Ittai Kidron: Okay. Very good. And then as a follow-up, I can’t help but feel somehow that the tone in the call now is a little bit different than what it was in the last two, three quarters, in the sense that through ’23, you were very much focused on security, and clearly rolling out Advanced Security and Curations. And while you did mention DevSecOps clearly on this earnings call, it wasn’t what you’ve kind of led with, which was the case two, three quarters ago. So, I want to make sure I’m not missing anything here. As I think about ’24, and perhaps even a little peek into ’25, when you look at your growth drivers, is cloud/pushing customers into the enterprise plus tier, a bigger driver to you than what Security — like, how should we qualify how big of a contributor do you think about — do you think Security is for you over the next year or two? Is it a small driver or a big driver? I just want to make sure I’m not losing focus here.
Shlomi Ben Haim: Thank you for this question. Security was in our focus for the past two years since we acquired VDOO. We built a full security suite with JFrog Advanced Security, with JFrog Curation, with a static analysis. We started to migrate customers from point solutions to our security solution, but it was only released a few quarters ago, as you remember. Now, Security is embedded into our platform. And the main differentiator that JFrog brings to the market as a security provider is that we also bring it with the Artifactory the center, with a single source of records. We protect your assets from the get-go all the way to the release. So, for sure, Security is a very important piece when we are offering our customers to upgrade to higher subscriptions, Enterprise X and Enterprise+.
Still, cloud growth is a very important item in our growth planning. And having cloud growing not only on DevOps, but with Security, I think we will see other numbers in consumption, and we might even see companies coming to JFrog because of Security first, although it’s still not the majority of our revenue, not in ’24 and not in ’25. It will become material, but not the majority of our revenue.
Operator: Our next question comes from the line of Miller Jump with Truist. Please go ahead.
Miller Jump: Great. Thank you for taking the question, and I’ll echo my congrats on the strong results. I guess just starting, customers over a $1 million in ARR really picked up steam in the second half. Given the go-to-market investments that you saw driving this, is this something that you all feel you actually might have the ability to accelerate with more investment there, or is it a matter of customers getting more mature and demanding the full platform?
Ed Grabscheid: Hi, Miller. This is Ed. So, it’s really, at this point, it’s difficult to know. This is a customer decision, and it requires commitments of budgets and resources. And at this point, it’s unknown. We have good line of sight in the first half of the year, but in terms of the second half, we don’t have as much visibility. So, it’s really, at this point, difficult for us to know if that accelerates.
Shlomi Ben Haim: And then I will add to that, Miller, I’m sorry. This is Shlomi. I just want to add to it. We are looking at the customers over $1 million, obviously outstanding results, and we build this momentum throughout the year. But there is also a growth in the over $100,000 customers, and these customers are slowly climbing. There are still a lot of customers that are falling between $0.5 million to $999,000 that we are not reporting. So, we need to bring more value to let them kind of embrace the full solution from JFrog, and then I think you will see this momentum keep happening.
Miller Jump: Definitely. That’s helpful, and we’re looking forward to the continued execution there. I guess maybe one more for Ed, just on the cloud side. Could you just remind us what you’re seeing in terms of growth characteristics from your cloud customer base versus self-managed customers in terms of maybe like a net retention basis and how that could impact the model as we get more of mix shifted to cloud?
Ed Grabscheid: Yes. So, we have significantly higher net dollar retention rates coming from our cloud versus our self-hosted. This is the reason why we continue to invest in the cloud and the migrations from self-hosted to cloud because we see better outcomes in terms of our growth and the net dollar retention rates on the cloud side.
Operator: Our next question comes from the line of Marc Bachner with Stifel. Please go ahead.
Marc Bachner: Great. Thank you, and thanks for all the detail. I think on Security, you guys talked about it being material after releasing it a few quarters ago, so just hoping to get sort of a comparison on MLOps and where you guys see that, is the early POC activity and how you see that maturing in comparison to how Security has matured over the last few quarters. Thank you.
Shlomi Ben Haim: Yes, hi. So, regarding Security in the world of MLOps, what we call MLSecOps, what we see now, a quarter after we released the support for Hugging Face and the native support in Artifactory and Xray for scanning malicious models, is that no enterprise ignores the revolution that AI brings, so they all try to set some standoffs and policies around what is the right and safe way to use the ML models within the software supply chain. Artifactory serves ML as a package, models as a package, yet another binary, and therefore Xray scan them, so we know already that our customers are setting the single source of records for MLOps with what we release. What you should expect in the future during ’24 and ’25 is the extension of the MLOps and MLSecOps solution coming from JFrog. It goes hand-in-hand, Security and ML model, ML hosting in the platform. So, that’s how we plan to extend our solution for MLOps and not just DevOps.
Operator: Our next question comes from the line of Kingsley Crane with Canaccord. Please go ahead.
Kingsley Crane: Hi. Congrats on the fantastic quarter. So, Shlomi, I want to start with you. I appreciated your comments about how you’re helping customers build with MLOps. Within the DevOps space, I think you’re relatively unique in that you’re more highly concentrated in really large enterprises. Just curious what you’re seeing in terms of AI/ML developer activity, how much that has changed in the past year, trying to get a better sense of how much of this is concentrated within large enterprises versus some of these newer started companies in the past two, three years.
Shlomi Ben Haim: Yes. That’s a great question. Some of it will come from our very early experience in the world of MLOps and some of it from the service we are leading and customer consultation. It is very clear now that the DevOps service providers within the organization, the security service providers within the organization, will also cover the service that is required to support the adoption of MLOps and MLSecOps. Therefore, Artifactory is playing a key role as a repository for models and a proxy and caching for models. And Xray and our security solutions are covering the aspects of MLSecOps to secure it while using it. So, I think that what we should expect is, DevOps engineers and ML engineers are becoming one to provide services to the consumers with inside the organization, data scientists, Python developers, and so on.
With regard to what we hear from the customers is that they are planning — AI is running a thousand times faster than every disruption we saw in the past and they are planning to have some of these assets in production during 2024. Therefore, we were early in 2023 starting to work on it, released it to GA in the last quarter of the year and now our platform is getting more and more mature to support the demand that is coming from our own customers, the DevOps engineers that are now supporting the MLS initiative.
Kingsley Crane: Thanks, Shlomi. That’s really great to hear and really helpful. And so, just as $1 million customers and $100,000 customers, they both progressed really nicely in this past year. Just want to hear more thoughts about what you think is the biggest unlock for you and then how much could we attribute to an increase in development activity versus just maybe vendor consolidation?
Ed Grabscheid: So, really, as Shlomi mentioned previously on the call there, we have quite a bit of customers that are sitting between that $0.5 million to $999,000. This really becomes an unlock through technology, so developing technology, adding new features, and then being able to increase ASPs to drive above $1 million. So, we see opportunity there in terms of driving that increase to the $1 million customer. In addition to that, we talked about, as we build our top-down model, we invest in the enterprise and the go-to-market, we’re landing at a much higher ASP and we’re bringing in better quality customers and those customers have more durable growth. That will get us to the $100 million customer quicker.
Shlomi Ben Haim: Yes. And to add to it, when we are building the plans for 2024, I think that the momentum that we will see from one quarter to another will be similar because customers are also starting the year, starting to plan their budget. Not everyone jumps and spends it all on the first quarter. So, we build this alongside with our product and R&D roadmap to make sure that when the value is there, they will not hesitate to take the bet with JFrog as they did in 2023.
Operator: Our next question comes from the line of Yi Fu Lee with Cantor Fitzgerald. Please go ahead.
Yi Fu Lee: Thank you for taking my question and congrats on the strong finish to — of 2023. First one for Shlomi. Like, in terms of your cash balance, great to see that you went from about $400 million to over $500 million right now. Any thoughts on like large M&As or even tuck-ins to like further enhance the platform? And then I have one for Ed. A quick follow-up for Ed.
Shlomi Ben Haim: That’s a great question. I don’t know what large M&A means every time I hear it…
Yi Fu Lee: Or tuck-ins.
Shlomi Ben Haim: M&As are a part of our strategy. We have a full team that sets the radar for the next few years as we discuss our M&A strategy. As you know, JFrog acquired nine companies in the past years. And we plan to grow inorganically as well. Some areas that we are looking at, obviously, reinforce our Security to the left and to the right. And also to shorten the time to market with MLOps, MLSecOps, and AI initiatives. I’m saying shorten the time to market because as you probably know, every two days there is a new company that claims that they are the next AI company. And we want to make sure what we bring in is not just the talents but also the technology that will support our enterprise demand.
Yi Fu Lee: Thanks for that, Shlomi. And a quick follow-up on the financial side with Ed. In terms of the linearity for the quarter, can you just kind of discuss like how the quarter trended and what you are seeing so far year-to-date? That’s it for me. Thank you and congrats.
Ed Grabscheid: Sorry, I didn’t quite understand the question at first. The linearity of the…
Yi Fu Lee: Like, I was wondering if you could comment on the linearity for the quarter. How did it trended from October to November to December? It didn’t sound like there was any drop-off, like even though there was a holiday in December. And then if you could comment on the so far year-to-date, the performance till early February.
Ed Grabscheid: Thank you for the clarification. From a linearity perspective, yes, we didn’t see — first of all, December seasonably is a drop-off. And we did see some drop-offs, but for the most part, we saw a pretty straight linearity for the quarter. We haven’t seen much change in January at this point, but we’re not going to comment on Q1.
Operator: Our next question comes from the line of Rob Owens with Piper Sandler. Please go ahead.
Rob Owens: Yes. Great. Thanks for taking my question. Just one for me, curious on sales and marketing as we think about 2024 and just sales capacity additions, especially with the top-down selling motion, just how aggressive are you going to be to add sales staff moving forward and also what you’re doing from a partnering perspective? Thanks.
