Welcome to the J. Frog's First Quarter Fiscal 2021 Financial Results Conference Call. My name is Rebecca, and I will be your operator for today's call. At this time, all participants are in a listen only mode. Later, we will conduct a question and answer session.
I will now turn the call over to Joanne Horn of the JFrog Investor Relations team. Joanne, please go ahead.
Good afternoon and thank you for joining us as we review JFrog's Q1 financial results, which were announced following the market close via press release earlier today. Joining us will be JFrog's CEO and Co Founder, Shlomi Ben Haim and Jacob Schulman, JFrog's CFO. During this call, We will make statements related to our business that are forward looking under federal securities laws and are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our future financial performance, including our outlook for the Q2 and full year of 2021. The words anticipate, believe, continue, estimate, expect, intend, will and similar expressions are intended to identify forward looking statements or similar indications of future expectations. You are cautioned not to place undue reliance on these forward looking statements, which reflect our views only as of today and not as of any other subsequent date.
Please keep in mind that we are not obligated ourselves to revise or publicly release the results of any to these forward looking statements in light of new information or future results. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of material risks and other important factors that could affect our actual results, Please refer to our Form 10 ks filed with the SEC on February 12, 2021, which is available in the Investor Relations section of our website and the earnings press release issued earlier today. Additional information will be made available in our quarterly report on Form 10 Q for the quarter ended March 31, 2021, and other filings and reports that we may file from time to time with the SEC. Additionally, non GAAP financial measures will be discussed on the conference call.
These non GAAP financial measures, which are used as measures of JFrog's performance, should be considered in addition to, not as a substitute for or in isolation from GAAP measures. Please refer to the tables in our earnings release for a reconciliation of those measures to their most directly comparable GAAP financial measures. A replay of this call will be available on the JFrog Investor Relations website for a limited time. And with that, I'd like to turn the call over to JFrog's CEO, Shlomi Benhaim. Shlomi?
Thank you, Joanne. Greetings from the swamp, and thanks for joining us for J. Fox 2021 Q1 earnings call. Before we start, And as some countries are still being ravaged by the pandemic, I want to take a moment and send our best wishes Good health and recovery to our employees, friends and families in India. We're proud of our strong first quarter, And I would like to thank all of the FOGs for their amazing work in making this a great launching pad for 2021.
This quarter was a milestone for all of us as it marked 1 year since the world entered the pandemic mode. I'm happy to see us beginning to emerge from it as we have opened the Israel offices where the majority of our R and D team is located. We will even be holding 1 of the first in person DevOps events of the year in July taking place in Tel Aviv. We are looking forward to meeting our customers and partners face to face again as we continue to bring more value to the community. Now I want to share our 2021 Q1 results.
I'm pleased to report that JFrog's revenue climbed to $45,100,000 A growth of 37% over the same period last year. Cloud revenue continued to grow with the 62% increase year over year, And our highly efficient business model contributed a quarterly free cash flow of $7,700,000 Now on to a few of our Q1 business highlights. In the Q1, JFOB increased the number of customers with over $100,000 in ARR to $395,000,000 Our customers with over $1,000,000 remained unchanged at $10,000 The strong growth in greater than $100,000 customer validates our land and expense model and demonstrates the high value for our customers. I'm also pleased to see healthy growth in new customers' additions for Q1. In the previous year, Under the pandemic forced reality, we guided our customer success team to be focused on our installed base retention.
As we reported in the past, we performed very well on that end. 2021 started with a focus on net new customers' growth in addition to our customers' retention that continues to be very high. As a result, in Q1, we are seeing an acceleration of new logos coming to JFOB. We'll continue to stay focused on increasing net new customers win for this fiscal year. Additionally, we continue to see new customers land at high subscription level, indicating demand for prospects and customers across DevOps maturity levels.
For example, one of the largest integrators and consultancy in the world recently came to JFrog as a new customer. They adopted the multi product end to end platform at our highest subscription level in order to standardize on a complete DevOps solution. This team asked for a universal solution It will also include software package distribution, so once built and secure, binaries will be deployed safely on the edge closer to the developer. We are excited to see that more and more customers are approaching us requiring a full solution that includes security and distribution for a multisite and hybrid setup. These customers expand their DevOps environment beyond just the software build and CICD processes.
Specifically for our cloud business in Q1, I'm pleased to report robust year over to our partnership with the major cloud providers, AWS, Microsoft and Google with new offerings In cloud marketplaces and increased options for co enterprise sales driving deal volume and size. We also announced JPOC Solutions availability on AWS GovCloud and Microsoft Government Cloud Infrastructure to set the stage for future growth in governmental and highly regulated sectors. As another sales highlight, We noted in the past our emphasis on APAC and the China market specifically as the target area for growth and expansion. This past quarter, we added the largest stock exchange in Mainland China as a customer and also welcome A large state owned financial and insurance company. We also recently announced expanding our footprint in China in sales, Marketing and support staff dedicated to that market, we look forward to these investments continuing to bear fruit.
Turning quickly to the sales funnel. We continue to see the growth in demand for our platform, With thousands of users every quarter joining our free tier and trial offering, both in the cloud and self managed, We also see growing number of new customers' conversion. We continue to invest in the customers' experience and on boarding process to improve the adoption of our solutions and conversion rate. It's important to understand the drivers behind this global growth. In addition to our Tifactory, which serves as the control point of our customers' DevOps environments, we also see 2 key themes Enterprise DevOps across the world, the security of software packages and software package distribution.
1st, on security. Keeping the entire software lifecycle secure is a mantra for JFOP. With the JFOP platform, customers can uniquely identify vulnerable software components discover the scope of their business impact and completely automate the CICD flow to prevent glitches while fixing issues discovered across their business. Some of our customers tell us A SolarWinds like attack could take them months or even years to identify where the vulnerabilities may lay. While using JFrog, this process can take A few second only.
We're proud of our security teams across products, R and D and more that have made this a reality. In fact, 1 of the Fortune 100 Financial Organizations recently standardized on JFrog X-ray and security solutions to fortify against supply chain attacks. 2nd, on distribution specifically, we believe that getting packages The last mile to production is the next wave of DevOps and solves a major pain point for all of our distributed customers. As part of our Global Customers event in February, we validated software distribution is the number one driver for migrations to our highest subscription level. Our customers tell us we are uniquely delivering software packages to the edge at scale, enabling the secure and fast movement of software packages to the edge.
For example, One of the largest fast food chains in America with over 2,000 restaurants is utilizing JFrog to deliver software packages directly A full sync is made between the order being made, the inventory in each of the restaurants and final food delivery is managed by software requiring updates powered by JFrog. As another example, one of Germany's most respected automotive companies Is utilizing JFrog Technologies to deliver software for the next generation of what they call liquid vehicle that will operate on over the air continued software updates with 0 downtime. The auto manufacturers team presented how software is being built and aggregated in our Pifactory, then secured and distributed only with the incremental software update. None of this is possible without the fast, secure, reliable distribution of software packages or in our customer worlds without JFrog. We saw JFOP displacing competitors based on these factors as companies identified binaries as the pipeline primary asset and move to our universal hybrid DevSecOps solution.
For example, one of Canada's largest banks moved away from a competitor that is focused on only subset of technologies and security scanning to our complete platform. They took advantage of our high number of technology type supported and our distribution solution alongside our security focus. Now I would like to turn to specific product enhancements and investments that are supporting our vision and end in mind approach. At JFrog, our customers' digital transformation is at the core of how we operate and how we develop our products. In Q1, we released our most significant set of new product capabilities and innovation in the past 2 years, changes that are unique in the market.
These were built with a single goal in mind, getting software from the developers' fingertips to the edge without any blockers in technology, processes or security. Enhancements included enterprise scalability, binary management security, software distribution and developer ecosystem integrations. As a highlight regarding enterprise scalability capabilities, we released JPRO projects allowing administrators and team leads to efficiently manage their organization by business units and operate the nuts and bolts of DevOps, Everything from permissions to storage quota and more. This feature alone can save thousands of developer hours and other resources for organizations. For distribution, we enhanced our peer to peer sharing feature And integrated technology for developers, allowing them to plan for software distribution from the beginning.
With these technologies, we will be able to monetize distribution capabilities, not just through adding more edge nodes licenses, but also scaling with our customers' data transfer, both in the cloud and on prem. From a binary management perspective, We delivered new capabilities for the RAS programming language and cargo repository to support the hundreds of thousands of C plus plus developers. RASK was also rated the most low programming language in the recent Stack Overflow survey, and we are proud to welcome This growing community into JFOP and look forward to building the world of IoT with them. We further enhanced The platform to include more security and ID management features, such as the scheme standard for ID management and integration with Hachikop Vault for Secret Management. We also added support for private networking with our partners, AWS, And expanded support for Conan C plus 5 packages in JFrog X-ray, expanding continued security into IoT, Automotive and other verticals.
These all allow companies the flexibility to integrate and standardize Their security processes and external management tools saving valuable time and effort. JFrog further enhanced our ability to provide data and metrics to our platform customers about the health and quality of the DevOps pipeline via improvements to JFrog Insight. Users can now monitor their pipeline as well as manage and allocate resources more efficiently. We also know that developers are the rainmaker of the software industry. For these developers, our users, we not only added new technology types, but enhanced our command line tools, which is the main way developers interact with JFOC Technologies.
Developers also need monitoring and management tools across the delivery pipeline. So we expanded our partners' integration, including Atlassian Jira, PagerDuty, Datadog and more to improve collaboration and traceability across the delivery process. We are excited about how these key updates bring an enhanced solution to the market that is driving both customers and community happiness. Finally, a quick note on our subscriptions. Subscriptions to JFOB platform have undergone a change effective April 1 to match the high value JFrog is providing.
Specifically, we included X-ray as a mandatory security product In our enterprise solution, ensuring customers' repository are always secure. In addition, we updated prices on Pro and Pro X self hosted subscription to align with the value provided to our customers. There were no changes to enterprise plus subscriptions for on prem and SaaS. These changes were already built into our annual guidance. As one last item before we dive into financials, we're greatly looking forward to our annual user conference and DevOps community event Swamp up in Q2.
This is the traditional venue where we unveil the J PAL roadmap and showcase both industry use cases and stories from some of the world's top companies. SwampUP is in late May early June across different time zones. I look forward to welcoming you and your community of technologies to a 3 day event of DevOps training, community sessions, tutorials and ecosystem partners' showcases. With that, I'd like to turn the call over to Jacob Schulman, JFrog's CFO, to look more deeply at the Q1 financials.
Thank you, Shlomi, and good afternoon, everyone. I will provide a brief overview of our Q1 financial results and provide our outlook for Q2 and the full year of 2021. As a reminder, please note that all numbers referenced in my remarks are on a non GAAP basis unless otherwise stated. A reconciliation to comparable GAAP measures can be found in today's earnings release, which is available on our website and as an exhibit to the Form 8 ks furnished to the SEC. So let's turn to our financial results.
Self managed revenues, also often called on prem, were $34,800,000 up 32%. Cloud revenues again grew significantly faster, up 62% to $10,300,000 or 23% of total revenues compared to 19% of total revenues in Q1 of last year. Net dollar retention for the trailing 4 quarters was 130%. As of quarter end, we had 3 95 customers with ARR of over $100,000 up from 3.52 customers as of December 31, 2020. Of this group, 10 customers had ARR greater than $1,000,000 We continue to see healthy growth in new customer additions with the majority landing at the Pro or Pro X subscription levels.
We again saw a solid growth in customer moving up the subscription stack to gain full access to the JFrog platform with the Enterprise Plus plan. In Q1, 29% of total revenue came from Enterprise Plus customers, up from 16% in Q1 of 2020. While we do not report bookings, I did want to point out that we saw a very strong booking in Q1. In line with the pricing change, We offered customers the opportunity to renew at the current rate if they move to a higher subscription tier and a number of customers renewed with multiyear agreements. Now let's review the income statement in more detail.
Gross profit in the quarter was $37,600,000 representing a gross margin of 83.4% compared to 81.6% in the year ago period. Over the recent quarters, we have made significant investments to improve R and D expense for the quarter was $11,700,000 or 26 percent of revenue compared to 25% of revenue in the year ago We have continued to invest significantly in enhancing our product offerings, including the introduction of peer to peer capabilities for distribution and JFrog projects feature that Shlomi discussed. We believe both represent enhanced monetization opportunities in the longer term as they mature. Sales and marketing expenses for the quarter was $16,900,000 or 37 percent of revenue compared to 40% of revenue in the year ago period. As expected, the spend on the free community offering stabilized during the quarter as we benefited from the infrastructure improvements made in prior quarters.
G and A expense for the quarter was $7,200,000 or 16% of revenue compared to 15% of revenue in the year ago period. Non GAAP operating income for Q1 was $1,900,000 or 4.1 percent operating margin compared to $700,000 or a 2.2 percent operating margin in the year ago period. We continue to balance investments in growing the business and leveraging the opportunity in front of JFrog with profitability. We continue to target the lowtomidsingle or $0.02 per diluted share based on approximately 103,200,000 weighted average diluted shares outstanding. Turning to the balance sheet and cash flow.
We ended the quarter with $606,000,000 in cash and short term investments. Cash flow from operations was $8,800,000 in the quarter. After taking into consideration CapEx, Free cash flow was $7,700,000 During the quarter, we implemented new lease accounting, recognizing right to use lease assets and related liabilities on the balance sheet. The implementation of this guidance did not have a material impact on our statements of operations or cash flow. As for guidance, for Q2, we expect revenue of $47,600,000 to $48,600,000 With non GAAP operating income of $500,000 to $1,500,000 and non GAAP EPS of $0.01 to $0.01 assuming a share count of approximately 104,000,000 shares.
At the midpoint of the guidance, we expect growth of approximately 32%. For the full year, we are increasing the low end of guidance and narrowing our outlook. We now expect revenue of 100 and $28,000,000 to $204,000,000 with non GAAP operating income between $5,000,000 $7,000,000 and an approximately 3% increase in fully diluted shares. At the midpoint, revenue growth is approximately 33%. Now let me turn the call back to Shlomi for some closing remarks before we take your questions.
Thank you, Jacob. 2021 has gotten off to a great start for JFrog. JFrog's hybrid universal end to end DevOps platform continues to innovate in the DevOps industry lead position, setting the goalpost for other companies to match. I look forward to sharing some of the exciting developments Q2 will bring in our next quarterly call, as well as welcoming you
Thank you. We will now begin the question and answer session. And our first question is from Sterling Auty from JPMorgan. Your line is open.
Yes, thanks. Hi, guys. Can you focus a little bit more on the new logo additions in the quarter? Can you give us a sense maybe of magnitude? So I think starting pre pandemic, you're adding a couple of 100, it slowed down.
I think you're adding less than 100 for maybe the last quarter or so. Has it bounced back and kind of where just generally are you in terms of that new logo additions?
Yes. Hi. Great first question and thank you for it. As we stated in the script, JFrog is focusing on growing the top of the funnel. If you remember, back in Q3 Of the previous year, we launched the free tier to enable an access to all of our prospects and users in the world To the full platform, we now start to see the results of the optimization and this offering being available for our users.
So We see a growth in new prospect, new users and obviously it's being translated to new logos in Q1. In addition to that, we were also very pleased to see The amount of trials and demand that we get on the free trial for the self positive solution is not materially declining. Therefore, we see the hybrid goal, which is very much aligned with our methodologies and our offering, And it's being translated to more net new logos in the year. We see this trend starting in Q4 And we saw it again in Q1.
Okay, great. And then one follow-up. I think a number of investors had identified the I think they're wondering you had mentioned that they're contemplated in your guidance, but There seem to be significant price increases. Why did it not have more material impact either on this quarter's revenue or the full year outlook?
Q1 revenues were not impacted by the price increases, mainly because of the The price increases will focus on the on prem subscriptions only And only and mainly on the enterprise subscription. Basically, it applies to 40% of our revenue. So the material revenue impact is not that material when you think about it that way. The second thing is that the price increases that we have performed are very much aligned with the values that we Created and injected into our subscription. And also, we moved any kind of friction between the different subscription As we move on from one subscription to another on the JFrog self-service offering.
It was not related to the cloud revenue. It is not impacting the PO users. The majority of our lending and customers are still using the PO version. So we expect it to have an impact on around 40% of
our total revenues.
Got it. Thank you.
Our next question is from Jack Andrews from Needham. Your line is open.
Good afternoon and thanks for taking my questions. Shlomi, I was wondering if you could just talk about X-ray for a moment. You Reference a very strong compelling example with how it might be impactful with the SolarWinds hack. Are your customers in the broader market Really aware of X-ray's capabilities or do you need to spend time evangelizing the value proposition around this?
That's a great question regarding the technology. X-ray comes with a very unique vision. X-ray, as everything else in JFrog, It's focusing on securing your software packages. Basically, this is the asset that you manage from the moment you beat software to The moment you deploy it. And this is why we created X-ray.
This is why X-ray is now natively sitting on our Tfacto and securing your repository. What we start to see more and more and the demand is just growing is that our customers are looking for security solutions That can be negatively embedded into the CICD pipeline and X-ray fits perfectly to it. First of all, It's allowing you to secure our factory looking into the metadata, the dependencies, software that you bring from outside the organization, Some software that you create inside the organization and provide you with the full protection, not only scanning your repository, but So with the ability to break the CITG flow if any vulnerable solution is being pushed. The second thing that we see is that while a lot of other vendors in the market are focusing on What we call the left side of the software life cycle, x-ray start to cover more and more spaces As you create software and you distribute software, it is in our vision to provide the world with the security solution That ESCO, the full binary flow, the full pipeline all the way from the moment it's being built To the deployment environment. And X-ray perfectly sits on this queue, and we see more and more demand as we reported More enterprise in our portfolio are switching to subscriptions that include X-ray and also the changes that we have done in the subscription model Include X-ray from the enterprise and above.
Well, thanks for the detail around that. Just as a follow-up question. Could you update us you gave an example of what sounds like a nice displacement win. Could you just update us how much of your market do you consider Greenfield in nature versus these displacement opportunities that you may be going after these days?
How much of the current market is ready for the opportunities? With Exaxe specifically, you mean?
Well, I guess just broader artifact And just your broader platform?
Yes. Well, it's very obvious now to see it used to be JPOG I'm saying that binaries are super important. What you hear everywhere in the market and you just take a fast look over The other vendors roadmap, the organizations around us are focusing on software packages Because the full automation of DevOps and the management of binary became the most important part Of the software, continuous delivery flow. When you look at JFrog And the primary flagship product of the factory is the database of all of those software packages. It makes a lot of sense to add security on top of it, automation, CICD distribution and also to think about Shifting even right to IoT and DevOps to IoT.
So our main focus on binaries from day 1 since the moment we The company and this is how we also build and improve our product portfolio. It's also very much aligned with what we see in the market And it's also very much aligned with other vessels that we are displacing with our solution on the customer side.
Got it. Thanks for taking my questions.
Sure.
Your next question is from Brad Reback from Stifel. Your line is open.
Great. Thanks very much. Jacob, could Take a minute and just review the commentary you had around the billings impact from the price increase?
Sure, absolutely. We had a record quarter in terms of bookings. Some certain portion of these bookings relate to the bookings by customers Who renew their businesses by upgrading to high level subscriptions As prices price of the change and some of them also entered into multiyear agreement. That's why we saw approximately 40% of these bookings related to this early renewals by the customers.
And just as a follow-up to that, as we think about billings for the next couple of quarters going forward, I'm assuming we should expect this to be somewhat of a headwind to growth rate and maybe quarters 2 and 3, maybe even 4?
Again, we don't believe that billings and bookings represent our revenue growth opportunities. Definitely for bookings in future quarters, there will be some headwinds, but it does not necessarily mean that it impacts revenue.
Great. Thank you very much.
Our next question is from Jason Ader from William Blair, your line is
open. Yes, thank you. Good afternoon, guys. First question for you is For, Shlomi, is there any lingering impact that you're seeing in the business from COVID and people not being in the office and not being able to get in front of certain folks. And then are you assuming in your guidance, any benefits, especially in the second half from reopening?
Yes, Jason. Unfortunately, what we see now in the world kind of Reminding us that the pandemic is still here. We started the script by sending our best wishes to the team in India, but India is One country that is still struggling with the pandemic. On our guidance, there is no change. We still see Q1, Q2, 2 quarters that will behave under the forced reality of the pandemic.
We believe that Q3 and Q4 will act differently. We already have the team in Israel, The majority of our team and R and D and product team are back to business, back to the swamp. We hope that we will see Remember that JFrog is also a company that starts from the bottom up. So the moment developers will be back To their seats, to conferences, the community will start to bubble again. I believe that we will start to see More and more demand and some things that were kind of pushed aside will again become more important and will take different priorities in But to your question, there is no change in the guidance.
We still believe that the second half of the year Will be a better half and we are also aligning our roadmap and business plan accordingly.
Okay. Thank you. And then a follow-up for Jacob. Jacob, net retention rate It's 130% as you reported. Where do you see that going over the next, I don't know, 4 to 6 quarters?
Yes. First of all, Jason, we see that net dollar retention rates stabilize around these levels. Obviously, we have seen over the past quarters A reduction in the net dollar retention, now we see stabilization around these levels. Our annual guidance midpoint suggests 33% year over year ago and that implies net loan retention of 130%. So we continue to target 130% net loan cash rate.
Right. And then do you
I mean is that the right level even beyond this year? Do you have any longer term Trajectory that you want to guide us towards?
Obviously, we see a lot of opportunities in front of us with new product adoptions And new features that we launched that create enhanced monetization opportunities in the future. So we do believe that net dollar repurchase will remain and may even grow from this level.
Thanks.
Our next question is from Ittai Kidron from Oppenheimer. Your line is open.
Thanks. Hey, guys. I wanted to dig into the guidance itself. It was somewhat disappointing you didn't raise the guidance for the year, especially on the Q1 So, Shalini, I want to kind of ask perhaps what from your perspective did not go right in the quarter? Were there parts of the business Happy performance wise.
And with respect to your hiring, clearly, you have a massive opportunity ahead of you. Do you feel like you're investing enough? Most companies in your size with your growth Are not profitable for a reason. You seem to think that you can still deliver profit and deliver on the growth. Why not Invest more and drive more.
Do you not see an opportunity to invest more dollars and drive more growth?
Yes, Ittai, hi. I think that these are two great questions. The first one It's about the goals and the goals expected and what we predicted And we were very much aligned with the numbers. We managed our portfolio and the potential alongside with And the changes we saw in the market, obviously, we are still under the reality That comes with COVID-nineteen, and we were very pleased that we delivered the numbers that we committed to the market. We also see we have the telescope view of how 2021 will look like.
And I know The JFrog growth and the JFrog efficiency goes hand in hand and I don't see Now regarding the potential of investing more and maybe harvest more, We never, never, before we went public and until today, we never had the mantra I'll spend money and then you will bear more fruits. Actually, we are very aligned With our plans, we invest a lot in all dimensions. We invest a lot in sales and marketing. What you've seen in the free tier investment, the amazing work that is being done by Our developer advocate team reaching out to community, although we are all remoted, building conferences that no one else in the market has. We deployed 1,000,000 of dollars into our sales and marketing, but we also very much aligned with our plans Make sure that what we do is the right thing and not just spending money for the sake of spending.
On the R and D, We have grown the team significantly in the past year. 100 of new folks joining JFrog in different swamps, And we are very pleased to see how fast the team is growing and you can see the results. Like no other vendor in the market released so much innovation in 1 quarter into the Different products, all of them enjoyed from material innovation that was offered to the community and to our customers. So I never saw JFOC spending a dollar without the cost, and I also never saw JFOC Not spending a dollar because we had a strict budget. So we will go on building the company.
We will go on With the growth of the company as projected, and we will do what's needed In order to keep the business as a business when needed to be profitable, it would be profitable when needed, it will have more investment.
Very good. Maybe as a follow-up, can you talk about the productivity of your sales organization right now? How is it tracking relative to your expectations? And maybe How even is it across your base? Clearly, there's some that outperform and underperform, but is it generally are they close together or you have Very big corners there.
Yes. Well, the sales and marketing organization It's growing significantly. As you remember from the previous calls, we are also developing the strategic team It goes after the top customers and expand our footprint there. Our marketing team is growing fast. And when I'm saying growing, it's not just in one location or 2, it's actually globally.
We now invest a lot In APAC, we see the growing demand in Asia Pacific for DevOps, and we increased the team in Japan and in China And in India, in order to support that. And what we also invest in is more partnerships, more integrations, Thinking about channels in different shape and form of channels, not only on the self hosted solution, but also in the cloud. So you should when you look at the JFrog certain marketing expansion, it's globally, it's hybrid, It's bottom up and it starts to be also top down with the strategic team. I think, again, very much aligned With our plan and our investment plan.
Very good. Good luck guys. Thanks.
Thank you.
Our next question is from Rob Owens from Piper Sandler. Your line is open.
Hi, guys. This is Ben Schmidt on for Rob. You mentioned that in 1Q you started to focus more on new logos. And wondering if you can remind us Just the kind of expected trajectory for adoption for these new logos and When we would expect them to start materially impacting revenue growth?
Yes, I will address that question.
So As we noted in our prepared remarks, we see acceleration in adding new customers to JFrog Team and portfolio, actually, we've seen several quarters in a row growing number of new customers coming to JFrog. Just to remind that significant portion of our revenue is coming from expansion of existing customers. That's why we believe that Most of the future growth will come from expansion of existing customers, but obviously it's very important for us to grow the overall Customer account, so it will allow this land and expand notion continue for many years going forward.
And just to add to it, we are very focusing on adding new logos and increasing The number of net new logos, but we also have to remember that the way it walks in Jacob and as Jacob mentioned, The expansion model, most of our new customers will end first on the subscription level and the on prem it will be With the basic subscription of our factory in the cloud, it will be the lowest deal. So revenue It's not very much in line with the number of new logos. We are building the future by adding more and more new customers.
Got it. Thanks. And you mentioned that distribution is One of the biggest factors that brings enterprises up to Enterprise Plus. Can you help us better understand the impetus behind that? What happens at those organizations?
Is it like a is it a DevOps organization on their side that needs to get organized and unified enough To need that distribution or what is the impetus that brings them to that point where they're ready for that?
Yes. Well, that's also a great follow-up on your previous question. If you looked at the numbers, The enterprise plus revenues now represent 29% of our total revenue comparing to 16% of last year. So obviously, we see this grow. We see the expansion.
We see customers identifying the innovation and the benefit of using the Part of these triggers are the software distribution. Now you would ask yourself What is different? Software delivery was there before JFrog, 10 years ago, 20 years ago, 30 years ago, Software, the world delivered software. The main difference is that now organizations want to be fast, They want to be secure, and they want to be efficient with their budget. They want to be cheap.
So, fast, obviously, as you get closer to your developer and you take whatever is ready and baked in our factory And you push it to the edge, then you are faster. If it's automated, even more. Secure, If you lock the pipeline, if you scan it by X-ray and you bless whatever release bundle you have that happened automatically from our factory And by X-ray and push to the edge, then you are more secure. You have more confidence, you can even move faster because you don't have all kinds of security gates In front of you. And the third thing, you want to be efficient with your budget.
Now look at what happened just 2 years ago. If you wanted to have a software update, you would push everything and you would have a new version on the edge without the factory x-ray, JFOP pipeline and JFOP distribution that enables that, you can push only the incremental piece of software that you want to update. And therefore, your own pipeline from building to distribution become super efficient and save a lot of resources for your company. Why this is changing? Because it used to be built by our customers.
It used to be built by the community. You would be in something on your network, maybe on top of a CDN. And now you understand that you can have Something faster, more secure, fully automated and save money not just on technology, but also on headcount. So the future Looks as we predicted and we are very happy to see that we are starting to harvest the Puttapar label As I started the answer with the percentage from the total revenue.
That's really helpful. Thanks guys.
Our next question is from Penny Yu from Morgan Stanley. Your line is open.
Hi, this is Peggy on behalf of Sanjit. I wanted to touch on the Enterprise subscription a little bit, saw another quarter of uptick. How much of that is coming from The pull forward bookings because of EnterpriseX pricing increase and how do you expect the price increase to affect it in the longer run.
Yes. So enterprise plus pricing did not change. What changed is the pricing for enterprise package and some of the Pro X package. So as we added a lot of value to the portfolio, including Enterprise Plus subscription, Many of the customers decided that it's time for them to move to the subscription. We actually added tens of customers to our Enterprise Plus subscription.
Part of these customers obviously utilize 3 price change levels, but we The adoption of our enterprise supply subscription across different customers. And as I said, this quarter was probably The largest number of customers who transition to enterprise plus subscription.
Got it. Got it. That's super helpful. And then I wanted to touch on the competitive environment a little bit. A lot of DevOps players have Talked about expanding into other parts of the DevOps pipeline.
Have you seen any incremental competitive pressure on that front?
Yes. Well, Peggy, the landscape of DevOps is being Expanded every day. Every day we see more and more innovation stepping into the market and more vendors That are claiming part of the DevOps life cycle. If you really ask yourself what DevOps is, it's all about how can we build And push software in a more secure and fast way. So in the landscape of building software, there is no difference on the Sales code guys, the key companies, the different key companies, key providers.
On the security side, we see an evolving market. There is more demand for security that is automated into the Yes, big and release flow. And we see more innovation alongside the developers and less Solutions on the right side that is securing and pushing software. In the world of automation, CICD, I believe that this world is quite mature on the CI level And very premature on the CD, the continuous deployment level. So there is still a lot of room to grow.
We're also very pleased to see that the market vote with the roadmap item, They both on the JFOC way, focusing on software packages, focusing on universal solution, universality start to matter. We start to appreciate the freedom of choice that developers demand and more and more vendors From the biggest companies in the world to the smallest, talking with developers and not just with the CIO or the C store of the organization.
Got it. Thank you very much.
And our last question is from Kingsley Crane from Berenberg. Your line is open.
Hi, thank you. Congrats on the quarter. It's It's good to see the expanded partnership with Atlassian and a great customer of yours for some time. They also have some product overlap. They have It bucket in that left side of the ecosystem.
They also have bamboos and more to pipeline. So if you look at the whole SDLC, how do you think about the relationship between Those two products, please.
Klagen is an amazing company. We are working together from day 1, we love seeing them serving developers and the complementary solution That Atlassian and JFrog brings together to the market. They have big bucket as the Git repository for Solesco. They have big bucket pipeline that replaced, I think, Bamboo, the CI server, OpGenie and Jira, Of course, to manage the administration and planning. And when you use Artifactory, your
Our call
today, a new integration or an enhanced integration with Atlassian, And we will keep on investing in this partnership. We actually love working with them.
Great. That's really helpful. So just one more would be, Lawson is also a hybrid cloud company that's been moving towards cloud. And we've seen similar pricing dynamics play out with raising products and specific parts of the product suite. So I guess, how should we think about the strategy behind the recent prices raises as applied to just Pro and Pro X for on prem?
Well, as you know, JFrog philosophy Is that in the near future, the world will demand more and more hybrid solutions. If you look even 10 years from now, the world would demand hybrid solution. When we speak with our top customers, The leaders of the Fortune 100 groups, they speak about hybrid and multi cloud. None of them want to be just on prem or just cloud and none of them want to become 1 cloud shop. What we are planning to do is to expand our multi cloud and have more offhandles available for our users.
And we're also going to double down on the hybrid solutions. So our users will have the freedom to choose whether they use on prem, Cloud or both of them. But with our eyes open, we also understand that the company is a big enterprise of tomorrow All starting in the cloud and probably will grow in the cloud. And therefore, you can see in our roadmap and in our Employment environment in our services, in our sales and marketing investments, you see that we are very much focused on growing the cloud Alongside our self hosted solution.
Great. That makes perfect sense. Great. Thanks so much.
We have no further questions at this time. Turning the call back over to Shlomi for closing remarks.
Guys, I would like to thank you all for joining us today. May we have better day and good news Post pandemic, by the next earnings call. And by then, may the frog be with you all. Thank you very much.
Thank you, ladies and gentlemen. This concludes today's conference. Thank you for participating. You may now