Shares of JFrog (FROG 2.79%) went up on Thursday after the company reported financial results for the third quarter of 2023. As of 12:30 p.m. ET, JFrog stock had leaped 17% higher -- get it?
Surprisingly strong financial results
JFrog is a usage-based enterprise software company. This kind of business has generally seen a slowdown in 2023. However, in the third quarter of 2023, the company generated revenue of $88.6 million, which was up 23% year over year and ahead of its guidance of $87 million to $88 million.
NASDAQ: FROG
Key Data Points
JFrog's cloud revenue jumped 46% year over year and now comprises 35% of total revenue. Cloud revenue is driven by customer usage. CFO Jacob Shulman further clarified by saying results were "driven primarily by usage of our large customers."
JFrog turned higher usage and collections into higher cash flows. The company had Q3 free cash flow of $26 million, which was its highest quarterly achievement since going public.
More growth expected for JFrog
JFrog's management raised its full-year guidance ever so slightly in light of Q3 results. Previously it had guided for 2023 revenue of $343.5 million to $345.5 million. Now it expects full-year revenue of $345.1 million to $346.1 million. If it hits the midpoint of its guidance, it will represent 23% year-over-year growth on top of last year's growth of 35% -- a great two-year result in spite of a tough operating environment.
While JFrog does continue to operate at a loss (it has a net loss of $50 million through the first three quarters of 2023) the company is at least growing at a better-than-average pace. Moreover, it's extremely well capitalized with about $500 million in cash, equivalents, and investments. So I wouldn't worry about ongoing losses too much.
Strong operating results suggest that JFrog is doing something right, which may make this a stock worthy of a place on your watch list.
