Earnings Call Transcript - FROG Q4 2020

Operator, Operator

Ladies and gentlemen, thank you for joining us, and welcome to the JFrog Fourth Quarter and Fiscal Year 2020 Earnings Conference Call. I'll hand the conference over today to JoAnn Horne of the JFrog Investor Relations team. JoAnn, please go ahead.

JoAnn Horne, Investor Relations

Good afternoon, and thank you for joining us as we review JFrog's fourth quarter and 2020 fiscal year 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 Shulman, 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 first quarter 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, 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 prospectus and our Form 10-Q filed with the SEC on September 15, 2020, and November 5, 2020, respectively, which are 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 annual report on Form 10-K for the year ended December 31, 2020, 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 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. With that, I'd like to turn the call over to JFrog's CEO, Shlomi Ben Haim. Shlomi?

Shlomi Ben Haim, CEO

Thank you, JoAnn. Good afternoon, and thanks for joining us for JFrog's 2020 fourth quarter and fiscal year earnings call. This is our second earnings call as a public company, reflecting the first time we will be announcing our performance versus prior quarter's guidance. I’m proud to say we exceeded the revenue numbers we had provided. Before we start, I'd like to take the opportunity to express my appreciation to JFrog's employees for their great job and for going beyond expectations in 2020. Well done. Now I'm excited to share both our 2020 annual and Q4 results with you. Q4 was a strong finish to what has been a milestone year for JFrog. Results were driven by large customers' adoption, further expansion into the APAC region, partnerships in the ecosystem, and ongoing technology innovation in the JFrog Platform. As a brief overview of the business and financials, I’m pleased to report that for the fiscal year ending on December 31, 2020, JFrog's overall revenue grew 44% over the previous year to $150.8 million, with a net dollar retention rate of 133% for the trailing four quarters. In Q4, JFrog's revenue climbed to $42.7 million, a growth of 39% over the same period last year. Our multi-cloud business achieved substantial growth of 69% due to increased demand for our consumption-based DevOps services. Our free cash flow for the fourth quarter was a record $11.9 million. Despite the COVID-19 pandemic, JFrog grew significantly in 2020, successfully securing new customers while achieving remarkable retention of our installed base across all verticals and company sizes. This growth and demonstrated customer retention support our belief that DevOps solutions, particularly software packages, are driving the next wave of digital transformation and innovation for modern businesses. Now I would like to talk about the past 12 months. 2020 was an unforgettable year for JFrog. In addition to the worldwide conditions affecting everyone, 2020 was monumental in the broad DevOps space. Just a year ago, in February 2020, JFrog launched the first universal, hybrid, multi-cloud, end-to-end DevOps platform with JFrog Artifactory at its core. This included both cloud and self-managed offerings for our complete platform, delivering flexibility and a unified user interface for enterprises. JFrog's nature is to innovate and create categories while also anticipating the next industry leaps and the needs of companies in those upcoming realities. We were proud to meet the challenges presented by the community and our customers in the ongoing software release management sector, addressing their needs both for today and tomorrow. In March and throughout the year, the impact of the pandemic reinforced the mission-critical nature of DevOps and software updates for businesses. Digital transformation was accelerated, with strategies around cloud migration and IT maturation taking center stage. As we faced unexpected challenges in the spring and summer, we made it clear to our sales and support teams that the focus must be on customer retention. I’m proud to report that we achieved this goal while also growing our customer base. Our demand for end-to-end solutions like the JFrog Platform increased, with many new customers opting for our higher-level subscriptions, indicating the critical importance of DevOps in the software industry. In 2020, we maintained our investments in our team and expanded our platform offerings to support the increasing demands from customers who expressed the need to deliver more quickly and efficiently in the digital age. Software innovation became key and, at times, the only competitive differentiator. Highlights from the year include the launch of the FrogCare free program to provide cloud-based DevOps solutions to organizations combating COVID-19, witnessing global interest from companies involved in medical research and equipment manufacturing. We focused on software distribution as a key driver for JFrog's platform adoption, emphasizing secure software package delivery that supports hybrid environments, microservices, and more. We launched a free community offering in the cloud, giving developers access to the JFrog Platform and facilitating an easy evaluation of our products prior to purchase. This self-service option has provided us with new data that informs customer experiences and product improvements. Our commitment to universality was further demonstrated through support for various new technologies in software package management and security tools. As we look forward, we believe in the potential to expand our platform portfolio in 2021 based on collected market demand data and customer feedback. Businesses need a comprehensive solution that ensures software packages are built, secured, distributed, and deployed efficiently. We are focusing on security across our pipelines and will continue driving innovations and regional expansion to meet the diverse needs of our customer base. JFrog is committed to reshaping how software is built and released, and we are dedicated to offering superior technology and services to make JFrog the go-to solution for software development. With that, I’ll hand it over to our CFO, Jacob Shulman, for more detailed financial results.

Jacob Shulman, CFO

Thank you, Shlomi, and good afternoon, everyone. I will provide a brief overview of our fourth quarter and full year 2020 financial results and discuss our outlook for 2021, both Q1 and the full year. 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-K furnished to the SEC. So let's turn to our financial results. We are pleased to have finished the year on a solid quarter. The remote work trends again drove faster growth in our cloud business. Total revenues for the 3 months ended December 31, 2020, were $42.7 million, up 39% year-over-year. Self-managed revenues, also often called on-prem, were $32.9 million, up 32%. Cloud revenues, again, grew significantly faster, up 69% to $9.8 million or 23% of total revenues compared to 19% of total revenues last year. For the full fiscal year, total revenues were $150.8 million, up 44% year-over-year. Self-managed revenues were $118.2 million, up 38%. Cloud revenues for the year were up 71% to $32.6 million or 22% of total revenues compared to 18% in 2019. Net dollar retention for the trailing 4 quarters was 133%. As of quarter end, we had 352 customers with ARR of over $100,000, up from 313 customers as of September 30, our fastest sequential increase in 5 quarters. Of this group, 10 customers had ARR greater than $1 million, adding an additional $1 million customer in Q4. At year-end, we had approximately 6,050 customers compared to approximately 5,600 customers at the end of 2019. We continue to believe COVID's most significant impact is on the length of the sales cycle. In addition, more and more customers are landing on high-level subscriptions, which also requires longer sales cycles. As Shlomi discussed, our fully integrated platform continues to differentiate JFrog in the marketplace, and the recognition of that value is accelerating. In Q4, 26% of total revenue came from Enterprise+ customers, up from 13% in Q4 of 2019. For the full year, Enterprise+ customers represented 20% of total revenue, increasing from 10% at the end of 2019. Now let's review the income statement in more detail. Gross profit in the quarter was $35.2 million, representing a gross margin of 82.6% compared to 81.2% in the year-ago period. For the fiscal 2020, gross profit was $124.3 million, representing a gross margin of 82.4% compared to 82.2% in fiscal 2019. During the year, we made significant investments in improving the efficiency of our operations particularly in our cloud business, which improved our margins. R&D expense for the quarter was $10.2 million or 24% of revenue compared to 22% of revenue in the year-ago period. We have continued to invest significantly in R&D, including the rollout of our free tier, along with expanding the capabilities of Xray and Distribution. Sales and marketing expenses for the quarter were $16.1 million or 38% of revenue compared to 37% in the year-ago period. We benefited from a number of cost-saving measures this quarter as a result of COVID, including a reduced travel budget and converting marketing programs to virtual mode. Sequentially, we saw an increase in sales and marketing largely due to costs associated with our free cloud community offering. We expect the spend on the free tier will stabilize here as we benefit from the infrastructure improvements I mentioned earlier. G&A expense for the quarter was $6.8 million or 16% of revenue compared to 14% in the year-ago period. G&A reflects an increase in our public company costs. Non-GAAP operating income for Q4 was $2.2 million or a 5.1% operating margin compared to $2.3 million or a 7.4% operating margin in the year-ago period. For the full year, non-GAAP operating income was $13 million or 8.6% operating margin compared to $5.9 million or 5.7% operating margin in 2019. We continue to balance investments in growing the business and leveraging the opportunity in front of JFrog with profitability. Our target for the near future is to remain in the low to mid-single-digit operating margin. Non-GAAP net income in the quarter was $2.2 million or $0.02 per diluted share based on approximately 103.6 million weighted average diluted shares outstanding. Non-GAAP net income for the full year was $13.5 million or $0.13 per diluted share based on approximately 101.3 million weighted average diluted shares outstanding. Turning to the balance sheet and cash flow. We ended the year with $598 million in cash and short-term investments. Cash flow from operations was $12.8 million in the quarter. After taking into consideration CapEx, free cash flow was a record $11.9 million. For the full year, free cash flow was $25.9 million. Now let's look at how our progress in 2020 positions us for a strong 2021. For the full year, we expect revenue of between $196 million to $204 million with non-GAAP operating income between $5 million and $7 million and an approximately 4% increase in fully diluted shares. At the midpoint of the guidance, revenue growth is approximately 33%. For Q1, we expect revenue of $44 million to $45 million with non-GAAP operating income of $0.5 million to $1.5 million and non-GAAP EPS of $0 to $0.01, assuming a share count of approximately 104 million shares. At the midpoint of the guidance, we expect growth of 36%, following on a very strong pre-COVID Q1 in 2020. Let me provide some color on the cadence of quarterly revenue growth this year. The first quarter is benefiting from the strong net dollar retention in Q1 '20. In the second quarter, year-over-year growth will be weaker as we saw lower upsells in Q2 '20, which was the first full quarter impacted by COVID. We expect the second half of 2021 will be stronger as we will benefit from a rebound in new customer additions as well as leverage the investments made over the past year.

Shlomi Ben Haim, CEO

Thank you, Jacob. 2020 was a challenging and unexpected year for every business, yet JFrog exceeded the guidance we had provided. We believe JFrog continues to be positioned well in the market to address the growing need for digitally rich businesses. Our success to date is a testament to our core business values. JFrog's hybrid, universal DevOps end-to-end platform gives companies an easy way to manage, secure, build and release software updates fearlessly and with a joyful customer experience. As we close 2020 and move into 2021, I couldn't be more proud of the Frogs, our employees, who have taken us through an unforgettable year. The platform innovation, the journey through our IPO and their never-ending commitment to quality and success have inspired our entire team. I would like to thank our community and customers who partnered with us on this journey in 2020. We couldn't have done it without you, and we look forward to more success together. Thanks for your attention. Best wishes for a healthy new year, and may the frog be with us all. And now we'll be happy to take your questions.

Operator, Operator

Our first question will come from Sanjit Singh from Morgan Stanley.

Sanjit Singh, Analyst

Congrats to the team on a year of 40%-plus revenue growth. I wanted to start with the momentum you're seeing on Enterprise+. That had a big jump in the quarter. And I wanted to get a sense, Shlomi, what's sort of driving that. Did you see a benefit kind of after the SolarWinds compromise with Xray? Or is it more about Pipelines? If you could sort of unpack the momentum we're seeing in that Enterprise+ subscription, that will be a good place to start.

Shlomi Ben Haim, CEO

Yes. Sure, Sanjit. Great to hear you again and greetings from Israel. Thank you for your question. Actually, it's 3 different questions, and I'll try to address it one by one. Regarding the growth we see in the adoption of the Enterprise+, the one thing we see very, very impactful is the Distribution software packages' ability that we added to the platform a bit more than a year ago. Companies are not anymore satisfied with just CI/CD and security solutions. They also want to make sure that software packages are reaching their destination. And with JFrog Platform, they have an embedded solution from build to secure to release their software packages. This is what we call the circle of trust. That's one of the main drivers for customers to adopt the Enterprise+ solution. The second thing that you have asked about is security and SecOps and referring to SolarWinds, and this is a very good question because we expect all of our customers to understand that in a world of software automation and software acceleration where machines are building software and bringing software from the outside world, you should secure your repositories, especially software packages that come in all shapes and types from the public market and from the internal development team. So with Xray, you can actually scan and secure your Artifactory, your repository. That's also a proxy software from the outside. It natively sits on Artifactory. Now back to the original question. When you get all 6 products under 1 subscription, the Enterprise+ subscription, which represents the platform and the full access to all of our products, obviously, this drives a lot of attention to the market. And JFrog provides an end-to-end solution with a hybrid notion so you can have it in the cloud and on-prem. So we see more and more customers using our platform not just on their self-hosted solutions but also in the cloud and multi-cloud.

Sanjit Singh, Analyst

Understood. If I could revisit the elements of growth, the dollar-based net expansion remains above 130%, which is encouraging. In terms of customer base growth, we saw an increase of about 7% this year compared to 20% last year, and this was understandably influenced by COVID. I'm curious about how the free offering impacts your paid customer growth and whether this indicates some pent-up demand that might lead to increased conversions from free to paid customers later this year or next year. Is this a correct perspective on potential growth in new customer acquisitions?

Shlomi Ben Haim, CEO

We aimed for a net dollar retention rate of over 130%, and we are proud to have exceeded that goal thanks to our team's efforts. As COVID began, we developed a playbook with three scenarios and made it clear to our sales and support teams that retaining our customers was our top priority, no matter the cost or level of support required. We worked diligently to achieve this during the pandemic. However, new customer acquisitions slowed down in the initial quarters of the pandemic due to budget reviews, concerns, and challenges in reaching procurement and legal entities, which extended the sales cycle. The slowdown in new logos was a result of our focus on retaining our existing customer base and the impact of the pandemic. Additionally, we launched a free tier at the end of Q3 and throughout Q4, which is showing promise by providing insights into customer journeys and allowing thousands of new users to explore the full capabilities of our platform without time limitations. This is not just a temporary trial but a consumption-based, cloud offering, and we anticipate these users will convert as they become more engaged with our cloud services.

Sanjit Singh, Analyst

Shlomi, congrats on Q4.

Shlomi Ben Haim, CEO

Thank you very much, Sanjit.

Operator, Operator

Next question will come from the line of Brad Reback from Stifel.

Brad Reback, Analyst

Jacob, as we think about the significant growth in the SaaS product and how that's going to become a larger and larger percent of revenue going forward, how should we think about the mix change and the potential impact to gross margin from that?

Jacob Shulman, CFO

Yes. So obviously, our cloud margins are lower than on-prem margins. Therefore, as cloud revenues represent a bigger portion, we'll see some impact on our overall gross margin. We did not see that in 2020 because we did a lot of work on streamlining our infrastructure and improving our cloud margins. Our long term, we will see convergence towards about 80% gross margin. But in the short term, we will see around similar levels, margins. As we continue to grow and cloud business continue to grow, only then we will see a gradual conversion towards 80%.

Operator, Operator

Our next question will come from the line of Jack Andrews from Needham.

Jon Andrews, Analyst

I want to ask about the customers who have reached the $1 million threshold for you. Are there any lessons learned as you've taken a look at these customers' journeys that could be applied more broadly to your customer base? And how many customers do you think might be able to potentially reach that threshold over time?

Shlomi Ben Haim, CEO

Yes. Jack, that's a great question. And we built the platform, aiming to have customers at this size. We understand that DevOps and software automation is kind of driving the digital transformation, which according to any survey that we read recently is the #1 priority of a CIO. So obviously, the budget is there, the need is there, the demand is there, the pain is there, and we see more and more customers upgrading to higher subscriptions and to multiple zones. Now what will drive over $1 million PO in ARR? The #1 is a full hybrid solution not just self-hosted but also in the cloud in order to be able to provide the flexibility to the organization to push software closer to the developers and to the consumers. The #2 thing is the multiple projects that you have in a company. And when you need to consolidate that into one platform, that obviously provides benefit to the organization and a bigger opportunity for us to grow. And then the third thing is the multi-cloud solution. JFrog is the only DevOps provider that offers you not just a hybrid solution but also a multi-cloud solution so you can actually choose where and when you want to push your software. And if JFrog has an end-to-end solution that not just serves you on-prem to your thousands of developers, in this specific case of the over $1 million ARR account, and pushes to all clouds, that's obviously a great avenue for us to generate growth.

Jon Andrews, Analyst

I appreciate your perspective. As a follow-up, I would like to ask specifically about your thoughts on CI/CD, particularly regarding the opportunity with Pipelines. Do you see this as a greenfield market, or is there potential for displacement with existing CI/CD tools that users currently have?

Shlomi Ben Haim, CEO

Yes. We used to think of CI/CD as a single market, but we are starting to see that Continuous Integration is more aligned with developers, while Continuous Deployment is closer to production deployment environments. Artifactory has become the central control point for organizations. JFrog Pipelines is fully integrated into the platform and communicates directly with Artifactory and Xray, providing several advantages over other CI/CD tools. Firstly, JFrog Pipelines is compatible with any CI tools you may already have and integrates smoothly with existing CI systems. Secondly, continuous deployment from binaries is essential for any deployment solution; therefore, instead of relying on a separate repository, Pipelines are integrated with Artifactory. Additionally, we recently introduced a feature called signed pipeline, which enhances the security of builds and software delivery through various stages. As we see Pipelines becoming increasingly mature and integrated into the platform, we believe this will offer new advantages in the CI/CD landscape and complete the trust cycle for building, testing, deploying, and delivering software packages on-premises.

Operator, Operator

And our next question will come from the line of Alex Kurtz from KeyBanc.

Michael Vidovic, Analyst

This is Michael on for Alex. Congrats on the quarter. So how do you see the expansion of Artifactory server licenses and existing customers? Is it like growth sector versus landing new accounts?

Shlomi Ben Haim, CEO

Michael, I believe that every organization is beginning to realize that in the cloud-native landscape, containers are the primary software package they will utilize, although multiple technologies are still involved. We have discussed universality and our radical universality approach at JFrog. Currently, we support over 30 different technology types, which drives the demand for and adoption of Artifactory as a central component in every organization. Additionally, Artifactory is integral to every subscription we offer. From the open-source version to the free tier and our higher-tier subscriptions, Artifactory forms the foundation, with other products providing added value on top of it. Therefore, in response to your question, we anticipate growing adoption of Artifactory not only in self-hosted environments but also across all cloud platforms.

Michael Vidovic, Analyst

Okay. Great. And I'd like to just ask one more. On the billings side, could you give any color on what helped drive the outperformance in the quarter?

Jacob Shulman, CFO

Yes. We believe that the best metric to assess our performance is actually ARR and billings, dependent on various factors, including sometimes customers entering into multi-year agreements, which actually happened in Q4. Therefore, we believe that the best KPI to assess our growth is net dollar retention and ARR.

Operator, Operator

And our next question will come from the line of Ittai Kidron from Oppenheimer.

Ittai Kidron, Analyst

Congratulations on a strong quarter and an engaging speech, Shlomi. I would like to discuss Pipelines. It seems that the CD side is lacking. I believe Pipelines presents a unique opportunity. Given the increasing maturity of Pipelines, the market's need for a solid CD solution, and the agnostic nature of Pipelines that you mentioned earlier, I'm curious if you see a potential opportunity to sell Pipelines independently, rather than solely as part of the Enterprise+ subscription. Would you consider marketing that product independently, or do you prefer to use it primarily as a driver for Enterprise+?

Shlomi Ben Haim, CEO

Yes, it's great to hear from you again. You’ve pointed out that the main challenge in the market is related to continuous deployment. I wouldn’t say it’s broken, but the landscape for continuous deployment is still evolving. Vendors are currently adopting new technologies. Kubernetes is pushing everyone to adapt. We recently released peer-to-peer distribution, which has enhanced distribution across all organizations using our platform and powered by Pipeline. Pipeline originated from our acquisition of a company named Shippable three years ago, which developed a CI/CD tool that utilizes binaries and the accompanying metadata. We were very enthusiastic about that acquisition and have since collaborated closely with the team, which has expanded significantly, to enhance its integration with our platform. Pipeline is available in all packages and tiers of our cloud offering, including our free tier. It is a CI/CD tool that integrates seamlessly with Artifactory, Xray, and JFrog Distribution. Regarding your question about possibly offering Pipeline as a stand-alone product, we might consider this in the future. Currently, we believe that the strength of our platform, as an end-to-end solution, provides more value than just offering individual tools, like a single security tool or a CI/CD solution. The CI aspect has become quite common, while CD remains challenging and requires robust distribution capabilities and access to metadata for all binaries. With these features, Pipeline is far more advanced than other CD tools available in the market. It aims not only to manage automation smoothly but also to secure your pipeline effectively and distribute software packages rapidly to all edges. Looking ahead, we believe that the DevOps journey extends beyond the data center and into edge devices, and we see Pipeline as a key driver in this evolution. Therefore, while we might explore the idea of selling Pipeline independently in the future, we currently recognize the advantages of having all six products work together to deliver greater value to our customers.

Operator, Operator

And our next question will come from the line of Alex Kurtz from KeyBanc.

Michael Vidovic, Analyst

This is Michael on for Alex. Congrats on the quarter. So how do you see the expansion of Artifactory server licenses and existing customers? Is it like growth sector versus landing new accounts?

Shlomi Ben Haim, CEO

I think what we observe now is that every organization has started to realize that in the realm of cloud-native technologies, containers have become the primary software package for everyone. Despite this, various technologies remain in use. We talked about universality and our unique approach at JFrog, where we now support over 30 different technology types. This has led to increased demand and adoption of Artifactory at the core of each organization. Another key point is that Artifactory is included with every subscription we offer. From open-source to the free tier and our premium subscriptions, Artifactory is fundamental to our products, with additional features layered on top. In response to your question, we expect to see an increase in the adoption of Artifactory, not only in self-hosted environments but also across all cloud platforms.

Michael Vidovic, Analyst

Okay. Great. And I'd like to just ask one more. On the billings side, could you give any color on what helped drive the outperformance in the quarter?

Jacob Shulman, CFO

Operator, Operator

And our next question will come from the line of Ittai Kidron from Oppenheimer.

Ittai Kidron, Analyst

Congratulations on a great quarter and an interesting speech, Shlomi. I wanted to discuss Pipelines. It certainly feels like the continuous delivery aspect is lacking. I think Pipelines presents a unique opportunity. Given its growing maturity and the market's need for a solid continuous delivery solution, along with its agnostic nature as you mentioned, I wonder if there’s a chance to sell Pipelines separately, instead of just as part of the Enterprise+ subscription. Are you considering an aggressive independent sales approach for that product, or would you prefer to use it mainly to drive Enterprise+ sales?

Shlomi Ben Haim, CEO

Yes, it's great to hear from you again. You pointed out that the main challenge in the market is in continuous deployment. While I wouldn't say it's broken, the continuous deployment environment is still not fully developed. Vendors are currently adopting new technologies, and Kubernetes is presenting challenges for many. We've recently released peer-to-peer distribution, which has enhanced distribution for all organizations using our platform powered by Pipeline. Pipeline resulted from our acquisition of a company called Shippable three years ago, which developed a CI/CD tool based on binaries and their associated metadata. We were very excited about this acquisition and have been collaborating closely with the significantly expanded team to enhance integration with our platform. To clarify, Pipeline is accessible across all tiers of our cloud offerings, including our free tier. It is a CI/CD tool that works natively with Artifactory, Xray, and JFrog Distribution. Regarding the potential of offering Pipeline as a stand-alone product, we may consider that in the future. Currently, we recognize that the true value lies in the comprehensive platform and the end-to-end solution JFrog provides. It's not just about a single security tool scanning repositories or just a CI/CD; to be honest, the CI landscape has become commoditized. Continuous deployment is quite complex and relies heavily on robust distribution and access to metadata associated with all binaries. When combined with these capabilities, Pipeline outperforms many other CD tools in the market. It represents a vision that goes beyond merely managing automation; it ensures the security of your pipeline and facilitates the swift distribution of software packages to every edge. Moving forward, we believe the DevOps journey extends beyond the data center and onto devices and edge devices. We see Pipeline as a significant driver in this journey. While we might consider selling Pipeline as a stand-alone in the future, we currently value the synergy of all six products working together, offering greater strength and value to our customers.

Operator, Operator

And our next question will come from the line of Alex Kurtz from KeyBanc.

Michael Vidovic, Analyst

This is Michael on for Alex. Congrats on the quarter. So how do you see the expansion of Artifactory server licenses and existing customers? Is it like growth sector versus landing new accounts?

Shlomi Ben Haim, CEO

I think what we see now is that every organization is starting to understand that in the cloud-native world, containers are the primary software package that every organization will use, although multiple technologies are still in play. We discussed universality, particularly the radical universality approach we have at JFrog. We now support over 30 different technology types, which drives the demand and adoption of Artifactory as a core component in every organization. Additionally, Artifactory is included in every subscription. From open-source to the free tier and our higher subscriptions, Artifactory is central, with every other product we offer built on top of it with distinct value. In response to your question, we expect to see increasing adoption of Artifactory, not only in self-hosted solutions but also in the cloud across all platforms.

Michael Vidovic, Analyst

Okay. Great. And I'd like to just ask one more. On the billings side, could you give any color on what helped drive the outperformance in the quarter?

Jacob Shulman, CFO

Operator, Operator

And our next question will come from the line of Ittai Kidron from Oppenheimer.

Ittai Kidron, Analyst

Congratulations on a great quarter and an interesting speech, Shlomi. I wanted to discuss Pipelines. It seems like the continuous delivery side is lacking. I believe Pipelines presents a unique opportunity. I'm curious if you see a chance to sell Pipelines as a standalone product, rather than just as part of the Enterprise+ subscription. Are you considering aggressively marketing that product independently, or do you see it mainly as a driver for Enterprise+?

Shlomi Ben Haim, CEO

Yes, it's great to hear from you again. You correctly pointed out that the main challenge in the market lies in continuous deployment. While it's not necessarily broken, the continuous deployment environment is still evolving. Vendors are currently adopting new technologies. Kubernetes is presenting challenges for everyone. We recently released peer-to-peer distribution, which has enhanced distribution across all organizations using our platform powered by Pipeline. Pipeline is the result of an acquisition we made three years ago when we acquired a company called Shippable, which developed a CI/CD tool that focuses on binaries and the metadata associated with them. We were very excited about that and have since collaborated closely with the team that has expanded significantly to enhance integration with our platform. Pipeline is accessible on all packages and tiers of our cloud offering, including our free tier. It is a CI/CD tool that works natively with Artifactory, Xray, and JFrog Distribution. Regarding your question about potentially offering Pipeline as a standalone product, we might consider that in the future. Right now, what we observe is that the strength of our platform lies in the end-to-end solution that JFrog offers; it’s not just about one security tool scanning your repository or merely a CI/CD tool. The CI world has become commoditized, while CD poses significant challenges that require robust distribution and access to metadata of all binaries. When it includes these types of assets and benefits, Pipeline is significantly more advanced than other CD tools available in the market. Pipeline aims not only to manage automation between stages but also to ensure the security of your pipeline and to facilitate the swift distribution of software packages to all edges. Looking ahead, we believe that the DevOps journey does not conclude in the data center but extends to devices and edge devices. We view Pipeline as a key catalyst in this journey. So, we might think about selling Pipeline independently in the future, but currently, we see the combined advantage of all six products working together, which is stronger and more valuable for all our customers.

Operator, Operator

And our next question will come from the line of Alex Kurtz from KeyBanc.

Michael Vidovic, Analyst

This is Michael on for Alex. Congrats on the quarter. So how do you see the expansion of Artifactory server licenses and existing customers? Is it like growth sector versus landing new accounts?

Shlomi Ben Haim, CEO

I appreciate the question, Michael. What we observe is that organizations are beginning to realize that in the cloud-native environment, containers have become the primary software package for widespread use, yet multiple technologies are still utilized. We discussed our approach to universality at JFrog, which now supports over 30 different technology types, leading to increased demand and adoption of Artifactory across organizations. Additionally, Artifactory is included in every subscription tier. Whether it's the open-source version, the free tier, or our higher-level subscriptions, Artifactory serves as the foundation, with additional products providing extra value. Therefore, we anticipate continued adoption of Artifactory, both in self-hosted solutions and across all cloud platforms.

Michael Vidovic, Analyst

Okay. Great. And I'd like to just ask one more. On the billings side, could you give any color on what helped drive the outperformance in the quarter?

Jacob Shulman, CFO

Operator, Operator

And our next question will come from the line of Ittai Kidron from Oppenheimer.

Ittai Kidron, Analyst

Congratulations on a successful quarter and an engaging presentation, Shlomi. I’d like to delve deeper into Pipelines. It appears that the continuous delivery aspect is facing challenges. I believe Pipelines presents a distinct opportunity. Given the increasing maturity of Pipelines and the market's need for an effective continuous delivery solution, along with its agnostic characteristics that you mentioned earlier, I’m curious if you envision an opportunity to sell Pipelines independently, rather than just as part of your Enterprise+ subscription. Are you considering the possibility of aggressively selling that product on its own, or do you see it primarily as a component to drive Enterprise+?

Shlomi Ben Haim, CEO

Yes, it's great to hear from you again. You highlighted that there is significant pain in the market with continuous deployment, which is still a work in progress. Vendors are currently adopting new technologies, and Kubernetes poses challenges for everyone. We recently launched peer-to-peer distribution, which has enhanced distribution for organizations using our platform powered by Pipeline. Pipeline was developed from our acquisition of Shippable three years ago, where they created a CI/CD tool utilizing binaries and their associated metadata. We’ve been focusing on improving its integration with our platform. To clarify, Pipeline is available across all packages and tiers of our cloud offering, including the free tier. It operates seamlessly with Artifactory, Xray, and JFrog Distribution. Regarding your question about offering Pipeline as a stand-alone product, we might consider this in the future, but for now, we believe in the value of our complete platform. The full suite offers much more than a single security tool or a CI/CD solution. The CI space has become commoditized while continuous deployment remains challenging and cannot thrive without robust distribution and access to binary metadata. Given its advanced capabilities, Pipeline outperforms other CD tools on the market. It not only automates processes but also secures pipelines and facilitates swift software distribution to edge devices. Looking ahead, we see the DevOps journey extending beyond data centers, reaching devices at the edge, and we view Pipeline as a key driver in this evolution. While we may explore selling Pipeline independently in the future, we currently see the greatest benefit in the synergy of all six of our products working together for our customers.

Operator, Operator

And I'm not showing any further questions. I'd like to turn the call back over to Shlomi for any closing remarks.

Shlomi Ben Haim, CEO

Guys, first of all, thank you so much for your attention and for taking the time to join us today. We are very happy and very pleased with the strong quarter that we shared the results with you. We wish you a great rest of the day, and may the frog be with you. Thank you very much.

Operator, Operator

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