JFrog Ltd. (FROG) Q4 2021 Earnings Call Transcript

JFrog Ltd. (FROG -0.24%)
Q4 2021 Earnings Call
Feb 10, 2022, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

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 on a listen-only mode. After the speakers' presentation, there'll be a question-and-answer session.

[Operator instructions] Please be advised that today's conference is being recorded. [Operator instructions] I would now like to hand the conference over to JoAnn Horne with investor relations. Please go ahead. 

JoAnn Horne -- Investor Relations

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 today via a press release. Leading the call today will be JFrog's CEO and co-founder, Shlomi Ben Haim; and Jacob Shulman, JFrog's CFO. Before management shares their 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 5, 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-K 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 or 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 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 -- Chief Executive Officer and Co-Founder

Thank you, JoAnn, and greetings to all of you from the swamp. I'm excited to welcome you to our fourth quarter and fiscal 2021 earnings call. Every end of year urges us to both 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 that I'm happy to share 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 38% year-over-year growth reported in the previous quarter. Our cloud revenue in Q4 grew by 52% year over year, an increase from 50% reported in the previous quarter. This reflects our ongoing strategy of accelerating our multicloud 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+ subscription.

I'm also happy to report that our four trailing quarters 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 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 reflect 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 applications, 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 the market. The moment first all third-party code is compiled, it changes to a binary form and requires full binary life cycle management from the developer's machines to the deployment environment to meet the demand of the business. This transformation into a digital and secure reality can be only 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 venerability or, as coined by the community, the software pandemic. This 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 bring their entire software delivery organization to a halt until the vulnerability was found, fixed, and replaced. JFrog customers were able to quickly identify where they were impacted and addressed 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 truth and the database of DevOps, allowing them to replace their vulnerable Log4j binary with a patch version and applying it across the organization automatically instead of manually finding every place it was being used in every application. Using JFrog Xray alongside Artifactory, they were able to easily protect themselves from additional exposure, setting security policies that automatically ensured vulnerable Log4j binaries could not be used again by developers and keeping the repositories from further risk. And finally, JFrog Distribution rapidly delivered and validated release to fix the software in all environments, including production.

Altogether, this bank automatically found, rebuild, replaced, and protected themselves against the all-vulnerable Log4j binaries in under 12 hours. This speed is only achievable with a unified integrated JFrog Platform that automates these activities across the company. Development organizations without this approach 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 a 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 their software supply chains.

The Log4j vulnerability will not be the last impactful binary discovered by our industry. This happened in 2021 with npm 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 road map in 2021 brought many innovations and enhancements to our holistic platform, deepening our commitment to deliver integrated automated solution to the DevOps and DevSecOps communities. This included delivery for many of our core product 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 a universal, scalable product across shelf-hosted hybrid and cloud environment.

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 is a recognition that many companies see a hybrid model as a strategic move for the 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 bore fruit again in Q4.

And as an 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's SaaS solution. They were looking for a DevOps partner to scale alongside their company growth and had found their existing competitive offering was no longer scaled to meet their needs nor able to support their cloud-first initiatives. With the JFrog Platform provided as a service in the cloud of their choice, they have managed to successfully migrate all of their binaries and scale across multisite setup. We look forward to partnering with more JFrog customers like TomTom headquartered in EMEA; or FastAF a luxury retail delivery company headquartered in North America, to ensure our DevOps solution meets enterprise demand across all verticals and hybrid deployments.

Across geographies, JFrog Distribution, which delivers binaries to production environments such as data centers or Kubernetes, remained 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 a dozen of global locations, each with their own regulations and compliance needs. Examples such as this illustrates a continuing trend we are seeing in organizations. They 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 Bintray, our legacy distribution as a service offering that provided the stand-alone binary store and distribution service. We managed an extensive and transparent process with our community and customers of 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 millions of developers but billions of devices with the ability to build, manage, protect, update, and automate next-gen 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 continue to see the fruits of this investment as we welcome 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 to 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 this consolidation pattern as we bring more solutions into the market. We look forward to extending our deep customer relationships and innovative technologies to meet these 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 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, stage is yours.

Jacob Shulman -- Chief Financial Officer

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 four quarters, and we continue to see a better business environment.

Self-managed revenues, also often called 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 sunset the Bintray product. While the vast majority of Bintray customers adopted our other distribution solutions, we lost approximately 200 customers as a result of this change. These customers were light users of the Bintray solution and represented a negligible revenue impact. Our gross retention rate remained at historic levels in the high 90s 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 and 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+ 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 expand 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 10 basis point operating margin compared to an operating income of $2.2 million or 5.1% operating margin in the year-ago period. As we discussed, integrating Vdoo and Upswift would impact our profitability. For the full year, non-GAAP operating income was $4.2 million or 2% operating margin compared to $13 million or 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 flow from operations was $17.7 million in the quarter. After taking into account capex, free cash flow was $16.6 million. For the full year, free cash flow was $23.7 million. As discussed last quarter, Q3 cash flow was impacted by a one-time payment of $90 million related to holdback agreements associated with Vdoo and Upswift acquisition.

Normalized for this, free cash flow 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 will recover 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 established revenue guidance of $273 million to $275 million.

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. Shlomi?

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

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 lead 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 bar. This growth is reflective of the strong uncompromising culture we have built that cuts through a challenging labor market. In the last year, greater 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 Investor 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.

May the Frog be with you. And now we are happy to take your questions. 

Questions & Answers:

Operator

Thank you. [Operator instructions] We ask that you please limit yourself to one question and one follow-up question. You may then return to the queue. [Operator instructions] Please stand by while we compile the Q&A roster.

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

Mike Cikos -- Need

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?

Jacob Shulman -- Chief Financial Officer

Yes. Hi, Mike, this is Jacob. As you know, we acquired two companies in Q3, Vdoo and Upswift. Actually, Vdoo was the large company that we acquired and had more material impact than Upswift acquisition.

Both of them are currently being integrated technologies, and we're making very nice progress with that. So specifically to the question, Upswift does not have any material impact on our profitability. It just was a very small team. It was -- the Vdoo acquisition had a bigger impact because it's a much bigger team.

Overall, our security division today is around 100 people. A significant portion of that is coming from Vdoo.

Mike Cikos -- Need

Understood. Thank you for that. And then the other question I wanted to ask 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 [Inaudible] coming into the quarter?

Jacob Shulman -- Chief Financial Officer

Yes, you're absolutely right that we're very pleased with the adoption of our platform. What we've seen is better than expected adoption of 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.

And that is also indicated in the acceleration of the growth of large customers, specifically over $100,000 customers grew 53% year over year. And as entry point to the platform is $115,000, that kind of gives you approximate number of new customers that adopted the platform.

Mike Cikos -- Need

Great, thank you, I'll turn it over to my colleagues. Appreciate it.

Operator

Thank you. Our next question will come from Sterling Auty with J.P. Morgan. Please go ahead.

Unknown speaker -- J.P. Morgan -- Analyst

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

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Yes, hi, thanks for the question. This is Shlomi. Xray, or if I may say, the security solution, is landing on a very strong demand around software supply chain and binary security request and requirement from our customers. Basically, what we have seen lately, and especially in 2021, is that most of the vulnerable pieces of your software supply chain are coming from binaries third party or first party.

Xray sits natively on top of Artifactory. It's part of three subscriptions in the self-hosted offering and offered to the -- all of the cloud customers. So obviously, we see a growing number of customers that are adopting Xray. Speaking of Log4j specifically, that was at the end of the year, but it echoes everything that we are saying about what type of security the world of DevOps and DevSecOps demand the need.

And obviously, they've generated a much greater demand by the market. So you see more adoption of our platform. You see more adoption of Xray and the integration of Xray and Vdoo technology have also a very promising road map ahead.

Unknown speaker -- J.P. Morgan -- Analyst

Great, thank you so much.

Operator

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

Kingsley Crane -- Berenberg -- Analyst

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

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

On other platform products, Kingsley, regarding Log4j specifically? 

Kingsley Crane -- Berenberg -- Analyst

Well, yes, you help them with Log4j, becoming trusted partner and maybe they'll expand into other products. 

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Yes. So let's take a step back for a moment then and see how this whole tool chain kind of supported this software pandemic as was going by the community. First of all, you have to identify the vulnerable binary. And this obviously happened in a matter of minutes by using Artifactory, the database of DevOps.

Point A Artifactory is the core product of our platform. Then you have to establish and to place all type of security policy on top of your repository to protect it so no developer will try to get a vulnerable piece again, and this is where you use Xray. And now you have to add deployment environment and development environment to build against the new patch of the Log4j. And this is where JFrog Distribution comes in play.

So obviously, the different sides of the platform playing together emphasize, amplified by the Log4j episode, was a great driver to tell the story not only of the JFrog Platform, but overall, DevOps with the binary-centric approach. 

Kingsley Crane -- Berenberg -- Analyst

OK, that's really helpful. That's it for me now. Thank you.

Operator

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

Sanjit Singh -- Morgan Stanley -- Analyst

Thank you so much. Thank you so much for taking the questions and congrats on the strong Q4. And the guidance was very healthy, too. So congrats on both accounts.

One of the things of the metrics you sort of disclosed was the customer base growth. And I'm really happy to see that growth get back into the double digits. So I was wondering if you could talk about how that sort of progresses the year. I know we had -- we took a deliberate focus on -- focusing on existing customers in 2020, and now it seems like we're starting to see growth again.

How durable is that going into 2022? And are there any sort of incentives that you guys are using to drive that free-to-pay conversion? Any sort of commentary on the customer base would be helpful.

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Yeah. Hey, Sanjit, thanks for the question. Obviously, we were very excited about all the metrics of 2021 and also the growth in new logos, new customers, new on-boarding users that are using the JFrog Platform. We committed in 2021 to perform in a higher pace and add more new logos than 2020, and we delivered.

And that although we had to remove friction, remove Bintray from our portfolio. And by that even, as Jacob mentioned in the script, we lost 200 customers. And still, we go as expected. We were very pleased to see this growth happening again, this trend of adopting the JFrog products again.

And what I see moving forward is that our investments will bear fruit. It happened in 2021. It will happen even further in 2022. The security investment is very much appealing to the market.

This is a booming market. Everyone, everyone that we speak with, speak about the pain of securing the full software supply chain. Xray is the perfect fit for it. The enforcements of Vdoo technology and the team is very, very well aligned with the market needs.

The enhancements added to Artifactory to manage binary from all type will be also very appealing to it. And also, our strategic move to the cloud with a free tier, as you remember, also saw to show higher adoption in terms of active users that are landing on JFrog solution rather than taking any other solution in the market. So I'm very optimistic regarding the growth of additional customers in the next year. And if I may also say, although it's 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 introduce us to new users that currently are not necessarily using any kind of DevOps practices. So bottom line, I'm very pleased and I'm very positive regarding the future.

Jacob Shulman -- Chief Financial Officer

If I may just add to that, Sanjit, majority of our customers now join in on cloud. And that's the biggest [Inaudible] that is three tiers that we launched late last year. Actually, of the new customers, about 60% now joining on cloud, and that portion of new customers on cloud continues to grow. 

Sanjit Singh -- Morgan Stanley -- Analyst

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

Jacob Shulman -- Chief Financial Officer

Yes. So I'll take that question. So as you know, the price increase went effect on April 1. And since then, actually, significant portion -- actually, the majority of our customers have already renewed at new prices.

So we continue to see same retention levels -- gross retention levels as previously. So our customers understand why we did that, and they accept new pricing and move forward. Actually, specifically, to your question on Q1, our renewal base of customers in Q4 was bigger than in Q1. So really, I think that the market and the customers understand the value we provide.

They accept it and move forward. So we don't expect any changes in this pattern in Q1.

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

And just to remind everyone, this is only relevant to SecOps solution. So the growth in the cloud was not impacted by the price changes. And it was not just price changes, but also a huge amount of technology added to our platform during this year. So as Jacob mentioned, the churn is very low, retention is very high.

And also, the net dollar retention has committed, climbed back, so we are very pleased with the results.

Sanjit Singh -- Morgan Stanley -- Analyst

Appreciate all the color. Thank you, guys.

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Thank you.

Operator

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

Unknown speaker -- J.P. Morgan -- Analyst

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 sort of the traditional DevOps market? And any type of TAM metrics or market opportunity metrics you could provide?

Jacob Shulman -- Chief Financial Officer

Yes. Thank you, Sebastian. We are very excited about this opportunity. And 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 stop. Like what is it that we really ask for. We ask for software update to happen at the edge.

We want our devices to be connected. And therefore, any kind of efforts that you invest only on the developer side or secure only part of your organization is lame. It's half-baked. And when we looked at the liquid software vision, our end in mind was getting the binaries all the way to the devices.

When we started to build JFrog Distribution a bit more than three years ago, we listed two years ago, we knew that there is a missing part. What happened after the data center? What happened after the cloud? What happened after your Kubernetes environment? And this missing part was connecting the devices to the CI/CD world. So from the developer machine from the developer keyboard, you will be able to push it all the way to the devices. Now what we see in the future, Sebastian, is not just millions and tens of millions of developers building 10 times -- 20 times a day.

We see billions of devices that need to be updated. And since binary is the only digital asset that moves from the developer hand to the device, to your iPhone, to your coffee maker, to any device that we use, we see a huge avenue of growth. We started with Distribution. We then extended with PDN.

We now acquired Upswift and JFrog Connect. And I'm sure that the market will follow, but this is the real demand, the real change of digital transformation.

Unknown speaker -- J.P. Morgan -- Analyst

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, the new logo lands? And then are you landing at higher ARRs as customers demand sort of a broader platform? Or because a lot of these new customers are adding the cloud version, are they actually lower ARR lands? 

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

So when you adopt the platform, on-prem or cloud, you already pay more than $100,000. And this is the high subscription of what we call the Enterprise+. And the cloud, obviously, we also grow by consumption, but the base prices in both cases is over $100,000. In terms of the go-to-market, what we have built on the self-hosted and in the cloud, is the combination of the freedom of choice to the user, to the developer comes with more value and capabilities of the platform.

So when you upgrade, you get security. When you upgrade again, you get a highly available solution DR and so on. when you upgrade to the platform, you get distribution capabilities and so on and so forth. In terms of the cloud, obviously, when you use more, you pay more.

That's the simple go-to-market philosophy that we have in JFrog. On top of that, we provide you with the multi-cloud solution. So it's not just one cloud that you can run on, and this is also very appealing. And one thing that we hear from all enterprise -- and remember, currently, we have approximately 7,000 customers -- this is something that we hear from all Fortune 100 or Global 2000.

Cloud is happening, but we need a hybrid environment. And JFrog is also very unique with providing that, giving you a hybrid environment for the same tool, whether it's in the cloud, self-hosted by yourself. The overall go-to-market is evolving together with the evolution and the adoption of DevOps and DevSecOps in the market and very focused on this binary piece that the number of binaries in your organization is just growing. 

Jacob Shulman -- Chief Financial Officer

And if I might just add to that, you're absolutely right that majority of new customers land on cloud. And typically, the landing point on cloud is lower ASP. Having said that, given the fact that many of our customers have an opportunity to try the products on free tier and also the platform resonates with a lot of value to the customers, we started seeing some of the customers landed on the platform. It doesn't happen a lot.

But every quarter, we might have a few cases where the new customers land on the platform. So on average, ASP did not change much, increased slightly for new land, but on average, it did not change much.

Unknown speaker -- J.P. Morgan -- Analyst

Got it. Thank you, very helpful.

Operator

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

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Hey, Shlomi, hey, Jacob, apologies if these questions were asked. I've been bouncing around for a couple of calls here. I wanted to ask you on billings. Taking a look at the billings in the quarter, it grew 34% according to our model.

I guess the top comp, do you realize a lot of mechanics this year with billings especially around the pricing change. But should we be heading into a period of normalization for billings over the next year? And I guess, thinking about with cloud usage, should we be looking at billings at all? Or is there something else that you suggest as a better forward-looking growth metric? 

Jacob Shulman -- Chief Financial Officer

Yes. Koji, thank you for this question. And just to remind you that, due to various dynamics, billings is not a very good predictor of future revenue growth because of co-terms and few other billing dynamics that we see from time to time. Now you're absolutely right that during the year the billings picture was kind of skewed toward Q1, where we did have significant pull-ins, but Q4 came out very strong in billings.

We don't see any one-time items there. We don't see any significant changes in duration -- average duration of our contracts. So it's a kind of normalized course. Going forward, again, cloud is primarily annual term for on-prem, for self-hosted solutions, we have some time multiyear deals.

But we don't see any changes right now in average contract duration. So billings should be probably normalized. Again, to remind you, billings is not a very good predictor of revenue growth because of the co-term dynamics that we experience from time to time. 

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Got it. Got it. And then I think I overheard in the prepared remarks, just talking about net revenue retention. Jacob, I think you made the comment that NRR should kind of hang around 130% level.

But just thinking about cloud usage, the cloud growth acceleration here in the fourth quarter, I mean, is there a potential for net revenue retention to actually end up over 130% in the future?

Jacob Shulman -- Chief Financial Officer

Yes. Our cloud customers expand more than 130% as cloud continues to become bigger proportion of our revenues. That's a definitely potential. Right now, we in our model and our guidance, we assume it to be around 130%. 

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Got it, got it. All right. Thanks, guys. Thanks for taking my questions.

Operator

Thank you. Our next question will come from Ittai Kidron with Oppenheimer. Please go ahead.

Ittai Kidron -- Oppenheimer and Company -- Analyst

Thanks, guys. Nice to see the acceleration in growth and into cloud. Jacob, I had a couple of questions for you. First, I just want to make sure I understand the Enterprise+.

In the last couple of quarters, you've been growing that business 150% year over year. We're now 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+. 

Jacob Shulman -- Chief Financial Officer

No. We continue to see very strong adoption of Enterprise+ subscription. The revenue continued to grow, today it represents 35% of the revenue. The number of customers adopting Enterprise+ actually grew nicely in Q4.

We don't see any unique trends. 

Ittai Kidron -- Oppenheimer and Company -- Analyst

OK. Very good. And then as a follow-up on the opex a lot of companies that have bases in Israel have been calling out a lot of FX headwinds. Can you kind of elaborate a little bit? I know you've been hedging somewhat, but I don't know how far out you do.

But as I think about your guidance for the year, what kind of a headwind are you seeing from FX? And how should I think about that going forward? 

Jacob Shulman -- Chief Financial Officer

Yes Ittai, you're absolutely right that we have a significant portion of our operating expenses denominated in Israeli shekel and [Inaudible] over the past one and a half years significantly. We do hedge, but you cannot hedge forever. And eventually, the less favorable rates catch up. So the impact on overall profitability, as we see right now is about 2 percentage points in 2022.

And if the situation changes and we see opposite trend, then it will help us. But this is what we're currently seeing. 

Ittai Kidron -- Oppenheimer and Company -- Analyst

Very good. Good luck, guys. Thanks.

Jacob Shulman -- Chief Financial Officer

Thank you.

Operator

Thank you. Our next question will come from Rob Owens with Piper Sandler. Please go ahead.

Rob Owens -- Piper Sandler -- Analyst

Yeah, hi. Thanks for taking my question, guys. Curious on the customer count front. Realizing you just disclose it once a year, but there was 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 churned off as well.

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Yes. So, thank you for the question. As we reported in Q3 when we acquired Vdoo and the Upswift, there was no material revenue coming from this acquisition and also no significant amount of customers. So the answer is, yes, this is the organic growth of the JFrog customers of the JFrog Platform. 

Rob Owens -- Piper Sandler -- Analyst

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? 

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Yes. Well, obviously, I'm not happy about what happened with Log4j in the world. It's not that we're [Inaudible] It emphasized the need for solutions like what JFrog provide because there is no other solution in the DevOps public market that gives you such a binary-centric approach, not only to security, but the all remediation of episodes like Log4j. It happened before with MPM.

It happened before with Python. And be sure, we will hear about another binary or proper package that comes with a vulnerable payback in the near future. It will just happen. And what we see is more and more customers are starting to understand that the holistic security solution must come with a single source of record solution like a repository that also control what you bring in and outside of your organization and then a security solutions that go across the whole pipeline, give you control over your repository or distribution field, test deployment environment, and obviously, to recover fast with the distribution.

So Log4j is one example. It's got all the way to the White House. But JFrog customers were not just well protected, but also well recovered and saved millions of developer dollars around the world by using our tool. So I believe that we will see a significant adoption of security solutions under the different subscription coming from JFrog.

Rob Owens -- Piper Sandler -- Analyst

Great. Thank you very much for the color.

Jacob Shulman -- Chief Financial Officer

Thank you.

Operator

Thank you. And we do have time for one more question. That will come from Steve Enders with KeyBanc Capital Markets. Please go ahead.

Steve Enders -- KeyBanc Capital Markets -- Analyst

Great. Thanks very much for taking questions here. I just want to follow up on that last point there, Shlomi, around security and the software supply chain in Log4j. I mean is this seen, I guess, increased pipeline activity at this point where now that people have maybe gotten on the other side of Log4j and spent all of the holidays and into January dealing with it.

Is this leading to increased opportunities for JFrog to go execute against?

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Yes. The answer is yes, clearly. And the amazing research and engineering security team in JFrog posted, I think, more than any other company in the market, following the Log4j, what will be the best practices to manage it in the future to protect our company from it. So the answer to the pipeline is, yes.

We hope that there will be no more Log4j, but yes, it helps the pipeline on. 

Steve Enders -- KeyBanc Capital Markets -- Analyst

OK. That's helpful. And just want to touch on the -- it looks like there is good traction within the Global 2000 that happened in 2021 from what you disclosed. I guess how would you kind of attribute what led to the really good customer growth with in the G2K in '21? Is this a function of the increased focus on strategic sales teams that have been built up in the past couple of years? And I guess, how penetrated do you see the opportunity within the G2K accounts today?

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Yeah. So Global 2000 customers that are adopting digital transformation practices are not just looking at one solution. Usually, when they look at the old solution, they are looking at cloud strategy versus on-prem. They are looking at security versus DevOps practices and obviously replacing in-house solution that was built 10, 15, 20 years ago.

All of the above is addressed by our strategic sales team because they have the capability to lend on the customer side, work with different persona, answer different needs, bringing along architects that can help our customers, and partner with them as they are adopting digital transformation. So Global 2000 customers will go in different avenues and different deployment environment.

Jacob Shulman -- Chief Financial Officer

And if I may just add to that, when we went public, we -- our penetration to Global 2000 was about low 20s. I think it was 22%. And today, we have above 30% in the penetration of Global 2000. So we continue our adoption of -- the Global 2000 customers continue adoption of JFrog products at a nice pace, yes. 

Steve Enders -- KeyBanc Capital Markets -- Analyst

Perfect. Thanks for taking my questions.

Operator

Thank you for participating in today's question-and-answer session. I would now like to turn the call back to Mr. Shlomi Ben Haim for any closing remarks. 

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Well, everyone, thank you for joining us. That was a hell of a year, and we are very excited about our performance. We are happy to see the company growing and the community and our customers adopting more and more of our products and technology. I'd like to thank again for the amazing Frog's team that made this year happen.

And I would like to thank you for joining us today. Next week, we are welcoming you to join us on our first Investor Day broadcasting from Nasdaq in New York. Thank you, everyone. And may the Frog be with you.

Operator

[Operator signoff]

Duration: 59 minutes

Call participants:

JoAnn Horne -- Investor Relations

Shlomi Ben Haim -- Chief Executive Officer and Co-Founder

Jacob Shulman -- Chief Financial Officer

Mike Cikos -- Need

Unknown speaker -- J.P. Morgan -- Analyst

Kingsley Crane -- Berenberg -- Analyst

Sanjit Singh -- Morgan Stanley -- Analyst

Koji Ikeda -- Bank of America Merrill Lynch -- Analyst

Ittai Kidron -- Oppenheimer and Company -- Analyst

Rob Owens -- Piper Sandler -- Analyst

Steve Enders -- KeyBanc Capital Markets -- Analyst

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