Israel's JFrog files to raise $100m in Wall Street IPO

JFrog Photo: PR

The software company saw revenue grow 65% in the first half of 2020, with losses narrowing to $400,000.

Israel's JFrog, which allows companies to regularly update their software, has filed a prospectus with the US Securities and Exchange Commission (SEC) to raise up to $100 million in an Initial Public Offering (IPO) on Wall Street.

The prospectus does not reveal the valuation for the offering but does show the company's financial results and how much JFrog has raised to date. In 2019, the company's revenue rose 65% to $105 million and in the first half of 2020, revenue rose a further 50% to $69 million.

JFrog is still not profitable but its losses have been narrowing - from $26 million in 2018 to $5.4 million in 2019 and just $400,000 in the first half of 2020. The company had positive free cash flow of $6.5 million in 2018, $8.2 million in 2019 and $4.4 million in the first half of 2020. The company has $170 million cash in its coffers and has raised $162 million since it was founded. The gap between positive cash flow and losses stems mainly from shared based remuneration (options for employees) and other deductions, which are probably accounting expenses.

JFrog's expenses have grown fast in 2020 from 15% in 2019 to 40% in the first half of 2020. In particular there has been a sharp rise in marketing and sales expenses (from 26% in 2019 to 41% in 2020), and R&D expenses (from 15% to 45%). There was a more moderate rise in management and general expenses.

JFrog CEO Shlomi Ben Haim recently told "Globes" in the "Road Show" podcast. "Since the first financing round when Yossi Sela from the Gemini fund invested in us, the company has been efficient. To date all the capital that we have raised since 2012 in dollar terms has been available in the bank. I think that is significant. You develop immunity from your board of directors which gives you lots of small prods to 'go and burn some more cash because you can grow more.' But you are building a company for a marathon not a sprint. Secondly you are building a company with a very strong safety net. We are in the midst of the crisis and I feel very certain about going to talk to people and say that we will prevail over it."

JFrog was founded in 2008 during the global financial crisis by Ben Haim, CTO Yoav Landman and chief data scientist Fred Simon. The company has developed 'liquid software' that allows users to implement routine updating of their software. If in the past, companies had to initiate updates, with JFrog's product it happens automatically without them even knowing. The company has 5,800 customers including all of the top ten largest Fortune 500 companies as well as eight of the top ten finance companies, nine of the top ten retail companies and more. JFrog has 590 employees including 300 in Israel in its offices in Tel Aviv and Netanya, 200 in the US and the rest in eight other offices worldwide.

JFrog's founders have a 24.3% stake in the company (Landman 9.8%, Simon 7.4% and Ben Haim 7.1%), Gemini (15%), Scale Ventures (10.8%), Sapphire Fund (9.9%), Insight Partners (9.8%), Dell Investment Fund (9.3%), and Qumra Fund (5.2%). The company has previously said that it has raised $226 million but in the prospectus it says it has raised only $162 million.

Most of the gap can be explained by deals whereby existing shareholders, mainly the founders, sold shares during financing rounds. According to the prospectus such deals amounted to $74 million. Ben Haim has sold shares worth $16 million, mainly in September 2018, when he received $4.2 million to compensate him for tax paid on the sale. Landman sold shares worth $9.5 million and Simon sold shares worth $8 million. The other shares were sold by investors including Gemini, which has sold shares worth $15 million.

Published by Globes, Israel business news - en.globes.co.il - on August 25, 2020 © Copyright of Globes Publisher Itonut (1983) Ltd. 2020

JFrog Photo: PR
JFrog Photo: PR
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