Good day, and thank you for standing by. Welcome to the JFrog's Fourth Quarter Fiscal 2021 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question-and-answer session. Please be advised that today's conference is being recorded. I'd now like to hand the conference over to JoAnn Horne with Investor Relations. Please go ahead.

Thank you, Norma. Good afternoon, and thank you for joining us as we review JFrog's fourth quarter and full year 2021 financial results, which were announced following market close via press release. Beginning the call today will be JFrog's CEO and Co-Founder, Shlomi Ben Haim; and Jacob Shulman, JFrog's CFO. Before management shares some remarks, let me review the safe harbor statement. During this call, we may make statements related to our business that are forward-looking under federal securities laws and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, including statements related to our future financial performance, including our outlook for the first quarter and full year of 2022. 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 subsequent date. Please keep in mind that we are not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. These statements are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For a discussion of material risks and other important factors that could affect our actual results, please refer to our Form 10-K for the year ended December 31, 2020, filed with the SEC on February 12, 2021, and our Form 10-Q for the quarter ended September 30, 2021, filed with the SEC on November 05, 2021, all of which are available on the Investor Relations section of our website along with the earnings press release issued earlier today. Additional information will be made available in our Form 10-Q for the year ended December 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 this 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 and in isolation from GAAP measures. Please refer to the tables in our earnings release for a reconciliation of those measures to the most directly comparable GAAP financial measures. A replay of this call will be available on the JFrog Investor Relations site for a limited time. With that, I'd like to turn the call over to JFrog's CEO, Shlomi Ben Haim. Shlomi?

Thank you, JoAnn, and greetings to all of you from the swamp. I am excited to welcome you to our fourth quarter and fiscal 2021 earnings call. Every interface urges us to pause, look back, and observe the leaps the company has taken from all perspectives. I'm grateful for our customers and community. Their faith in JFrog and their determination to innovate and digitalize the world inspires us to bring our best to work every day. 2021 ended on a strong note. Our multiple strategies across technology, business, and culture continue to bear fruit, and I'm happy to share this with you today. I'm pleased to report that we delivered another strong quarter, and that in Q4, all of JFrog's key metrics continued to trend upwards, reflecting the continuous demand for our platform in an expanding market. Q4 revenue was $59.2 million, a growth of 39% over the same period last year, and compared to a 38% year-over-year growth reported in the previous quarter. Our cloud revenue in Q4 grew by 52% year-over-year, which reflects our ongoing strategy of accelerating our multi-cloud and hybrid growth. Growth in customers with over $100,000 in ARR accelerated to 53% year-over-year, reflecting a compelling market need for complete JFrog platform solution with our enterprise plus subscription. I'm also happy to report that our full trading quarter's net dollar retention climbed to 130%, as predicted, compared to 129% reported in the previous quarter. This was driven by customers' increased usage of our product as a unified platform with binary management, security, and software distribution as key drivers. This year, hundreds of new customers adopted our solutions, and I'm pleased to report that we closed the year with approximately 6,650 customers across industries, which represents a 10% year-over-year net growth. Team JFrog, these 2021 results are a testament to your hard work and dedication, allowing us to better serve developers, DevOps, and security communities, exceeding our revenue commitments in every single quarter of the year. This success belongs to you and reflects the unique spirit of the frogs. Now, I would like to share with you some additional market and business highlights. In a world that demands faster, secure, more innovative software to the edge, the DevOps-driven software supply chain is more top of mind and mission-critical than ever before. Getting software updates to your vehicle, mobile application, medical devices, and more requires the ability to build, release, secure, distribute, and deploy binaries, often also called software packages. Complementary solutions for CI/CD and source code management make development more efficient, but this isn’t enough to bring software quickly to market. The moment first, all third-party code is compiled, it changes to a binary form and requires full binary lifecycle management from the developer's machine to the deployment environment to meet the demands of the business. This confirmed into a digital and secure reality can only be achieved by managing the binary. To illustrate this, we only need to look at the major news item that shook the software industry late in 2021. The Log4j vulnerability, coined by the community as the software pandemic, affected almost every organization in the world within days of its discovery, frustrating millions of developers who had to drop everything and rush to identify patient zero across all software environments. This forced many companies to render entire software delivery organizations to a halt until the vulnerability was found, fixed, and replaced. JFrog customers were able to quickly identify where they were impacted and address the risk. For example, one of the Fortune 100 banks with over 20,000 developers globally was able to identify where the infected Log4j binary was hosted in their business and what dependencies it carried across the global pipeline. This identification happened in a matter of minutes, with JFrog Artifactory serving as the bank's single source of proof and the database of DevOps, allowing them to replace their vulnerable Log4j binary with a patched version and apply it across the organization automatically, instead of manually finding every place it was being used in every application. Using JFrog X-ray alongside Artifactory, they were able to easily protect themselves from additional exposure by setting security policies that automatically ensured vulnerable Log4j binaries could not be used again by developers and kept them protected from further risk. And finally, JFrog Distribution rapidly delivered and validated releases to fix the software in all environments, including production. Altogether, this bank automatically found, rebuilt, replaced, and protected itself against all vulnerable Log4j binaries in under 12 hours. This speed is only achievable with the unified integrated JFrog platform that automates these activities across company development organizations. Without this approach, companies would have taken weeks hunting these binaries down, and many are still in the trenches trying to recover today. During the Log4j episode, the power of the binary-centric approach to DevOps saved JFrog customers potential millions of dollars in lost business due to downtime or security breaches, and countless hours spent by millions of global developers fortifying those software supply chains. The Log4j vulnerability will not be the last impactful binary discovered by our industry. This occurred in 2021 with MPM, Python, and it will happen again. This reality reinforces JFrog's strategy to manage the entire DevOps flow from the binary repository to security and through distribution to deliver complete automated pipeline control for every development organization. As a result, we are seeing a growing demand for our end-to-end platform. Now on to some product and business highlights from Q4 and the fiscal year. In support of our liquid software vision, our roadmap in 2021 included many innovations and enhancements to our holistic platform, deepening our commitment to deliver an integrated, automated solution to the DevOps and DevSecOps communities. This included delivery for many of our core categories, such as artifact management, CI/CD, security, and software distribution. Importantly, all of the solutions delivered in 2021 continue to fulfill our promises to always deliver universal, scalable products across self-hosted, hybrid, and cloud environments. As a result, we continue to see strong demand for our hybrid and multi-cloud subscriptions. In Q4 specifically, we were proud to partner with AWS for the announcement of EKS Anywhere on the AWS Marketplace, which makes Amazon Cloud services available for self-hosted customers as well. This move by AWS recognizes that many companies see a hybrid model as a strategic move for their business, and we are excited to be at the forefront of hybrid DevOps with our customers and cloud partners. Our strategic investment in our cloud offering paid off again in Q4, and there is a new illustration of our cloud subscription growth. One of the largest providers of GPS and geolocation services in the world recently became a new customer of JFrog, standardizing their development teams on JFrog SaaS solution. They were looking for a DevOps partner to scale alongside their company growth, and they found that their existing competitive offering could no longer scale to meet their needs nor support their cloud-first initiatives. With the JFrog platform provided as a service in the cloud of their choice, they were able to successfully migrate all of their binaries and scale across a multi-SaaS setup. We look forward to partnering with more JFrog customers like TomTom, headquartered in EMEA, or AA, a luxury retail delivery company headquartered in North America, to ensure our DevOps solutions meet enterprise demands across all verticals and hybrid deployments. Across geographies, JFrog Distribution, which delivers binaries to production environments such as data centers or Kubernetes, remains a key driver for upgrades to our full platform subscriptions. One of the world's largest financial institutions recently upgraded to JFrog's enterprise subscription in order to distribute binaries for thousands of applications written by thousands of developers, delivering to dozens of global locations, each with their own regulations and compliance needs. Examples such as this illustrate a continuing trend we are seeing in organizations: the need to secure, automate, and manage software distribution at scale across all applications and multiple releases per day can no longer rely on manual processes built in-house and implemented a decade ago. These complex environments and the pace of releases requires a binary-centric and distribution-capable DevOps platform in order to be successful. To avoid friction with the platform capabilities, and to focus on one consolidated platform, we decided to sunset the legacy distribution as a service offering that provided the standalone binary store and distribution service. We managed an extensive and transparent process with our community and customers for shutting down this service in 2021. As a natural extension of the increasing value of JFrog Distribution, we also recently made JFrog Connect available following our acquisition of Upswift. This early offering for connected device management aims to greatly increase our addressable market by bringing binaries all the way to devices. JFrog Connect will bridge the world of DevOps with the exploding market of IoT and connected devices. We look forward to driving this growth at the edge in the future. We are innovating, extending, and maturing our platform, which we believe will serve not just billions of developers, but billions of devices with the ability to build, manage, protect, update, and automate the NextGen software supply chain from any source to any device. On the go-to-market front, during the year, we also focused on building our strategic sales team backed up with high-touch support, field marketing, and solution architects in order to expand business with our key accounts. During Q4, we continued to see the fruits of this investment as we welcomed more and more large enterprises who are expanding their JFrog product adoption. In fact, one of the world's largest telecommunication providers managed by our strategic team is continuing to standardize on JFrog in order to reduce the usage of ad-hoc toolsets and develop DevOps best practices across the organization. This over $1 million customer grew over 80% year-over-year and continues to expand. We believe that the expanded strategic sales team will continue to drive these consolidation patterns as we bring more solutions into the market. We look forward to extending our relationships with these customers and introducing innovative technologies to meet their enterprise needs. As a final note, before we dive into the financials, I wanted to extend a warm welcome to the newest member of JFrog's Board, Meerah Rajavel. Meerah currently serves as the CIO of Citrix and brings more than 20 years of experience in enterprise software and cybersecurity. We are proud to have her joining our board and look forward to her guidance as JFrog continues to grow. With that, I would like to turn the call over to our CFO, Jacob Shulman, to look more deeply at the 2021 Q4 and fiscal year financial numbers and share our outlook for 2022. Jacob, the stage is yours.

Thank you, Shlomi, and good afternoon, everyone. We are very pleased to have ended the year with a strong quarter in line with the commitment we made back in Q1 of this year that the second half of the year would show acceleration across the business. I will start with a brief overview of our fourth quarter and fiscal year 2021 financial results and provide our outlook for Q1 and the full year of 2022. As a reminder, 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-K furnished to the SEC. Now let's turn to our financial results: total revenues for the three months ended December 31, 2021, were $59.2 million, up 39% year-over-year. This is our strongest growth rate in the fourth quarter, and we continue to see a better business environment. Self-managed revenues, also known as On-Prem, were $44.4 million, up 35%. Cloud revenues again grew faster, up 52% to $14.8 million, or 25% of total revenues. For the full fiscal year, total revenues were $206.7 million, up 37% year-over-year. Self-managed revenues were $157 million, up 33%. Cloud revenues for the year were up 52% to $49.7 million, or 24% of total revenues compared to 22% in 2020. Net dollar retention for the four trailing quarters was 130%. We expect net dollar retention for the trailing four quarters to remain around approximately 130% for the foreseeable future. We ended the year with approximately 6,650 customers, a 10% increase over 6,050 customers at the end of 2020. As noted by Shlomi, we did lose approximately 200 customers as a result of the product changes. These customers represented a negligible revenue impact. Our gross retention rate remained at historic levels in the high nineties for the year. As of the quarter end, we had 537 customers with ARR of over $100,000, up from 466 customers as of September 30, 2021. On a year-over-year basis, we grew the number of over-$100,000 ARR customers 53%. In addition, we grew the number of over $1 million ARR customers to 15, up from 14 in the previous quarter, representing a 50% increase year-over-year. This increase in the number of large customers is driven primarily by the greater adoption of our full platform, both in cloud and on-prem. In Q4, 35% of total revenue came from enterprise plus customers, up from 26% in Q4 of 2020. Now let's review the income statement in more detail. Gross profit in the quarter was $50.2 million, representing a gross margin of 84.8% compared to 82.6% in the year-ago period. For fiscal 2021, gross profit was $173.9 million, representing a gross margin of 84.1% compared to 82.4% in fiscal 2020. We continue to see our sales gross margin improve as a result of the steps we took early in the year to improve our cost structure. R&D expense for the quarter was $17.9 million, or 30% of revenue compared to 24% of revenue in the year-ago period. We continue to invest significantly in enhancing our product solutions, along with integrating Vdoo and Upswift technologies into the platform. Sales and marketing expenses for the quarter were $23.2 million, or 39% of revenue compared to 38% of revenue in the year-ago period. G&A expense for the quarter was $9.1 million, or 15% of revenue compared to 16% of revenue in the year-ago period. Non-GAAP operating income for Q4 was $49,000, or a 10 basis point operating margin compared to an operating income of $2.2 million, or a 5.1% operating margin in the year-ago period. As we discussed, integrating Vdoo and Upswift affected our profitability. For the full year, non-GAAP operating income was $4.2 million, or a 2% operating margin compared to $13 million, or an 8.6% operating margin in 2020. Non-GAAP net loss in the quarter was $965,000, or negative $0.01 per diluted share based on approximately 97 million weighted average shares outstanding. Non-GAAP net income for the full year was $2.7 million, or $0.03 per diluted share based on approximately 103.6 million weighted average diluted shares outstanding. Turning to the balance sheet and cash flow, we ended the year with $421 million in cash and short-term investments, up from $402 million last quarter. Cash from operations was $17.7 million in the quarter. After taking into account CapEx, free cash was $16.6 million. For the full year, free cash was $23.7 million. As discussed last quarter, Q3 cash flow was impacted by a one-time payment of $19 million related to a holdback agreement associated with the Vdoo and Upswift acquisition. Normalized for this, free cash for the year would be $42.7 million. Let's briefly discuss the cadence of the financial model in 2022. We expect to see linear top-line revenue growth on a year-over-year basis throughout 2022. Additionally, beginning in Q2, we will see higher expenses due to merit increases in employee compensation and alignment with labor market benchmarks. As a result, the second quarter will be the low point from a profitability standpoint, and we expect a recovery in the back half of the year. Turning to guidance for Q1, we expect revenue of $60.8 million to $61.8 million, with non-GAAP operating results between a loss of $0.5 million to income of $0.5 million, and non-GAAP operating earnings per share of negative $0.01 to positive $0.01, assuming a share count of approximately 104 million shares. For the full year of 2022, we're establishing revenue guidance of $273 million to $275 million, with non-GAAP operating results between a loss of $1 million to income of $1 million, and non-GAAP earnings per share of negative $0.01 to positive $0.01, assuming a share count of approximately 107 million shares. Now let me turn the call back to Shlomi for some closing remarks before we take your questions.

Thank you, Jacob. JFrog successfully marked its first complete fiscal year as a public company, exceeding revenue commitments in every single quarter of 2021. We met our product delivery goals while continuing to build an efficient and healthy business. JFrog's fourth quarter performance is a great foundation to build upon as we leap into 2022, providing further evidence that we have the right strategy and portfolio for growth in 2022 and beyond. During 2021, under the pandemic reality, we also nearly doubled the size of the company in terms of employee headcount and recently crossed the 1,000 employee mark. This growth is reflective of the strong uncompromising culture we have built that cuts through a challenging labor market. In the last year, more than ever before, we saw more and more companies identifying software binaries as the primary asset to allow fast and secure digital transformation. We believe JFrog is well-positioned to drive strong results in 2022. We look forward to delivering for developers, companies, customers, and shareholders throughout the year. Next week on February 15, we'll hold our first Investors Day. We look forward to virtually hosting you as we share more in-depth details about JFrog's technology and business. I'd like to thank you all for your attendance, and may the JFrog be with you. And now we are happy to take your questions.

Our first question will come from Mike Cikos with Needham and Co. Please go ahead.

Hi guys. Thanks for taking the questions here. I appreciate it. The first question that I wanted to ask about, I know that you guys had mentioned an impact of 4Q profitability as it relates to the Upswift acquisition. Could you help us fine-tune what that impact was and then maybe parse out what kind of impact we should be thinking about from the Upswift acquisition as we look at the guidance that you guys provided us for fiscal year '22?

Yes. Hi Mike, this is Jacob. As you know, we acquired two companies in Q3: Vdoo and Upswift. Actually, Vdoo was a large company that required and had more material impact than the Upswift acquisition. Both of them are currently integrating technologies and making very nice progress with that. So specifically with your question, Upswift did not have any material impact on our profitability. It just was a very small team. The Vdoo acquisition had a bigger impact because it's a much bigger team. Overall, our security division today is around 100 people, with a significant portion coming from Vdoo.

Understood. Thank you for that. And then the other question I wanted to add is if I'm thinking about Q4 and the revenue upside that you guys delivered, can you help us think about the outperformance? What went better for you guys this quarter that helped deliver that upside versus your expectations coming into the quarter?

Yes. You're absolutely right that we were very pleased with the adoption of our platform. What we've seen is better than expected adoption of the platform, and Shlomi talked about different drivers behind that: distribution capabilities and enhanced security capabilities were the primary drivers for the adoption of the platform. This is also indicated in the acceleration for the growth of large customers. Specifically, customers with over $100,000 grew 53% year-over-year. A substantial point to the platform is $115,000, which gives you an approximate number of new customers that adopted the platform.

Thank you. Our next question will come from Sterling Auty with JPMorgan. Please go ahead.

Hey, this is Doug on for Sterling. Thank you for taking my question. Can you talk about what you're seeing in terms of the adoption of X-ray now that it's included in the enterprise price?

Yes. Hi, and thanks for the question. This is Shlomi. X-ray, or if I may say the security solution, is landing on a very strong demand around software supply chain and binary security requests and requirements from our customers. Essentially, what we have seen lately, especially in 2021, is that most of the vulnerable pieces of your software supply chain are coming from binaries, third-party or first-party. X-ray fits natively on top of Artifactory. It's part of three subscriptions in the hosted offering and is offered to all of the cloud customers. So obviously, we see a growing number of customers that are adopting X-ray. Speaking of Log4j specifically, that was evident at the end of the year, but it echoed everything that we are saying about what type of security the world of DevOps and DevSecOps demands and obviously generated a much greater demand from the market. So you see more adoption of our platform and more adoption of X-ray, and the integration of X-ray and Vdoo technology have also a very promising roadmap ahead.

Thank you. Our next question will come from Kingsley Crane with Berenberg. Please go ahead.

Hi, I'm wondering on Log4j. So how much did helping customers with this open up a broader conversation on other platform products?

On other platform products, Kingsley, regarding Log4j specifically, it was a significant opportunity. First of all, you have to identify the vulnerable binary, which happened in a matter of minutes using Artifactory, the database of DevOps. Artifactory is the core product of our platform. Then, you have to establish and place all types of security policies on top of your repository to protect it. So no developer will attempt to use a vulnerable piece again, and this is where you use X-ray. Now you must ask all of your deployment environment and development environment to build against the new patch of Log4j, and this is where JFrog Distribution comes into place. So obviously the different sides of the platform playing together, amplified by the Log4j episode, was a great driver to tell the story not only of the JFrog platform, but also of DevOps with the binary-centric approach.

Thank you. Our next question will come from Sandeep Singh with Morgan Stanley. Please go ahead.

Thank you for taking the question, and congratulations on a strong Q4 along with very healthy guidance. It's great to see positive results in both areas. One of the metrics you shared was customer base growth, and I was pleased to see that return to double digits. Shlomi, could you discuss how that progressed throughout the year? I know you focused on existing customers in 2020, and it appears we're starting to see growth again. How sustainable is that as we move into 2022, and are there any incentives in place to encourage free to paid conversions? Any insights on the customer base would be appreciated.

Yeah. Hey, Sandeep, thankful for the question. Obviously, we were very excited about all the metrics of 2021 and also the growth in new logos, new customers, and new onboarding users that are using the JFrog platform. We committed in 2021 to perform at a higher pace and add more new logos compared to 2020, and we delivered. Although we had to remove friction and bins from our portfolio, as Jacob mentioned in the script, we lost 200 customers but still grew as expected. We were very pleased to see this growth happening again. This trend of adopting the JFrog products again. What I see moving forward is that our investments will bear fruit. It happened in 2021, and it will happen further in 2022. The security investment is very appealing to the market; this is a booming market. Everyone we speak to talks about securing the full software supply chain, and X-ray is the perfect fit for it. The integration of Vdoo technology is very well aligned with market needs. The enhancements added to Artifactory to manage binaries from the pack will also be very appealing. Also, our strategic move to the cloud with the free tier that you remember is starting to show higher adoption in terms of active users leaning on JFrog solutions rather than opting for other solutions in the market. So I'm very optimistic regarding the growth of additional customers this next year. If I may also say, although it is the very early beginning of JFrog Connect, this is also a very unique solution to the market. There is no other distribution solution from the DevOps environment that is secured, going all the way to devices. This will open a new field for JFrog and introduces new users who may not necessarily be using any kind of DevOps practices currently. So bottom line, I'm very pleased and very positive regarding the future.

If I may just add to that, Sandeep, the majority of our customers now join in on the cloud, and a big portion of that is our free tier that was launched late last year. Actually, of the new customers, about 60% are now joining on the cloud, and that portion of new customers on cloud continues to grow.

That's very encouraging to hear. And then sort of dovetail off the previous question, if we look back at last year, the other part of last year, there was a new pricing structure rolled out for server customers. In Q1, you saw a sizeable cohort take advantage of the opportunity to upgrade their subscription tiers to bypass that price increase. What is the team's base case view on what those customer cohorts will do when they come up for renewal this spring? Do you expect those price increases to flow through? Or do we expect some customer behavior to minimize the impact there? Any insights would be helpful?

Yes, I'll take that question. As you know, the price increase went into effect on April 1, and since then, a majority of our customers have renewed at the new prices. We continue to see same retention levels, growth retention levels as previously. Our customers understand why we implemented those changes, are satisfied with the pricing, and are moving forward. Specifically, our renewal base of customers in Q4 was bigger than in Q1. I believe the market and the customers understand the value we provide and are willing to move forward. So we don't expect any changes in this pattern in Q1. Just to remind everyone, this is only relevant to the self-hosted solution. The growth in the cloud was not impacted by the price changes. It wasn't just about the price changes; it was also about a substantial amount of technology added to our platform during this year. As Jacob mentioned, the churn is very low, and net dollar retention has climbed significantly. We are very pleased with the results.

Thank you. Our next question will come from Jason Ader with William Blair. Please go ahead.

Hey, this is Sebastian on for Jason. Thanks for taking the question. I wanted to double-click a little bit on this DevOps for connected devices market where Connect and distribution products play. Can you maybe help us define what this market is and how it might be a little different from the traditional DevOps market and any type of metrics or market opportunity metrics you could provide?

Yes. Thank you, Sebastian. We are very excited about this opportunity. JFrog was established 12 years ago. We pioneered the DevOps market by introducing the binary solution, but we had the end in mind already from the start. We want software updates to happen at the edge, and therefore, any kind of efforts you invest only on the developer side or to secure only part of your organization is half-baked. When we looked at the liquid software vision, our end goal was getting the binary all the way to the devices. When we started building JFrog Distribution a little over three years ago, we knew there was a missing part: what happens after the data center? What happened after the cloud? What happens after your Kubernetes environment? This missing path was connecting the devices to the CI/CD world. Thus, from the developer's machine, you will be able to push all the way to the devices. What we see in the future, Sebastian, is not just millions and tens of millions of developers building 10, 20 times a day. We see billions of devices that need to be updated. Since binary is the only digital asset that moves from the developer's hand to the device—be it your iPhone, your coffee maker, or any device we use—we see a huge avenue for growth. We started with distribution, then extended with PDN, and now, with our acquisition of Upswift and building JFrog Connect, I’m sure the market will follow. This is the real demand arising from digital transformation.

Got it. That's very helpful. And then if I could just follow up, could you maybe talk a little bit about the go-to-market investments that you've made that could help accelerate the new customer acquisitions and new logo lands? Are you landing at higher ARR's as customers demand a broader platform, or because a lot of these new customers are adding the cloud version, are they landing at lower ARR?

When you adopt the platform, either on-prem or cloud, you already pay more than $100,000. This is the highest subscription for what we call the enterprise-plus in the cloud. Obviously, you also pay by consumption, but the base price in both cases is over $100,000. In terms of go-to-market, what we have built on the self-hosted and in the cloud is a combination of the freedom of choice for the user—the developer—combined with more value and capabilities of the platform. When you upgrade, you gain security. When you upgrade further, you get high availability, disaster recovery, and so on. When you upgrade to the platform, you gain distribution capabilities, etc. In terms of cloud, obviously when you use more, you pay more—that's the straightforward go-to-market philosophy that we have in JFrog. Essentially, we provide you with the multi-cloud solution; you're not limited to just one cloud provider. This is also appealing to many customers. This is feedback from all enterprise customers, and remember we currently have approximately 7,000 customers. This is something we hear from all Fortune 100 or Global 2000: cloud adoption is happening, but there is a need for a hybrid environment. JFrog is unique in what we can provide while giving you a hybrid environment on the same tool—whether it's in the cloud or self-hosted.

Got it. Thank you. Very helpful.

Thank you. Our next question will come from Koji Ikeda from Bank of America. Please go ahead.

Hey, Shlomi and Jacob, apologies if these questions have been asked. I wanted to ask you about billings; looking at the billings in the quarter, it grew 34%, according to our model. I guess there are a lot of mechanics at play here, especially around the pricing changes. But should we be heading into a period of normalization for billings over the next year? Thinking about cloud usage, should we be looking at billings at all, or is there something else you suggest as a better forward-looking growth metric?

Yes, Koji, thank you for this question. I want to remind you that billings is not a very good predictor of future revenue growth due to various dynamics. As you noted, during this year, the billings features skewed toward Q1, where we did have significant pulling, but Q4 came out very strong in billings. We don't see one-time items there, nor do we see significant changes in duration, or average contract duration. So it’s normalized for the future. Again, cloud is primarily annual terms; for on-prem, we sometimes have multi-year deals, but we don't see any changes in average contract duration.

Got it. And then I think I overheard in the prepared remarks, a mention of net revenue retention. Jacob, I think you said it should remain around 130%. But as I think about cloud usage, the cloud growth acceleration here in Q4, do you believe net revenue retention could actually exceed 130% in the future?

Yes. Our cloud customers extend more than 20%, 30%. As the cloud continues to become a more significant portion of our revenues, that's definitely a potential. Right now, we assume that net dollar retention remains around 130% in our model and guidance.

Thanks. Hey, guys. It's nice to see the acceleration in growth in the cloud. Jacob, I had a couple of questions. First, I want to make sure I understand the enterprise-plus; in the last couple of quarters, you've been growing that business 150% year-over-year. Now we're down to under 90. I don't get me wrong; it's still a very impressive number. I'm just wondering if there’s anything going on there in the adoption of enterprise-plus.

No, we continue to see very strong adoption of the enterprise-plus subscription. The revenue continues to grow today, presenting 35% of the revenue. The number of customers adopting enterprise-plus grew nicely in Q4. We do not see any unique trends.

Okay. Very good. And then as a follow-up on the optics, a lot of companies that have bases in Israel have been calling out a lot of FX headwinds. Can you elaborate on this? I know you've been hedging somewhat, but how far out do you go? As I think about your guidance for the year, what kind of headwind are you seeing from FX and how should I think about that going forward?

Yes, Ittai, you’re correct. We have a significant portion of our operating expenses denominated in Israeli shekels, and over the past year and a half, we have been affected. We do hedge, but you cannot hedge forever, and eventually the law of variable rates catches up. The impact on overall profitability is around 2% points in 2022. If the situation changes, and we see an opposite trend, it will help us, but this is what we expect.

Yeah. Hi. Thanks for taking my question, guys. Curious on the customer count front. Realizing you just disclosed it once a year, but there were a few acquisitions during the year itself. Is that an organic 600 customers? Is that a net addition? Because you mentioned the 200 that had turned off as well.

Yes, thank you for the question. As we reported in Q3 when we acquired Vdoo and Upswift, there was no material revenue coming from these acquisitions, nor was there a significant amount of customers. Therefore, this is a net addition; yes, this is the organic growth of the JFrog customer base.

And given the opportunity post-Log4j, how do you think about customer growth as you look at 2022? Should that again be an accelerating type of metric for you?

Yes. Obviously, while I'm not happy about the Log4j incident, it highlighted the need for solutions like what JFrog provides because there is no other solution in the DevOps public market that gives you such a binary-centric approach, not only to security but to the overall remediation of issues like Log4j. It happened before with MPM and Python, and we can be sure we will hear about another binary or software package that comes with significant vulnerabilities in the near future. It will just happen. Many more customers are beginning to recognize that a holistic security solution must come with a single source software control solution, like a repository that ensures control over what is brought into and out of the organization, alongside security solutions that extend across the entire pipeline, allow you control over repository distribution, and recover quickly with distribution features. So yes, while I'm not thrilled that Log4j happened, I believe it will lead to increased opportunities for JFrog, as our customers understand the value our platform can provide.

Great. Thanks for taking the questions here. I just want to follow up on that last point. Given the security concerns around the supply chain related to Log4j, are you seeing increased pipeline activity at this point where customers are responding to those security concerns as we move into 2022?

Yes, the answer is yes. The amazing research and engineering security team at JFrog has posted more best practices regarding Log4j than any other company in the market. Following this event, we expect increased engagement and activity in our pipelines. So yes, it helps with the pipeline.

Thank you, everyone, for joining us today. We are very excited about our performance and the growth of our community and customers adopting our products and technology. I would like to thank again our amazing team for making this year happen. We look forward to sharing more updates with you at Investor Day next week on February 15. Thank you, everyone. May the JFrog be with you.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.