, and results of operations could be materially and adversely affected.
Further, the process for obtaining necessary licenses may be time-consuming or unsuccessful, potentially causing delays in sales or losses of sales opportunities. Trade Controls are complex and dynamic regimes, and monitoring and 40 Table of Contents ensuring compliance can be challenging, particularly given that our products are widely distributed throughout the world and are available for download without registration.
Further, the process for obtaining necessary licenses may be time-consuming or unsuccessful, potentially causing delays in sales or losses of sales opportunities. Trade Controls are complex and dynamic regimes, and monitoring and ensuring compliance can be challenging, particularly given that our products are widely distributed throughout the world and are available for download without registration.
If we are unable to successfully enhance our existing products to meet evolving customer requirements, increase adoption and use cases of our products, develop new products, quickly resolve security vulnerabilities, or if our efforts to increase the use cases of our products are more expensive than we expect, then our business, results of operations and financial condition would be adversely affected.
If we are unable to successfully enhance our existing products to meet evolving customer requirements, increase adoption and use cases of our products, develop new 22 Table of Contents products, quickly resolve security vulnerabilities, or if our efforts to increase the use cases of our products are more expensive than we expect, then our business, results of operations and financial condition would be adversely affected.
The market price of our ordinary shares may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, many of which are beyond our control, including: • actual or anticipated changes or fluctuations in our results of operations; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • announcements by us or our competitors of new offerings or new or terminated significant contracts, commercial relationships or capital commitments; • industry or financial analyst or investor reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • sales or expected future sales of our ordinary shares; • investor perceptions of us and the industries in which we operate; 43 Table of Contents • price and volume fluctuations in the overall stock market from time to time; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property rights or our solutions, or third-party proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; • actual or perceived breaches of, or failures relating to, privacy, data protection or data security; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • any major changes in our management or our board of directors; • general economic conditions, the recent global economic downturn and slow or negative growth of our markets; • market volatility and fluctuation resulting from the ongoing COVID-19 pandemic; and • other events or factors, including those resulting from war, incidents of terrorism or responses to these events.
The market price of our ordinary shares may be highly volatile and may fluctuate or decline substantially as a result of a variety of factors, many of which are beyond our control, including: • actual or anticipated changes or fluctuations in our results of operations; • the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections; • announcements by us or our competitors of new offerings or new or terminated significant contracts, commercial relationships or capital commitments; • industry or financial analyst or investor reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; • sales or expected future sales of our ordinary shares; • investor perceptions of us and the industries in which we operate; • price and volume fluctuations in the overall stock market from time to time; • changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular; • failure of industry or financial analysts to maintain coverage of us, changes in financial estimates by any analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • actual or anticipated developments in our business or our competitors’ businesses or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • developments or disputes concerning our intellectual property rights or our solutions, or third-party proprietary rights; • announced or completed acquisitions of businesses or technologies by us or our competitors; 45 Table of Contents • actual or perceived breaches of, or failures relating to, privacy, data protection or data security; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • any major changes in our management or our board of directors; • general economic conditions, the recent global economic downturn and slow or negative growth of our markets; and • other events or factors, including those resulting from war, including the war between Israel and Hamas, incidents of terrorism or responses to these events.
We could also face subscription terminations and a reduction in renewals, which could significantly affect both our current and future revenue. We offer multiple tiers of subscriptions to our products and as such our service-level commitments will increase if more customers choose subscriptions of JFrog Pro X, JFrog 26 Table of Contents Enterprise, JFrog Enterprise X, and JFrog Enterprise Plus.
We could also face subscription terminations and a reduction in renewals, which could significantly affect both our current and future revenue. We offer multiple tiers of subscriptions to our products and as such our service-level commitments will increase if more customers choose subscriptions of JFrog Pro X, JFrog Enterprise X, and JFrog Enterprise Plus.
There is currently a high demand for experienced DevOps professionals and we may not be successful in attracting, integrating or retaining qualified personnel to fulfill our current or future needs.
There is currently a high demand for experienced DevSecOps professionals and we may not be successful in attracting, integrating or retaining qualified personnel to fulfill our current or future needs.
Israeli labor courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former employee will harm one of a limited number of material interests of the employer that have been recognized by the courts, such as the protection of a company’s trade secrets or other intellectual property.
Israeli labor courts have required employers seeking to enforce non-compete undertakings of a former employee to demonstrate that the competitive activities of the former 28 Table of Contents employee will harm one of a limited number of material interests of the employer that have been recognized by the courts, such as the protection of a company’s trade secrets or other intellectual property.
To the extent changes in the political environment have a negative impact on us or on our markets, our business, results of operation and financial condition could be materially and adversely affected in the future.
To the extent changes in the political environment have a negative impact on us or on our markets, our business, results of operations and financial condition could be materially and adversely affected in the future.
Governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing 31 Table of Contents to continue buying our subscriptions, a reduction of revenue, or fines or civil or criminal liability if the audit uncovers improper or illegal activities, which could materially and adversely affect our results of operations.
Governments routinely investigate and audit government contractors’ administrative processes, and any unfavorable audit could result in the government refusing to continue buying our subscriptions, a reduction of revenue, or fines or civil or criminal liability if the audit uncovers improper or illegal activities, which could materially and adversely affect our results of operations.
Other data protection authorities in the EU are increasingly focused on the use of online tracking tools and have indicated that they plan to issue similar rulings. Further on January 31, 2020, the United Kingdom (“U.K.”) left the EU (commonly referred to as “Brexit”).
Other data protection authorities in the EU are increasingly focused on the use of online tracking tools and have indicated that they plan to issue similar rulings. 37 Table of Contents Further on January 31, 2020, the United Kingdom (“U.K.”) left the EU (commonly referred to as “Brexit”).
Because our customers rely on our software to manage a wide range of operations, the incorrect implementation, use of, or our customers’ failure to update, our software or our failure to train customers on how to use our 25 Table of Contents software productively has in the past and may in the future result in customer dissatisfaction, and negative publicity and may adversely affect our reputation and brand.
Because our customers rely on our software to manage a wide range of operations, the incorrect implementation, use of, or our customers’ failure to update, our software or our failure to train customers on how to use our software productively has in the past and may in the future result in customer dissatisfaction, and negative publicity and may adversely affect our reputation and brand.
Risks Related to Foreign Operations Our international operations and expansion expose us to risk. Our primary research and development operations are located in Israel. As of December 31, 2022, we had customers located in over 90 countries, and our strategy is to continue to expand internationally. In addition, as a result of our strategy of leveraging a distributed workforce.
Risks Related to Foreign Operations Our international operations and expansion expose us to risks. Our primary research and development operations are located in Israel. As of December 31, 2023, we had customers located in over 90 countries, and our strategy is to continue to expand internationally. In addition, as a result of our strategy of leveraging a distributed workforce.
The growth and expansion of our business places a continuous significant strain on our management, operational, and financial resources. In addition, as 18 Table of Contents customers adopt our products for an increasing number of use cases, we have had to support more complex commercial relationships.
The growth and expansion of our business places a continuous significant strain on our management, operational, and financial resources. In addition, as customers adopt our products for an increasing number of use cases, we have had to support more complex commercial relationships.
While our insurance 38 Table of Contents policies include liability coverage for certain of these matters, subject to applicable deductibles, if we experienced a widespread security breach or other incident that impacted a significant number of our customers, we could be subject to indemnity claims or other damages that exceed our insurance coverage.
While our insurance policies include liability coverage for certain of these matters, subject to applicable deductibles, if we experienced a widespread security breach or other incident that impacted a significant number of our customers, we could be subject to indemnity claims or other damages that exceed our insurance coverage.
We have in the past and may in the future need to issue corrective releases of our software to fix these defects, errors or performance failures, which could require us to allocate significant research and development and customer support resources to address these problems.
We have in the past and may in the future need to issue corrective releases of our software to fix these defects, 26 Table of Contents errors or performance failures, which could require us to allocate significant research and development and customer support resources to address these problems.
The concentration of our share ownership with insiders will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring shareholder approval. Our executive officers, directors, current 5% or greater shareholders and affiliated entities together beneficially owned approximately 32% of our ordinary shares outstanding as of December 31, 2022.
The concentration of our share ownership with insiders will likely limit your ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring shareholder approval. Our executive officers, directors, current 5% or greater shareholders and affiliated entities together beneficially owned approximately 18% of our ordinary shares outstanding as of December 31, 2023.
Our subscription structure is aligned with the way we have built our platform, and JFrog Artifactory is at the core of our business and all subscriptions. Accordingly, market acceptance of JFrog Artifactory is critical to our success. If demand for JFrog Artifactory declines, the demand for our other products will also decline.
Our subscription structure is aligned with the way we have built our platform, and JFrog Artifactory is at the center of our platform and all subscriptions. Accordingly, market acceptance of JFrog Artifactory is critical to our success. If demand for JFrog Artifactory declines, the demand for our other products will also decline.
They may be able to leverage these resources to gain business in a manner that discourages customers from purchasing our offerings. Furthermore, we expect that our industry will continue to attract new companies, 23 Table of Contents including smaller emerging companies, which could introduce new offerings. We may also expand into new markets and encounter additional competitors in such markets.
They may be able to leverage these resources to gain business in a manner that discourages customers from purchasing our offerings. Furthermore, we expect that our industry will continue to attract new companies, including smaller emerging companies, which could introduce new offerings. We may also expand into new markets and encounter additional competitors in such markets.
These developments represent a milestone in the regulation of cross-border data transfers, and require major changes to our data transfer policy, including the need to conduct legal, technical, and security assessments for each data transfer from the EEA to a country outside of the EEA.
These developments represent a milestone in the regulation of cross-border data transfers, and have required major changes to our data transfer policy, including the need to conduct legal, technical, and security assessments for each data transfer from the EEA to a country outside of the EEA.
Our vendors and service providers have been and, in the future may be, the targets of cyberattacks, malicious software, phishing schemes, fraud, and other risks to the confidentiality, security, and integrity of their systems and the data they process for us.
Our vendors and service providers have been and, in the future may be, the targets of cyberattacks, malicious software, supply chain attacks, phishing schemes, fraud, and other risks to the confidentiality, security, and integrity of their systems and the data they process for us.
We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to enhance our products, broaden our customer base, expand our sales and marketing activities, including building a small, high-touch strategic sales team and customer success team, expanding our operations, hiring additional employees, and continuing to develop our technology.
We anticipate that our operating expenses will increase substantially in the foreseeable future as we continue to enhance our products, broaden our customer base, expand our sales and marketing activities, including building a customer success team and continuing to invest in our strategic sales team, expanding our operations, hiring additional employees, and continuing to develop our technology.
The European Commission has issued new SCCs that account for the CJEU’s “Schrems II” decision and that are required to be implemented over time.
The European Commission has issued new SCCs that account for the CJEU’s “Schrems II” decision and that are required to be implemented.
For example, since our IPO, we have implemented additional policies and procedures 48 Table of Contents associated with the financial statement close process and implemented a system to supplement our core accounting system as part of our control environment.
For example, since our IPO, we have implemented additional policies and procedures associated with the financial statement close process and implemented a system to supplement our core accounting system as part of our control environment.
Competition for these employees is intense, specifically for engineers for research and development and support positions who are experienced in DevOps, and such competition often results in increasing wages, especially in Israel, where most of our research and development positions are located, and in the San Francisco Bay Area, where we have a significant presence.
Competition for these employees is intense, specifically for engineers for research and development, security experts, and support positions who are experienced in DevSecOps, and such competition often results in increasing wages, especially in Israel, where most of our research and development positions are located, and in the San Francisco Bay Area, where we have a significant presence.
It is difficult to predict exactly when, or even if, we will make a sale to a potential customer or if we can increase sales to our existing customers. As a result, large individual sales have, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all.
It is difficult to predict exactly when, or even if, we 30 Table of Contents will make a sale to a potential customer or if we can increase sales to our existing customers. As a result, large individual sales have, in some cases, occurred in quarters subsequent to those we anticipated, or have not occurred at all.
JFrog Artifactory is at the core of our business and any decline in demand for JFrog Artifactory occasioned by malfunction, inferior performance, increased competition or otherwise, will impact our business, results of operations and financial condition.
JFrog Artifactory is at the center of our platform and any decline in demand for JFrog Artifactory occasioned by malfunction, inferior performance, increased competition or otherwise, will impact our business, results of operations and financial condition.
Not all of our directors or officers are residents of the United States. Most of our assets and those of our non-U.S. directors and officers are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers may be difficult to obtain within the United States.
Most of our assets and those of our non-U.S. directors and officers are located outside the United States. Service of process upon us or our non-U.S. resident directors and officers may be difficult to obtain within the United States.
Furthermore, certain jurisdictions, such as the United Kingdom and France, introduced a digital services tax, which is generally a tax on gross revenue generated from users or customers located in those jurisdictions, and other jurisdictions have enacted or are considering enacting similar laws.
Furthermore, certain 44 Table of Contents jurisdictions, such as the United Kingdom and France, introduced a digital services tax, which is generally a tax on gross revenue generated from users or customers located in those jurisdictions, and other jurisdictions have enacted or are considering enacting similar laws.
There is no guarantee that such events will translate into new customers, or that freemium and open source users will convert to paying subscribers. In addition, a significant aspect of our sales and marketing focus is to expand deployments within existing customers.
There is no guarantee that such events will translate into new customers, or that open source users will convert to paying subscribers. 25 Table of Contents In addition, a significant aspect of our sales and marketing focus is to expand deployments within existing customers.
Even if we continue to seek patent protection in the future, we may be unable to obtain further patent protection for our technology. In addition, any patents issued in the future may not provide us with competitive advantages, or may be successfully challenged by third parties.
Even if we continue to seek patent protection in the future, we may be unable to obtain further patent protection for our technology. In addition, any patents issued in the future may not provide us with competitive advantages, or 33 Table of Contents may be successfully challenged by third parties.
In addition, our customers and users may also 37 Table of Contents disclose or leak their passwords, API keys, or secrets that could lead to unauthorized access to their accounts and data, including information about their software, source code, and security environment, stored within our products.
In addition, our customers and users may also disclose or leak their passwords, API keys, or secrets that could lead to unauthorized access to their accounts and data, including information about their software, source code, and security environment, stored within our products.
Additionally, if we increase our activities outside 42 Table of Contents of Israel through acquisitions, for example, our expanded activities might not be eligible for inclusion in future Israeli tax benefit programs.
Additionally, if we increase our activities outside of Israel through acquisitions, for example, our expanded activities might not be eligible for inclusion in future Israeli tax benefit programs.
Government certification requirements for products like ours may change, thereby restricting our ability to sell into the U.S. federal government, U.S. state governments, or non-U.S. government sectors until we have attained such revised certification or certifications.
Government certification requirements for products like ours may change, thereby restricting our ability to sell into the U.S. federal government, U.S. state governments, or non-U.S. government sectors 32 Table of Contents until we have attained such revised certification or certifications.
Further, our gross margins and results of operations could be harmed by changes in revenue mix and costs, together with numerous other factors, including entry into new markets or growth in lower margin markets; entry into markets with different pricing and cost structures; pricing discounts; and increased price competition.
Further, our gross margins and results of operations could be harmed by numerous other factors, including entry into new markets or growth in lower margin markets; entry into markets with different pricing and cost structures; pricing discounts; and increased price competition.
Accordingly, it is difficult to predict customer adoption and renewals and demand for our platform and our products, the entry of competitive products, the success of existing 19 Table of Contents competitive products, or the future growth rate, expansion, longevity, and the size of the DevOps and software release management software markets.
Accordingly, it is difficult to predict customer adoption and renewals and demand for our platform and our products, the entry of competitive products, the success of existing competitive products, or the future growth rate, expansion, longevity, and the size of the DevOps, DevSecOps, MLOps, and software release management software markets.
We also anticipate being required to engage in new contract negotiations with third parties that aid in processing data on our behalf, and entering 35 Table of Contents into the new SCCs.
We also anticipate being required to engage in new contract negotiations with third parties that aid in processing data on our behalf, and entering into the new SCCs.
Our current international operations involve, and future initiatives will involve, a variety of risks, including: • unexpected changes in practices, tariffs, export quotas, custom duties, trade disputes, tax laws and treaties, particularly due to economic tensions and trade negotiations or other trade restrictions; • different labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as compared to the United States, including differing hourly wages and overtime regulations in these locations; • exposure to many stringent and potentially inconsistent laws and regulations relating to privacy, data protection, and information security, particularly in the European Union; • changes in a specific country’s or region’s political or economic conditions, such as Russia’s significant military action against Ukraine and the associated geopolitical tensions and regional instability, as well as economic sanctions the U.S. and other countries have imposed on Russia and certain of its allies and the impact of the foregoing on the global economy; • risks resulting from the COVID-19 pandemic, including uncertainty regarding how the U.S. or foreign governments will act or continue to act with respect to the ongoing pandemic; • risks resulting from changes in currency exchange rates; • challenges inherent to efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs; • risks relating to the implementation of exchange controls, including restrictions promulgated by the OFAC, and other similar trade protection regulations and measures in the United States or in other jurisdictions; • reduced ability to timely collect amounts owed to us by our customers in countries where our recourse may be more limited; • slower than anticipated availability and adoption of cloud and hybrid infrastructures by international businesses; • limitations on our ability to reinvest earnings from operations derived from one country to fund the capital needs of our operations in other countries; • potential changes in laws, regulations, and costs affecting our U.K operations and personnel due to Brexit; • limited or unfavorable intellectual property protection; and • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Our current international operations involve, and future initiatives will involve, a variety of risks, including: • unexpected changes in practices, tariffs, export quotas, custom duties, trade disputes, tax laws and treaties, particularly due to economic tensions and trade negotiations or other trade restrictions; 40 Table of Contents • different labor regulations, especially in the European Union, where labor laws are generally more advantageous to employees as compared to the United States, including differing hourly wages and overtime regulations in these locations; • exposure to many stringent and potentially inconsistent laws and regulations relating to privacy, data protection, AI, and data security, particularly in the European Union; • changes in a specific country’s or region’s political or economic conditions, such as the war between Israel and Hamas and the war between Russia and Ukraine and the associated geopolitical tensions and regional instability, as well as economic sanctions the U.S. and other countries have imposed on Russia and certain of its allies and the impact of the foregoing on the global economy; • risks resulting from changes in currency exchange rates, in particular, fluctuations in the value of the NIS compared to the U.S. dollar; • challenges inherent to efficiently managing an increased number of employees over large geographic distances, including the need to implement appropriate systems, policies, benefits and compliance programs; • risks relating to the implementation of exchange controls, including restrictions promulgated by the OFAC, and other similar trade protection regulations and measures in the United States or in other jurisdictions; • reduced ability to timely collect amounts owed to us by our customers in countries where our recourse may be more limited; • slower than anticipated availability and adoption of cloud and hybrid infrastructures by international businesses; • limitations on our ability to reinvest earnings from operations derived from one country to fund the capital needs of our operations in other countries; • potential changes in laws, regulations, and costs affecting our U.K operations and personnel due to Brexit; • limited or unfavorable intellectual property protection; and • exposure to liabilities under anti-corruption and anti-money laundering laws, including the U.S.
Any decreased use of our products or limitation on our ability to export to or sell our products in international markets could adversely affect our business, financial condition, and results of operations. Failure to comply with anti-bribery, anti-corruption, anti-money laundering laws, and similar laws, could subject us to penalties and other adverse consequences. We are subject to the U.S.
Any decreased use of our products or limitation on our ability to export to or sell our products in international markets could adversely affect our business, financial condition, and results of operations. 42 Table of Contents Failure to comply with anti-bribery, anti-corruption, anti-money laundering laws, and similar laws, could subject us to penalties and other adverse consequences.
Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended (the “FCPA”), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S.
General economic conditions and disruptions in global markets due to the COVID-19 pandemic and Russia-Ukraine conflict, and other areas of geopolitical tension around the world, and any actions taken by governmental authorities and other third parties in response may also affect our future performance.
General economic conditions and disruptions in global markets due to the Israel-Hamas war, the Russia-Ukraine war, and other areas of geopolitical tension around the world, and any actions taken by governmental authorities and other third parties in response may also affect our future performance.
We have never declared or paid any cash dividends on our shares. We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our ordinary shares in the foreseeable future.
We currently intend to retain all available funds and any future earnings for use in the operation of our business and do not anticipate paying any dividends on our ordinary shares in the foreseeable future.
Further, in the event a court finds the exclusive forum provision contained in our amended and restated Articles of Association to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations. U.S.
Further, in the event a court finds the exclusive forum provision contained in our amended and restated Articles of Association to be unenforceable or inapplicable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could harm our results of operations. We do not intend to pay dividends in the foreseeable future.
We believe that our ability to compete successfully depends upon many factors both within and beyond our control, including the following: • ability to provide an end-to-end, unified platform solution for the DevOps workflow; • breadth of technologies we support; • breadth of technology integrations; • total cost of ownership; • extensibility across organizations, including software developers, IT operators, and IT managers; • ability to enable collaboration between software developers and IT operators; • ability to deploy our products in any combination of cloud, multi-cloud or on-premise environments; • performance, security, scalability, and reliability; • quality of customer experience and satisfaction; • quality of customer support; • ease of implementation and use; and • brand recognition and reputation.
We believe that our ability to compete successfully depends upon many factors both within and beyond our control, including the following: • ability to provide an end-to-end, unified platform solution for the DevOps and DevSecOps workflows; • ability to provide updated security products to create and maintain trusted software releases; • breadth of technologies we support; • breadth of technology integrations; • total cost of ownership; • extensibility across organizations, including software developers, security teams, AI/ML engineers, data scientists, and IT operators; • ability to enable collaboration between software developers, security teams, and IT operators; • ability to deploy our products in any combination of cloud, multi-cloud, on-premise, or hybrid environments; • performance, security, scalability, and reliability; • quality of customer experience and satisfaction; • quality of customer support; • ease of implementation and use; and • brand recognition and reputation.
Our total number of customers has grown to approximately 7,200 organizations as of December 31, 2022 from approximately 6,650 organizations as of December 31, 2021. Our employee headcount has also increased significantly from approximately 1,000 as of December 31, 2021 to approximately 1,300 as of December 31, 2022. We expect to continue to grow our headcount over the next year.
Our total number of customers has grown to approximately 7,400 organizations as of December 31, 2023 from approximately 7,200 organizations as of December 31, 2022. Our employee headcount has also increased from approximately 1,300 as of December 31, 2022 to approximately 1,400 as of December 31, 2023. We expect to continue to grow our headcount over the next year.
Our technology partnership ecosystem powers significant extensibility of our products and offers our customers the ability to use external tools of their choice with our products and to deploy our products in their preferred environments and successfully support new package technologies as they arise.
Our technology partnership ecosystem powers significant extensibility of our products, offers our customers the ability to use external tools of their choice with our products, provides the ability to deploy our products in their preferred environments, and allows them to support new package technologies as they are released.
We cannot guarantee that we will be able to compete successfully against current and future competitors, some of which may have greater resources than we have, or that competitive pressure or the availability of new open source software will not result in price reductions, reduced operating margins, and loss of market share, any one of which could harm our business, financial condition, results of operations, and cash flows. 22 Table of Contents The market for our products is nascent and highly fragmented, and we may not be able to compete successfully against current and future competitors, some of whom have greater financial, technical, and other resources than we do.
We cannot guarantee that we will be able to compete successfully against current and future competitors, some of which may have greater resources than we have, or that competitive pressure or the availability of new open source software will not result in price reductions, reduced operating margins, and loss of market share, any one of which could harm our business, financial condition, results of operations, and cash flows.
The extent and continued impact of the COVID-19 pandemic, the Russia-Ukraine conflict, and related global economic disruptions on our operational and financial condition will depend on certain developments, including: government responses to the pandemic and the Russia-Ukraine conflict; the efficacy of COVID-19 vaccines; the impact of the pandemic and the Russia-Ukraine conflict on our customers and our sales cycles; their impacts on customer, industry, or technology-based community events; and effects on our partners, some of which are uncertain, difficult to predict, and not within our control.
The extent and continued impact of the Israel-Hamas war, the Russia-Ukraine war, and related global economic disruptions on our operational and financial condition will depend on certain developments, including: government responses to the wars; the impact of the wars on our customers and our sales cycles; their impacts on customer, industry, or technology-based community events; and their effect on our partners, some of which are uncertain, difficult to predict, and not within our control.
We incurred a net loss of $90.2 million, $64.2 million and $9.4 million in the years ended December 31, 2022, 2021 and 2020, respectively. As a result, we had an accumulated deficit of $229.2 million as of December 31, 2022.
We incurred a net loss of $61.3 million, $90.2 million and $64.2 million in the years ended December 31, 2023, 2022 and 2021, respectively. As a result, we had an accumulated deficit of $290.4 million as of December 31, 2023.
As of December 31, 2022, we had employees located in nine countries.
As of December 31, 2023, we had employees located primarily in nine countries.
We believe that our culture has been and will continue to be a key contributor to our success. We expect to continue to hire as we expand. If we do not continue to maintain our corporate culture as we grow, we may be unable to foster the innovation, creativity, and entrepreneurial spirit we believe we need to support our growth.
We expect to continue to hire as we expand. If we do not continue to maintain our corporate culture as we grow, we may be unable to foster the innovation, creativity, and entrepreneurial spirit we believe we need to support our growth.
Our operations in China are subject to a number of risks relating to China’s economic and political systems, including: • A government-controlled foreign exchange rate and limitations on the convertibility of the Chinese Renminbi; • Uncertainty regarding the validity, enforceability and scope of protection for intellectual property rights and the practical difficulties of enforcing such rights; • Ability to secure our business proprietary information located in China from unauthorized acquisition; • Extensive government regulation; • Changing governmental policies relating to tax benefits available to foreign-owned businesses; • A relatively uncertain legal system; and • Instability related to continued economic, political and social reform.
Our operations in China are subject to a number of risks relating to China’s economic and political systems, including: • A government-controlled foreign exchange rate and limitations on the convertibility of the Chinese Renminbi; • Uncertainty regarding the validity, enforceability and scope of protection for intellectual property rights and the practical difficulties of enforcing such rights; • Ability to secure our business proprietary information located in China from unauthorized acquisition; • Extensive government regulation; • Changing governmental policies relating to tax benefits available to foreign-owned businesses; • A relatively uncertain legal system; • Application of and limitations related to the DSL and PIPL regulations over processing of data and personal data within China as well as cross-border data transfers and other activities outside of China; and 41 Table of Contents • Instability related to continued economic, political and social reform.
The impact of the ongoing COVID-19 pandemic, the Russia-Ukraine conflict, and other areas of geopolitical tension around the world, including the related global economic disruptions, remains uncertain at this time, and could harm or continue to harm our business and results of operations.
The impact of the war between Israel and Hamas, the war between Russia and Ukraine, and other areas of geopolitical tension around the world, including the related global economic disruptions, remains uncertain at this time, and could harm or continue to harm our business and results of operations.
As of the date of this Annual Report on Form 10-K, the full impact of the COVID-19 pandemic, Russia-Ukraine conflict, and related global economic disruptions on our financial condition and results of operations remains uncertain.
As of the date of this Annual Report on Form 10-K, the full impact of the war between Israel and Hamas, the war between Russia and Ukraine, and related global economic disruptions on our financial condition and results of operations remains uncertain.
In the event that our service agreements with our third-party hosting services are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our cloud solution for deployment on a different cloud infrastructure service provider, which could adversely affect our business, financial condition, and results of operations.
To the extent that we do not effectively upgrade our systems as needed and continually develop our technology to accommodate actual and anticipated changes in technology, our business and results of operations may be harmed. 27 Table of Contents In the event that our service agreements with our third-party hosting services are terminated, or there is a lapse of service, elimination of services or features that we utilize, interruption of internet service provider connectivity or damage to such facilities, we could experience interruptions in access to our platform as well as significant delays and additional expense in arranging or creating new facilities and services and/or re-architecting our cloud solution for deployment on a different cloud infrastructure service provider, which could adversely affect our business, financial condition, and results of operations.
We currently utilize foreign currency contracts, with financial institutions to protect against foreign exchange risks, mainly the exposure to changes in the exchange rate of the NIS against the U.S. dollar that are associated with future cash flows denominated in NIS.
Furthermore, we anticipate that a material portion of our expenses will continue to be denominated in NIS. We currently utilize foreign currency contracts, with financial institutions to protect against foreign exchange risks, mainly the exposure to changes in the exchange rate of the NIS against the U.S. dollar that are associated with future cash flows denominated in NIS.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties We are co-headquartered in Sunnyvale, California and in Netanya, Israel. We lease approximately 49,000 square feet of office space in Sunnyvale under leases expiring through 2026, and approximately 67,000 square feet of office space in Netanya under a lease expiring in 2026. We lease all of our facilities and do not own any real property.
Biggest changeItem 2. Properties We are co-headquartered in Sunnyvale, California and in Netanya, Israel. We lease approximately 49,000 square feet of office space in Sunnyvale under leases expiring through 2026, and approximately 52,000 square feet of office space in Netanya under a lease expiring in 2026. We lease all of our facilities and do not own any real property.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings The information set forth under the heading “Legal Proceedings” in Note 11 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 51 Table of Contents PART II
Biggest changeItem 3. Legal Proceedings The information set forth under the heading “Legal Proceedings” in Note 11 to the consolidated financial statements in Part II, Item 8 of this Annual Report on Form 10-K is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 53 Table of Contents PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeIssuer Purchases of Equity Securities None. 52 Table of Contents Item 6. [Reserved]
Biggest changeUnregistered Sales of Equity Securities None. 54 Table of Contents Issuer Purchases of Equity Securities None. Item 6. [Reserved]
The graph below compares the cumulative total stockholder return on our ordinary share from September 16, 2020 (the date our ordinary share commenced trading on the Nasdaq) through December 31, 2022 with the cumulative total return on the S&P 500 Index and the S&P 500 Information Technology Index.
The graph below compares the cumulative total stockholder return on our ordinary share from September 16, 2020 (the date our ordinary share commenced trading on the Nasdaq) through December 31, 2023 with the cumulative total return on the S&P 500 Index and the S&P 500 Information Technology Index.
All values assume a $100 initial investment and data for the S&P 500 Composite Index and the S&P Information Technology Index assume reinvestment of dividends. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our ordinary share. Unregistered Sales of Equity Securities None.
All values assume a $100 initial investment and data for the S&P 500 Composite Index and the S&P Information Technology Index assume reinvestment of dividends. The comparisons are based on historical data and are not indicative of, nor intended to forecast, the future performance of our ordinary share.
Holders of Record As of January 31, 2023, we had 72 holders of record of our Ordinary Shares. The actual number of holders is greater than this number of record holders and includes holders who are beneficial owners but whose shares are held in street name by brokers and other nominees.
Holders of Record As of February 9, 2024, we had 57 holders of record of our Ordinary Shares. The actual number of holders is greater than this number of record holders and includes holders who are beneficial owners but whose shares are held in street name by brokers and other nominees.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeResults of Operations The following tables set forth selected consolidated statements of operations data and such data as a percentage of total revenue for each of the periods indicated: Year Ended December 31, 2022 2021 2020 (in thousands) Revenue: Subscription—self-managed and SaaS $ 261,452 $ 190,046 $ 137,978 License—self-managed 18,588 16,637 12,849 Total subscription revenue 280,040 206,683 150,827 Cost of revenue: Subscription—self-managed and SaaS (1)(2)(3) 61,407 41,023 27,619 License—self-managed (2) 880 800 832 Total cost of revenue—subscription 62,287 41,823 28,451 Gross profit 217,753 164,860 122,376 Operating expenses: Research and development (1)(3) 121,225 79,604 41,113 Sales and marketing (1)(2)(3)(4) 130,812 96,962 60,936 General and administrative (1)(3)(4) 55,556 56,663 34,519 Total operating expenses 307,593 233,229 136,568 Operating loss (89,840 ) (68,369 ) (14,192 ) Interest and other income, net 5,094 744 2,045 Loss before income taxes (84,746 ) (67,625 ) (12,147 ) Income tax expense (benefit) 5,438 (3,422 ) (2,742 ) Net loss $ (90,184 ) $ (64,203 ) $ (9,405 ) _________________________________________ (1) Includes share-based compensation expense as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue: subscription–self-managed and SaaS $ 6,991 $ 4,027 $ 1,129 Research and development 24,664 14,572 3,903 Sales and marketing 22,753 15,256 4,882 General and administrative 14,253 23,094 13,938 Total share-based compensation expense $ 68,661 $ 56,949 $ 23,852 (2) Includes amortization expense of acquired intangible assets as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue: subscription–self-managed and SaaS $ 9,543 $ 4,147 $ — Cost of revenue: license—self-managed 880 800 832 Sales and marketing 1,145 952 729 Total amortization expense of acquired intangible assets $ 11,568 $ 5,899 $ 1,561 57 Table of Contents (3) Includes acquisition-related costs as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Cost of revenue: subscription–self-managed and SaaS $ 25 $ 16 $ — Research and development 9,610 5,489 1,403 Sales and marketing 762 463 367 General and administrative 315 1,006 — Total acquisition-related costs $ 10,712 $ 6,974 $ 1,770 (4) Includes legal settlement costs as follows: Year Ended December 31, 2022 2021 2020 (in thousands) Sales and marketing $ — $ 2,550 $ — General and administrative 216 203 — Total legal settlement costs $ 216 $ 2,753 $ — Year Ended December 31, 2022 2021 2020 Revenue: Subscription—self-managed and SaaS 93 % 92 % 91 % License—self-managed 7 8 9 Total subscription revenue 100 100 100 Cost of revenue: Subscription—self-managed and SaaS 22 20 18 License—self-managed — — 1 Total cost of revenue—subscription 22 20 19 Gross profit 78 80 81 Operating expenses: Research and development 43 39 27 Sales and marketing 47 47 40 General and administrative 20 27 23 Total operating expenses 110 113 90 Operating loss (32 ) (33 ) (9 ) Interest and other income, net 2 — 1 Loss before income taxes (30 ) (33 ) (8 ) Income tax expense (benefit) 2 (2 ) (2 ) Net loss (32 )% (31 )% (6 )% Comparison of the Years Ended December 31, 2022 and 2021 Revenue Year Ended December 31, 2022 2021 $ Change % Change (in thousands, except percentages) Subscription—self-managed and SaaS $ 261,452 $ 190,046 $ 71,406 38 % License—self-managed 18,588 16,637 1,951 12 Total subscription revenue $ 280,040 $ 206,683 $ 73,357 35 % The increase in total subscription revenue for the year ended December 31, 2022 compared to the year ended December 31, 2021 consisted of approximately $66.4 million growth from existing customers and the remaining attributable to new customers. 58 Table of Contents Cost of Revenue and Gross Margin Year Ended December 31, 2022 2021 $ Change % Change (in thousands, except percentages) Subscription—self-managed and SaaS $ 61,407 $ 41,023 $ 20,384 50 % License—self-managed 880 800 80 10 Total cost of revenue—subscription $ 62,287 $ 41,823 $ 20,464 49 % Gross margin 78 % 80 % Total cost of revenue increased for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Biggest changeResults of Operations The following tables set forth selected consolidated statements of operations data and such data as a percentage of total revenue for each of the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands) Revenue: Subscription—self-managed and SaaS $ 330,193 $ 261,452 $ 190,046 License—self-managed 19,693 18,588 16,637 Total subscription revenue 349,886 280,040 206,683 Cost of revenue: Subscription—self-managed and SaaS (1)(2)(3) 76,244 61,407 41,023 License—self-managed (2) 799 880 800 Total cost of revenue—subscription 77,043 62,287 41,823 Gross profit 272,843 217,753 164,860 Operating expenses: Research and development (1)(3) 134,584 121,225 79,604 Sales and marketing (1)(2)(3)(4) 150,675 130,812 96,962 General and administrative (1)(3)(4) 63,132 55,556 56,663 Total operating expenses 348,391 307,593 233,229 Operating loss (75,548 ) (89,840 ) (68,369 ) Interest and other income, net 21,032 5,094 744 Loss before income taxes (54,516 ) (84,746 ) (67,625 ) Income tax expense (benefit) 6,740 5,438 (3,422 ) Net loss $ (61,256 ) $ (90,184 ) $ (64,203 ) 59 Table of Contents _________________________________________ (1) Includes share-based compensation expense as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue: subscription–self-managed and SaaS $ 9,784 $ 6,991 $ 4,027 Research and development 32,689 24,664 14,572 Sales and marketing 30,338 22,753 15,256 General and administrative 22,360 14,253 23,094 Total share-based compensation expense $ 95,171 $ 68,661 $ 56,949 (2) Includes amortization expense of acquired intangible assets as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue: subscription–self-managed and SaaS $ 9,546 $ 9,543 $ 4,147 Cost of revenue: license—self-managed 799 880 800 Sales and marketing 1,431 1,145 952 Total amortization expense of acquired intangible assets $ 11,776 $ 11,568 $ 5,899 (3) Includes acquisition-related costs as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Cost of revenue: subscription–self-managed and SaaS $ 20 $ 25 $ 16 Research and development 7,301 9,610 5,489 Sales and marketing 125 762 463 General and administrative 161 315 1,006 Total acquisition-related costs $ 7,607 $ 10,712 $ 6,974 (4) Includes legal settlement costs as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Sales and marketing $ — $ — $ 2,550 General and administrative — 216 203 Total legal settlement costs $ — $ 216 $ 2,753 60 Table of Contents Year Ended December 31, 2023 2022 2021 Revenue: Subscription—self-managed and SaaS 94 % 93 % 92 % License—self-managed 6 7 8 Total subscription revenue 100 100 100 Cost of revenue: Subscription—self-managed and SaaS 22 22 20 License—self-managed — — — Total cost of revenue—subscription 22 22 20 Gross profit 78 78 80 Operating expenses: Research and development 39 43 39 Sales and marketing 43 47 47 General and administrative 18 20 27 Total operating expenses 100 110 113 Operating loss (22 ) (32 ) (33 ) Interest and other income, net 6 2 — Loss before income taxes (16 ) (30 ) (33 ) Income tax expense (benefit) 2 2 (2 ) Net loss (18 )% (32 )% (31 )% Comparison of the Years Ended December 31, 2023 and 2022 Revenue Year Ended December 31, 2023 2022 $ Change % Change (in thousands, except percentages) Subscription—self-managed and SaaS $ 330,193 $ 261,452 $ 68,741 26 % License—self-managed 19,693 18,588 1,105 6 Total subscription revenue $ 349,886 $ 280,040 $ 69,846 25 % The increase in total subscription revenue for the year ended December 31, 2023 compared to the year ended December 31, 2022 consisted of approximately $64.5 million growth from existing customers and the remaining attributable to new customers.
Investing Activities Net cash used in investing activities of $53.3 million for the year ended December 31, 2022 consisted primarily of net purchase of short-term investments of $48.5 million and capital expenditure of $4.3 million.
Net cash used in investing activities of $53.3 million for the year ended December 31, 2022 consisted primarily of net purchase of short-term investments of $48.5 million and capital expenditure of $4.3 million.
Financing Activities Net cash provided by financing activities of $11.0 million for the year ended December 31, 2022 consisted primarily of proceeds from exercise of share options of $5.9 million and proceeds from employee share purchases under our ESPP of $5.2 million.
Net cash provided by financing activities of $11.0 million for the year ended December 31, 2022 consisted primarily of proceeds from exercise of share options of $5.9 million and proceeds from employee share purchases under our ESPP of $5.2 million.
We have an unwavering commitment to the software developer, security and IT operator communities, and show this commitment by offering varying forms of free access to our products in addition to the paid subscriptions described above.
We have an unwavering commitment to the software developer, security teams, and IT operator communities, and show this commitment by offering varying forms of free access to our products in addition to the paid subscriptions described above.
To date, we have primarily relied on our self-service and inbound sales model to attract new customers. Prospective customers can evaluate and adopt our products through our freemium offerings, free trials, and open source software options. The costs associated with providing these freemium offerings, free trials, and open source software options are included in sales and marketing.
To date, we have primarily relied on our self-service and inbound sales model to attract new customers. Prospective customers can evaluate and adopt our products through our free trials and open source software options. The costs associated with providing these free trials and open source software options are included in sales and marketing.
Our future capital requirements will depend on many factors including our revenue growth rate, subscription renewal activity, billing frequency, the timing, and extent of spending to support further sales and marketing and research and development efforts, the continuing market acceptance of our products and services, as well as expenses associated with our international expansion, 60 Table of Contents the timing, and extent of additional capital expenditures to invest in existing and new office spaces.
Our future capital requirements will depend on many factors including our revenue growth rate, subscription renewal activity, billing frequency, the timing, and extent of spending to support further sales and marketing and research and development efforts, the continuing market acceptance of our products and services, as well as expenses associated with our international expansion, the timing, and extent of additional capital expenditures to invest in existing and new office spaces.
Significant judgement is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. We recognize and measure benefits for uncertain tax positions using a two-step approach.
Significant judgment is required in determining the provision for income taxes and income tax assets and liabilities, including evaluating uncertainties in the application of accounting principles and complex tax laws. We recognize and measure benefits for uncertain tax positions using a two-step approach.
We evaluate uncertain tax positions on a quarterly basis, based upon a number of factors, including 62 Table of Contents changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits, and effective settlement of audit issues. Significant judgment is also required in determining any valuation allowance against deferred tax assets.
We evaluate uncertain tax positions on a quarterly basis, based upon a number of factors, including changes in facts or circumstances, changes in tax law, correspondence with tax authorities during the course of audits, and effective settlement of audit issues. Significant judgment is also required in determining any valuation allowance against deferred tax assets.
All of the top 10 technology organizations, 9 of the top 10 financial services organizations, 8 of the top 10 retail organizations, 9 of the top 10 healthcare organizations, and 5 of the top 6 telecommunications organizations in the Fortune 500 have adopted the JFrog platform, embarking on their journey towards Liquid Software.
All of the top 10 technology organizations, 9 of the top 10 financial services organizations, 9 of the top 10 retail organizations, 9 of the top 10 healthcare organizations, and all of the top 6 telecommunications organizations in the Fortune 500 have adopted the JFrog platform, embarking on their journey towards Liquid Software.
Acquiring New Customers We believe there is a significant opportunity to grow the number of customers that use our platform. As of December 31, 2022, approximately 32% of the Forbes Global 2000 were JFrog customers. Our results of operations and growth prospects will depend in part on our ability to attract new customers.
Acquiring New Customers We believe there is a significant opportunity to grow the number of customers that use our platform. As of December 31, 2023, approximately 32% of the Forbes Global 2000 were our customers. Our results of operations and growth prospects will depend in part on our ability to attract new customers.
Sales and Marketing Sales and marketing expenses primarily consist of personnel-related expenses, share-based compensation expenses, sales commissions directly associated with our sales and marketing organizations, public cloud infrastructure costs associated with our free trials, freemium offerings, and open source software options, and costs associated with marketing programs and user events. Marketing programs include advertising, promotional events, and brand-building activities.
Sales and Marketing Sales and marketing expenses primarily consist of personnel-related expenses, share-based compensation expenses, sales commissions primarily associated with our sales and marketing organizations, public cloud infrastructure costs associated with our free trials and open source software options, and costs associated with marketing programs and user events. Marketing programs include advertising, promotional events, and brand-building activities.
For subscriptions to our self-managed software products, revenue is 55 Table of Contents recognized ratably over the subscription term. For our SaaS subscriptions, revenue is recognized based on usage as the usage occurs over the contract period. License—Self-Managed The license component of our self-managed subscriptions reflects the revenue recognized by providing customers with access to proprietary software features.
For subscriptions to our self-managed software products, revenue is recognized ratably over the subscription term. For our SaaS subscriptions, revenue is recognized based on usage as the usage occurs over the contract period. License—Self-Managed The license component of our self-managed subscriptions reflects the revenue recognized by providing customers with access to proprietary software features.
We will continue to expand our strategic team to identify new use cases and drive expansion and standardization on JFrog within our largest customers, to maintain engineering-level customer support, and to introduce new products and features that are responsive to our customers’ needs. We quantify our expansion across existing customers through our net dollar retention rate.
We will continue to expand our strategic team to 56 Table of Contents identify new use cases and drive expansion and standardization on JFrog within our largest customers, to maintain engineering-level customer support, and to introduce new products and features that are responsive to our customers’ needs. We quantify our expansion across existing customers through our net dollar retention rate.
The following section generally discusses our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
The following section generally discusses our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2021 compared to the year ended December 31, 2020 can be found in Part II, Item 7 of our 2021 Annual Report on Form 10‐K, filed with the SEC on February 11, 2022.
A discussion regarding our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021 can be found in Part II, Item 7 of our 2022 Annual Report on Form 10‐K, filed with the SEC on February 9, 2023.
Our net dollar retention rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features, and our ability to retain our customers. As of December 31, 2022 and 2021, our net dollar retention rate was 128% and 130%, respectively.
Our net dollar retention rate may fluctuate as a result of a number of factors, including the level of penetration within our customer base, expansion of products and features, and our ability to retain our customers. As of December 31, 2023 and 2022, our net dollar retention rate was 119% and 128%, respectively.
Revenue from Enterprise Plus subscription represented approximately 38% of our total revenue for the year ended December 31, 2022, compared to approximately 32% for the year ended December 31, 2021. The growth in revenue from our Enterprise Plus subscription demonstrates the increased demand for our end-to-end solutions for customers’ entire software supply chain management.
Revenue from Enterprise Plus subscription represented approximately 46% of our total revenue for the year ended December 31, 2023, compared to approximately 38% for the year ended December 31, 2022. The growth in revenue from our Enterprise Plus subscription demonstrates the increased demand for our end-to-end solutions for customers’ entire software supply chain management.
We expect that our research and development expenses will continue to increase as we increase our research and development headcount to further strengthen and enhance our products and invest in the development of our software.
We expect that our research and development expenses will 58 Table of Contents continue to increase as we increase our research and development headcount to further strengthen and enhance our products and invest in the development of our software.
For the year ended December 31, 2022, our 10 largest customers represented approximately 7% of our total revenue and no single customer accounted for more than 1% of our total revenue. For the year ended December 31, 2022, 37% of our revenue was generated from customers outside of the United States.
For the year ended December 31, 2023, our 10 largest customers represented approximately 7% of our total revenue and no single customer accounted for more than 1% of our total revenue. For the year ended December 31, 2023, 38% of our revenue was generated from customers outside of the United States.
Revenue from SaaS subscription contributed 28% of our total revenue for the year ended December 31, 2022, compared to 24% for the year ended December 31, 2021. Our self-managed subscriptions are offered on an annual and multi-year basis, and our SaaS subscriptions are offered on a monthly, annual, and multi-year basis.
Revenue from SaaS subscriptions contributed 34% of our total revenue for the year ended December 31, 2023, compared to 28% for the year ended December 31, 2022. Our self-managed subscriptions are offered on an annual and multi-year basis, and our SaaS subscriptions are offered on a monthly, annual, and multi-year basis.
Our principal uses of cash in recent periods have been funding our operations, investing in capital expenditures, and business and asset acquisitions. As of December 31, 2022, our principal sources of liquidity were cash, cash equivalents, and short-term investments of $443.2 million. Cash and cash equivalents primarily consist of cash in banks and money market funds.
Our principal uses of cash in recent periods have been funding our operations, investing in capital expenditures, and business and asset acquisitions. As of December 31, 2023, our principal sources of liquidity were cash, cash equivalents, and short-term investments of $545.0 million. Cash and cash equivalents primarily consist of cash in banks and money market funds.
We continued to invest in our business and had net loss of $90.2 million and $64.2 million for the years ended December 31, 2022 and 2021, respectively.
We continued to invest in our business and had net loss of $61.3 million and $90.2 million for the years ended December 31, 2023 and 2022, respectively.
In instances where observable standalone sales are not available, our estimate of the standalone selling price requires judgment. We consider multiple factors including market conditions, pricing strategies, the economic life of the software, and other observable inputs.
To determine the standalone selling price for each performance obligation, we use observable standalone sales where available. In instances where observable standalone sales are not available, our estimate of the standalone selling price requires judgment. We consider multiple factors including market conditions, pricing strategies, the economic life of the software, and other observable inputs.
This free access takes the form of freemium offerings, free trials, and open source software, and helps generate demand for our paid offerings within the software developer, security and IT operator communities. 53 Table of Contents We generated revenue of $280.0 million and $206.7 million for the years ended December 31, 2022 and 2021, respectively, representing year-over-year growth rate of 35%.
This 55 Table of Contents free access takes the form of free trials and open source software, and helps generate demand for our paid offerings within the software developer, security and IT operator communities. We generated revenue of $349.9 million and $280.0 million for the years ended December 31, 2023 and 2022, respectively, representing year-over-year growth rate of 25%.
As of December 31, 2022, 736 of our customers had ARR of $100,000 or more, increasing from 537 customers as of December 31, 2021. We had 19 customers with ARR of at least $1.0 million as of December 31, 2022, increasing from 15 customers as of December 31, 2021.
As of December 31, 2023, 886 of our customers had ARR of $100,000 or more, increasing from 736 customers as of December 31, 2022. We had 37 customers with ARR of at least $1.0 million as of December 31, 2023, increasing from 19 customers as of December 31, 2022.
Income Tax Expense (Benefit) Year Ended December 31, 2022 2021 $ Change % Change (in thousands, except percentages) Income tax expense (benefit) $ 5,438 $ (3,422 ) $ 8,860 (259 )% Effective income tax rate (6 )% 5 % Our effective tax rate is affected primarily by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as non-deductible expenses, such as share-based compensation, and changes in our valuation allowance.
Income Tax Expense Year Ended December 31, 2023 2022 $ Change % Change (in thousands, except percentages) Income tax expense (benefit) $ 6,740 $ 5,438 $ 1,302 24 % Effective income tax rate (12 )% (6 )% Our effective tax rate is affected primarily by tax rates in foreign jurisdictions and the relative amounts of income we earn in those jurisdictions, as well as non-deductible expenses, such as share-based compensation, and changes in our valuation allowance.
As of December 31, 2022, we had a global customer base of approximately 7,200 organizations across all industries and sizes, including approximately 89% of Fortune 100 organizations, increasing from approximately 6,650 organizations as of December 31, 2021.
As of December 31, 2023, we had a global customer base of approximately 7,400 organizations across all industries and sizes, including approximately 83% of Fortune 100 organizations, increasing from approximately 7,200 organizations as of December 31, 2022.
Some of the limitations of free cash flow are that this metric does not reflect our future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure. We expect our free cash flow to fluctuate in future periods as we invest in our business to support our plans for growth.
Some of the limitations of free cash flow are that this metric does not reflect our future contractual commitments and may be calculated differently by other companies in our industry, limiting its usefulness as a comparative measure.
Overview JFrog’s vision is to power a world of continuously updated, version-less software – we call this Liquid Software. We provide an end-to-end, hybrid, universal DevOps Platform that powers and controls the software supply chain, enabling organizations to continuously and securely deliver software updates across any system.
Overview JFrog’s vision is to power a world of continuously updated, secure, trusted software – we call this Liquid Software. We provide an end-to-end, hybrid, universal Software Supply Chain Platform that enables organizations to continuously and securely create and deliver software updates across any system.
The increase was primarily attributable to an increase of $10.5 million in personnel-related expenses mainly as a result of increased headcount, an increase of $7.5 million in share-based compensation expense as discussed in the section titled “ Share-Based Compensation Expense ” below, and an increase of $6.4 million in marketing program costs.
The increase was primarily attributable to an increase of $7.6 million in share-based compensation expense as discussed in the section titled “ Share-Based Compensation Expense ” below, an increase of $5.9 million in personnel-related expenses mainly as a result of increased headcount, and an increase of $5.6 million in commissions mainly from amortization of deferred contract acquisition costs.
We may also use the expected cost-plus margin approach to estimate the price we would charge if the products and services were sold separately. The standalone selling price is reassessed periodically or when facts and circumstances change.
We may also use the expected cost-plus margin approach to estimate the price we would charge if the products and services were sold separately. The standalone selling price is reassessed periodically or when facts and circumstances change. Income taxes We are subject to income taxes in Israel, the U.S., and other foreign jurisdictions.
This platform is the critical bridge between software development and deployment of that software, paving the way for the modern DevOps paradigm. We enable organizations to build and release software faster and more securely while empowering developers to be more efficient.
This platform is the critical bridge between software development and deployment of that software, paving the way for modern software supply chain management and software release processes. We enable organizations to build and release software faster and more securely while empowering developers, security teams and machine learning operation teams to be more efficient.
Net cash provided by operating activities of $27.9 million for year ended December 31, 2021 was primarily related to our net loss of $64.2 million adjusted for non-cash charges of $77.3 million, including share-based compensation expense of $56.9 million and depreciation and amortization of $8.7 million, and changes in our operating assets and liabilities of $14.8 million.
Net cash provided by operating activities of $21.4 million for the year ended December 31, 2022 was primarily related to our net loss of $90.2 million, adjusted for non-cash charges of $94.8 million, including share-based compensation expense of $68.7 million and depreciation and amortization of $14.7 million, and changes in our operating assets and liabilities of $16.8 million.
The following table summarizes our cash flows for the periods presented and provides a reconciliation of net cash from operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow, a non-GAAP financial measure, for each of the periods presented: Year Ended December 31, 2022 2021 2020 (in thousands) Net cash provided by operating activities $ 21,425 $ 27,902 $ 29,458 Less: purchases of property and equipment (4,328 ) (4,228 ) (3,522 ) Free cash flow $ 17,097 $ 23,674 $ 25,936 Net cash used in investing activities $ (53,338 ) $ (125,545 ) $ (311,796 ) Net cash provided by financing activities $ 11,027 $ 1,444 $ 406,134 Components of Results of Operations Revenue Our revenues are comprised of revenue from self-managed subscriptions and SaaS subscriptions.
We expect our free cash flow to fluctuate in future periods as we invest in our business to support our plans for growth. 57 Table of Contents The following table summarizes our cash flows for the periods presented and provides a reconciliation of net cash from operating activities, the most directly comparable financial measure calculated in accordance with GAAP, to free cash flow, a non-GAAP financial measure, for each of the periods presented: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 74,155 $ 21,425 $ 27,902 Less: purchases of property and equipment (1,982 ) (4,328 ) (4,228 ) Free cash flow $ 72,173 $ 17,097 $ 23,674 Net cash used in investing activities $ (53,476 ) $ (53,338 ) $ (125,545 ) Net cash provided by financing activities $ 18,371 $ 11,027 $ 1,444 Components of Results of Operations Revenue Our revenues are comprised of revenue from self-managed subscriptions and SaaS subscriptions.
The decrease was primarily attributable to a decrease of $8.8 million in share-based compensation expense 59 Table of Contents as discussed in the section titled “ Share-Based Compensation Expense ” below, partially offset by an increase of $6.7 million in personnel-related expenses mainly as a result of increased headcount.
The increase was primarily attributable to an increase of $8.1 million in share-based compensation expense as discussed in the section titled “ Share-Based Compensation Expense ” below and an increase of $1.6 million in personnel-related expenses mainly as a result of increased headcount, partially offset by a decrease of $1.9 million in professional fees for recruiting, accounting and other services.
The increase was primarily attributable to an increase of $20.5 million in personnel-related expenses mainly as a result of increased headcount, including headcount from our acquisitions, an increase of $10.1 million in share-based compensation expense as discussed in the section titled “ Share-Based Compensation Expense ” below, and an increase of $5.4 million in compensation expense associated with holdback and retention arrangements as part of our acquisitions.
The increase was primarily attributable to an increase of $8.0 million in share-based compensation expense as discussed in the section titled “ Share-Based Compensation Expense ” below, an increase of $4.8 million in personnel-related expenses mainly as a result of increased headcount, and an increase of $1.8 million in costs of development environments and tools, partially offset by a decrease of $2.1 million in compensation expense associated with holdback and retention arrangements from our acquisitions in 2021.
The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2022 2021 (in thousands) Net cash provided by operating activities $ 21,425 $ 27,902 Net cash used in investing activities $ (53,338 ) $ (125,545 ) Net cash provided by financing activities $ 11,027 $ 1,444 Operating Activities Net cash provided by operating activities of $21.4 million for the year ended December 31, 2022 was primarily related to our net loss of $90.2 million, adjusted for non-cash charges of $94.8 million, including share-based compensation expense of $68.7 million and depreciation and amortization of $14.7 million, and changes in our operating assets and liabilities of $16.8 million.
The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2023 2022 (in thousands) Net cash provided by operating activities $ 74,155 $ 21,425 Net cash used in investing activities $ (53,476 ) $ (53,338 ) Net cash provided by financing activities $ 18,371 $ 11,027 Operating Activities Net cash provided by operating activities of $74.2 million for the year ended December 31, 2023 was primarily related to our net loss of $61.3 million, adjusted for non-cash charges of $112.1 million, including share-based compensation expense of $95.2 million and depreciation and amortization of $15.3 million, and changes in our operating assets and liabilities of $23.3 million.
The amount of revenue recognized reflects the consideration that we expect to receive in exchange for these goods or services. Our contracts may contain multiple performance obligations, each of which is separately accounted for as a distinct performance obligation. To determine the standalone selling price for each performance obligation, we use observable standalone sales where available.
Revenue Recognition Revenue is recognized when a customer obtains control of promised goods or services are delivered. The amount of revenue recognized reflects the consideration that we expect to receive in exchange for these goods or services. Our contracts may contain multiple performance obligations, each of which is separately accounted for as a distinct performance obligation.
The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis. Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances.
Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses, as well as related disclosures. We evaluate our estimates and assumptions on an ongoing basis.
While we believe we have a significant market opportunity that our platform 54 Table of Contents addresses, we will need to continue to invest in customer support, sales and marketing, and research and development in order to address this opportunity.
While we believe we have a significant market opportunity that our platform addresses, we will need to continue to invest in customer support, sales and marketing, and research and development in order to address this opportunity. Additionally, we believe our products address the software release needs of customers worldwide, and we see international expansion as a major opportunity.
Sales and Marketing Year Ended December 31, 2022 2021 $ Change % Change (in thousands, except percentages) Sales and marketing $ 130,812 $ 96,962 $ 33,850 35 % Sales and marketing expense increased for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Sales and Marketing Year Ended December 31, 2023 2022 $ Change % Change (in thousands, except percentages) Sales and marketing $ 150,675 $ 130,812 $ 19,863 15 % Sales and marketing expense increased for the year ended December 31, 2023 compared to the year ended December 31, 2022.
The increase was primarily attributable to an increase of $6.4 million in personnel-related expenses mainly as a result of increased headcount, an increase of $5.5 million in amortization of intangibles mainly as a result of our acquisition of Vdoo Connected Trust Ltd (“Vdoo”) in July 2021, an increase of $3.6 million in third-party hosting costs primarily driven by increased revenue from SaaS subscription, and an increase of $3.0 million in share-based compensation expense as discussed in the section titled “ Share-Based Compensation Expense ” below.
The increase was primarily attributable to an increase of $9.1 million in third-party hosting costs primarily driven by increased revenue from SaaS subscriptions, an increase of $2.8 million in share-based compensation expense as discussed in the section titled “ Share-Based Compensation Expense ” below, and an increase of $1.8 million in personnel-related expenses mainly as a result of increased headcount.
General and Administrative Year Ended December 31, 2022 2021 $ Change % Change (in thousands, except percentages) General and administrative $ 55,556 $ 56,663 $ (1,107 ) (2 )% General and administrative expense decreased for the year ended December 31, 2022 compared to the year ended December 31, 2021.
General and Administrative Year Ended December 31, 2023 2022 $ Change % Change (in thousands, except percentages) General and administrative $ 63,132 $ 55,556 $ 7,576 14 % General and administrative expense increased for the year ended December 31, 2023 compared to the year ended December 31, 2022.
We maintain a full valuation allowance on certain deferred tax assets in Israel as we have concluded that it is 56 Table of Contents not more likely than not that the deferred tax assets will be realized.
Income Tax Expense Income tax expense (benefit) consists primarily of income taxes related to the U.S. and other foreign jurisdictions in which we conduct business. We maintain a full valuation allowance on certain deferred tax assets in Israel as we have concluded that it is not more likely than not that the deferred tax assets will be realized.
We believe our judgements and estimates associated with the determination of standalone selling price for each performance obligation in revenue recognition, accounting for business combinations, and accounting for income taxes, which we discuss further below, could have a material impact on our consolidated financial statements.
We believe our judgments and estimates associated with the determination of standalone selling price for each performance obligation in revenue recognition and accounting for income taxes, which we discuss further below, could have a material impact on our consolidated financial statements. 64 Table of Contents Please see Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements.
As events continue to evolve and additional information becomes available, our estimates and assumptions may change materially in future periods.
Our estimates are based on historical experience and various other assumptions that we believe to be reasonable under the circumstances. As events continue to evolve and additional information becomes available, our estimates and assumptions may change materially in future periods.
Operating Expenses Research and Development Year Ended December 31, 2022 2021 $ Change % Change (in thousands, except percentages) Research and development $ 121,225 $ 79,604 $ 41,621 52 % Research and development expense increased for the year ended December 31, 2022 compared to the year ended December 31, 2021.
Gross margin remained consistent for the year ended December 31, 2023 compared to the year ended December 31, 2022. 61 Table of Contents Operating Expenses Research and Development Year Ended December 31, 2023 2022 $ Change % Change (in thousands, except percentages) Research and development $ 134,584 $ 121,225 $ 13,359 11 % Research and development expense increased for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Obligations under contracts that we can cancel without a significant penalty are not included in the table above. We believe we will have sufficient liquidity from our operations to fulfil the commitments. Critical Accounting Estimates Our consolidated financial statements are prepared in accordance with GAAP.
Purchase obligations represent our commitments primarily for hosting services, software products and services under contracts of 12 months or longer. Obligations under contracts that we can cancel without a significant penalty are not included in the table above. We believe we will have sufficient liquidity from our operations to fulfill the commitments.
We started experiencing slower expansion across existing customers towards the end of fiscal 2022, and expect this trend to continue in the near future. We focus on growing the number of large customers as a measure of our ability to scale with our customers and attract larger organizations to adopt our products.
We expect our net dollar retention rate to stabilize around current levels. We focus on growing the number of large customers as a measure of our ability to scale with our customers and attract larger organizations to adopt our products.
The changes in our operating assets and liabilities was primarily related to an increase in deferred revenue of $43.0 million and an increase in accrued expense and other liabilities of $13.1 million, partially offset by an increase in prepaid expense and other assets of $17.7 million, an increase of accounts receivable of $12.8 million, and an increase in deferred contract acquisition costs of $6.2 million.
The changes in operating assets and liabilities were primarily related to an increase of $38.4 million in deferred revenue and an increase of $10.7 million in accrued expense and other liabilities mainly due to higher accrued compensation and benefits, 63 Table of Contents partially offset by an increase of $14.1 million in accounts receivable, an increase of $7.8 million in net deferred contract acquisition costs, and a decrease of $7.7 million in operating lease liabilities primarily as a result of payments.
Share-based Compensation Expense Year Ended December 31, 2022 2021 $ Change % Change (in thousands, except percentages) Cost of revenue: subscription–self-managed and SaaS $ 6,991 $ 4,027 $ 2,964 74 % Research and development 24,664 14,572 10,092 69 Sales and marketing 22,753 15,256 7,497 49 General and administrative 14,253 23,094 (8,841 ) (38 ) Total share-based compensation expense $ 68,661 $ 56,949 $ 11,712 21 % The increase in share-based compensation expenses for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily attributable to grants to new and existing employees.
Share-based Compensation Expense Year Ended December 31, 2023 2022 $ Change % Change (in thousands, except percentages) Cost of revenue: subscription–self-managed and SaaS $ 9,784 $ 6,991 $ 2,793 40 % Research and development 32,689 24,664 8,025 33 Sales and marketing 30,338 22,753 7,585 33 General and administrative 22,360 14,253 8,107 57 Total share-based compensation expense $ 95,171 $ 68,661 $ 26,510 39 % The increase in share-based compensation expenses for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily attributable to grants to new and existing employees. 62 Table of Contents Interest and Other Income, Net Year Ended December 31, 2023 2022 $ Change % Change (in thousands, except percentages) Interest and other income, net $ 21,032 $ 5,094 $ 15,938 313 % Interest and other income, net increased for the year ended December 31, 2023 compared to the year ended December 31, 2022, primarily due to higher interest income as a result of higher interest rates on our deposits and marketable securities.
Additionally, we believe our products address the software release needs of customers worldwide, and we see international expansion as a major opportunity. We have been operating and selling our products in international markets since our inception.
We have been operating and selling our products in international markets since our inception.
The increases in deferred revenue, accounts receivable, and deferred contract acquisition costs were driven by higher sales.
The increases in deferred revenue, accounts receivable, and deferred contract acquisition costs were driven by higher sales. Investing Activities Net cash used in investing activities of $53.5 million for the year ended December 31, 2023 consisted primarily of net purchase of short-term investments of $51.5 million.
Since our initial launch of JFrog Artifactory, we have released several additional products and solutions that together create a unified DevOps platform. We invest heavily in integrating our products with the major package technologies so that our products can be easily adopted in any development environment.
For instance, in July 2023, we released JFrog Curation, a solution that prevents malicious open source or third-party software packages and their respective dependencies from entering an organization’s software development environment. We invest heavily in integrating our products with the major package technologies so that our products can be easily adopted in any development environment.
Net cash provided by financing activities of $1.4 million for the year ended December 31, 2021 consisted of proceeds from exercise of share options of $6.8 million and proceeds from employee share purchases under our ESPP of $3.1 million, partially offset by net payments of $8.5 million to tax authorities associated with our employee equity transactions. 61 Table of Contents Contractual Obligations The following table summarizes our non-cancellable contractual obligations as of December 31, 2022: Payments Due by Period Total Short-term Long-term (in thousands) Operating lease obligations $ 30,839 $ 8,381 $ 22,458 Purchase obligations 62,852 18,569 44,283 Total $ 93,691 $ 26,950 $ 66,741 The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding.
Contractual Obligations The following table summarizes our non-cancellable contractual obligations as of December 31, 2023: Payments Due by Period Total Short-term Long-term (in thousands) Operating lease obligations $ 23,383 $ 8,895 $ 14,488 Purchase obligations 32,687 16,346 16,341 Total $ 56,070 $ 25,241 $ 30,829 The contractual commitment amounts in the table above are associated with agreements that are enforceable and legally binding.
Removed
Revenue from subscriptions that provide our customers with access to multiple products represented approximately 94% of our total revenue for the year ended December 31, 2022, compared to 92% for the year ended December 31, 2021.
Added
Israel-Hamas War On October 7, 2023, Hamas militants and members of other terrorist organizations infiltrated Israel’s southern border from the Gaza Strip and conducted a series of terror attacks on civilian and military targets.
Removed
Income Tax Expense (Benefit) Income tax expense (benefit) consists primarily of income taxes related to the U.S. and other foreign jurisdictions in which we conduct business.
Added
Following the attack, Israel’s security cabinet declared war against Hamas and a military campaign against these terrorist organizations commenced in parallel with continued rocket and terror attacks from Hamas.
Removed
The decrease in gross margin for the year ended December 31, 2022 compared to the year ended December 31, 2021 reflects mainly higher amortization expense as discussed above.
Added
In connection with the Israeli security cabinet’s war declaration against Hamas and possible hostilities with other organizations, several hundred thousand Israeli military reservists were drafted by the Israel Defense Forces to perform immediate military service. Certain of our employees and consultants in Israel have been called and additional employees may be called as the conflict progresses.
Removed
In addition, equity awards and holdback arrangements associated with our Vdoo acquisition resulted in an increase of $3.8 million share-based compensation expense primarily in research and development.
Added
Such employees may be absent for an extended period of time. Accordingly, we have taken steps to mitigate the effects of the war between Hamas and Israel on our business and results of operations. Although we are domiciled in Israel, we are a global, cloud-based company, with operations spanning numerous countries with redundant infrastructure and code located outside of Israel.
Removed
Share-based compensation expense in general and administrative decreased due to $14.6 million expense recognized for the nine months ended September 30, 2021 related to the RSU granted to our CEO, which fully vested in September 2021.
Added
We maintain a comprehensive business continuity plan and have taken the necessary steps in line with such plan, in an effort to ensure that our operations and service to our customers remain consistent, in light of certain employees drafted as reservists in the war between Hamas and Israel.
Removed
Interest and Other Income, Net Three Months Ended December 31, 2022 2021 $ Change % Change (in thousands, except percentages) Interest and other income, net $ 5,094 $ 744 $ 4,350 585 % Interest and other income, net increased for the year ended December 31, 2022 compared to the year ended December 31, 2021, primarily due to higher interest income as a result of higher interest rates on our deposits and marketable securities.
Added
Our business continuity plan is structured around three pillars and was activated on October 7, 2023, hours after the attack on Israel. The first pillar is our internal plan focused on the safety of our employees in Israel and maintaining internal communication channels.
Removed
The increase in accrued expense and other liabilities was primarily attributable to a $8.8 million increase in compensation and benefit accruals and an accrual for litigation settlement of $2.6 million. $16.1 million of the increase in prepaid expense and other assets were due to prepayments pursuant to holdback agreements associated with our acquisitions.
Added
The second pillar revolves around technology to support continuity of our services, security, cyber defense, and research and development. The third pillar is dedicated to our external-facing activities to promote continuity of customer engagements, support and external communication.
Removed
Net cash used in investing activities of $125.5 million for the year ended December 31, 2021 consisted primarily of payments for acquisitions of $195.8 million, net of cash acquired and capital expenditure of $4.2 million, partially offset by net proceeds from sales and maturities of short-term investments of $75.0 million.
Added
As of the date of this Annual Report on Form 10-K, there has been no major interruption or material adverse impact on our operating results. We will continue to monitor the situation as it progresses.
Removed
Please see Notes to Consolidated Financial Statements included in Part II, Item 8 of this Annual Report on Form 10-K for a summary of significant accounting policies and the effect on our financial statements. Revenue Recognition Revenue is recognized when a customer obtains control of promised goods or services are delivered.
Added
Today, with JFrog Artifactory at its center, our platform is comprised of additional security solutions and the connected device management solution. We have continued to invest in innovation and introduce new products and capabilities.
Removed
Business Combinations Accounting for business combinations requires us to make significant estimates and assumptions in determining the fair values of assets acquired and liabilities assumed, especially with respect to intangible assets .
Added
Furthermore, we see expansion opportunities when customers migrate from self-managed subscriptions to SaaS solutions because customers have generally increased their platform usage levels after migration.
Removed
Critical estimates in valuing the acquired intangible assets include, but are not limited to, future expected cash flows from product sales, the appropriate weighted-average cost of capital, and the cost savings expected to be derived from acquiring an asset.
Added
Cost of Revenue and Gross Margin Year Ended December 31, 2023 2022 $ Change % Change (in thousands, except percentages) Subscription—self-managed and SaaS $ 76,244 $ 61,407 $ 14,837 24 % License—self-managed 799 880 (81 ) (9 ) Total cost of revenue—subscription $ 77,043 $ 62,287 $ 14,756 24 % Gross margin 78 % 78 % Total cost of revenue increased for the year ended December 31, 2023 compared to the year ended December 31, 2022.
Removed
Although we believe the assumptions and estimates we have made in the past have been reasonable and appropriate, they are based, in part, on histor ical experience and information obtained from management of the acquired companies and are inherently uncertain. Income taxes We are subject to income taxes in Israel, the U.S., and other foreign jurisdictions.
Added
Financing Activities Net cash provided by financing activities of $18.4 million for the year ended December 31, 2023 consisted primarily of proceeds from exercise of share options of $10.0 million and proceeds from employee share purchases under our ESPP of $6.7 million.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

10 edited+1 added−1 removed3 unchanged
Biggest changeA 10% adverse change in current exchange rates would not have materially affected on our cash, cash equivalents, restricted cash, and short-term investment balances as of December 31, 2022. Interest Rate Risk As of December 31, 2022, we had cash and cash equivalents of $45.6 million, and short-term investments of $397.6 million.
Biggest changeAs of December 31, 2023, our cash, cash equivalents, restricted cash, and short-term investments were primarily denominated in U.S. dollars. A 10% adverse change in current exchange rates would not have materially affected our cash, cash equivalents, restricted cash, and short-term investment balances as of December 31, 2023.
Changes in interest rates affect the interest earned on our cash and cash equivalents and marketable securities, and the market value of those securities. A hypothetical 1% increase in interest rates would not have had a material impact on their fair value as of December 31, 2022.
Changes in interest rates affect the interest earned on our cash and cash equivalents and marketable securities, and the market value of those securities. A hypothetical 1% increase in interest rates would not have had a material impact on their fair value as of December 31, 2023.
However, if our costs, in particular labor, sales and marketing, and hosting costs, were 63 Table of Contents to become subject to inflationary pressures, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations. 64 Table of Contents
However, if our costs, in particular labor, sales and marketing, and hosting costs, were to become subject to inflationary pressures, we might not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition, and results of operations. 66 Table of Contents
The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash. We do not enter into investments for trading or speculative purposes. Such interest-earning instruments carry a degree of interest rate risk.
Our cash, cash equivalents, and short-term investments are held for working capital purposes. The primary objectives of our investment activities are the preservation of capital, the fulfillment of liquidity needs and the fiduciary control of cash. We do not enter into investments for trading or speculative purposes. Such interest-earning instruments carry a degree of interest rate risk.
To reduce the impact of foreign exchange risks associated with forecasted future cash flows and certain existing assets and liabilities and the volatility in our Consolidated Statements of Operations, we have established a hedging program. Foreign currency contracts are generally utilized in this hedging program. Our foreign currency contracts are generally short-term in duration.
We anticipate that a material portion of our expenses will continue to be denominated in NIS. To reduce the impact of foreign exchange risks associated with forecasted future cash flows and certain existing assets and liabilities and the volatility in our Consolidated Statements of Operations, we have established a hedging program.
Our hedging program reduces but does not eliminate the impact of currency exchange rate movements. The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business, after considering our hedging programs, would not have had a material impact on our results of operations for the years ended December 31, 2022, 2021, and 2020, respectively.
The effect of a hypothetical 10% change in foreign currency exchange rates applicable to our business, after considering our hedging programs, would not have had a material impact on our results of operations for the years ended December 31, 2023, 2022, and 2021, respectively. 65 Table of Contents Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement.
We do not enter into derivative instruments for trading or speculative purposes. We account for our derivative instruments as either assets or liabilities and carry them at fair value in the Consolidated Balance Sheets. The accounting for changes in the fair value of the derivative depends on the intended use of the derivative and the resulting designation.
Foreign currency contracts are generally utilized in this hedging program. Our foreign currency contracts are generally short-term in duration. We do not enter into derivative instruments for trading or speculative purposes. We account for our derivative instruments as either assets or liabilities and carry them at fair value in the Consolidated Balance Sheets.
Cash and cash equivalents primarily consist of cash in banks and money market funds. Short-term investments generally consist of bank deposits, certificates of deposit, commercial paper, corporate debt securities, municipal securities, and government and agency debt. Our cash, cash equivalents, and short-term investments are held for working capital purposes.
Interest Rate Risk As of December 31, 2023, we had cash and cash equivalents of $84.8 million, and short-term investments of $460.2 million. Cash and cash equivalents primarily consist of cash in banks and money market funds. Short-term investments generally consist of bank deposits, certificates of deposit, commercial paper, corporate debt securities, municipal securities, and government and agency debt.
This foreign currency exposure gives rise to market risk associated with exchange rate movements of the U.S. dollar against the NIS. Furthermore, we anticipate that a material portion of our expenses will continue to be denominated in NIS.
This foreign currency exposure gives rise to market risk associated with exchange rate movements of the U.S. dollar against the NIS. Since the beginning of the war between Israel and Hamas, the volatility of NIS against the U.S. dollar has not materially affected the results of our business.
Our derivatives expose us to credit risk to the extent that the counterparties may be unable to meet the terms of the agreement. We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading the risk across a number of major financial institutions.
We seek to mitigate such risk by limiting our counterparties to major financial institutions and by spreading the risk across a number of major financial institutions. However, failure of one or more of these financial institutions is possible and could result in incurred losses.
Removed
However, failure of one or more of these financial institutions is possible and could result in incurred losses. As of December 31, 2022, our cash, cash equivalents, restricted cash, and short-term investments were primarily denominated in U.S. dollars.
Added
The accounting for changes in the fair value of the derivative depends on the intended use of the derivative and the resulting designation. Our hedging program reduces but does not eliminate the impact of currency exchange rate movements.

Other FROG 10-K year-over-year comparisons