JFrog IPO: What Investors Need To Know

JFrog FROG, “The Liquid Software Company,” is one of several companies set to go public this week.

The Filing: JFrog plans to sell 11.5 million at a price of $44 a share, above the initial price range of $39 to $41. The company previously increased its previous pricing range of $33 to $37. JFrog plans to list on the NASDAQ under symbol FROG.

Co-founders and directors will sell 1,438,000 shares as part of the IPO. The directors and top 5% holders will own 74% of the company after the IPO. A pricing at the midpoint of $40 would value JFrog at $3.5 billion.

About JFrog: JFrog provides complete Devops platform to its users. The company has an end-to-end system to provide continuous software release management (CSRM) for digital transformation. JFrog serves millions of developers across more than 90 countries. JFrog created the “world’s first universal package repository to fundamentally transform the way that the software release cycle is managed.”

“Our leading CSRM platform enables organizations to continuously deliver software updates across any system. Our platform is the critical bridge between software development and deployment of that software, paving the way for the modern DevOps paradigm,” the filing states.

JFrog is used by 75% of the Fortune 100. Over 5,800 customers trust JFrog for its end-to-end solutions. Of this total, 286 customers represent $100,000 in annual revenue. Eighty-five percent of the company’s revenue comes through multi-product subscriptions. As of June 30, the company’s 10 largest customers accounted for 8% of revenue and no company represented more than 2% of the company’s revenue.

Growth Plans: IDC reports the Devops tools market will be worth $18 billion by 2024. JFrog believes it competes directly in this market and several others. The company sees a total addressable market size of $22 billion based on its own research.

The company plans the following as its keys to growth:

• Extend our technology leadership
• Expand within our existing customers base
• Acquire new customers
• Expand and develop our technology partnership ecosystem

Financials: Revenue grew 65% year over year for JFrog in fiscal 2019 with a total of $104.7 million. JFrog had revenue of $69.3 million for the first six months of 2020, representing a year over year increase of 50%.

JFrog has been free cash flow positive for five years. JFrog reported $8.2 million in free cash flow for fiscal 2019. The company’s net losses are improving. After posting a net loss of $5.4 million in fiscal 2019, JFrog reported a net loss of only $0.4 million in the first six months of fiscal 2020, compared to $2.1 million in the prior year’s six month period.