October 12, 2021
Photo: Pankaj Patel/Unsplash
DevOps software provider GitLab filed its S-1 with the SEC in September 2021. The company went public Thursday via Nasdaq under the "GTLB" symbol. It sold shares in the lead up to the IPO at $77, which was above the target price range of $66 to $69. GitLab's stock popped even higher on opening day, reaching nearly $97. That pushed its market cap above $13.5 billion. GitLab helped execute the sale of its shares on secondary markets in November 2020 that valued the company at around $6 billion.
GitLab began in 2011 as an open-source project and converted to a for-profit company in 2014. It describe its application as "a fundamentally new approach to DevOps consisting of a single codebase and interface with a unified data model." The field of DevOps, a portmanteau containing elements of "software development" and "IT operations," arose in response to the increasing complexity associated with running software over the internet.
GitLab's application is intended to support businesses through the software development lifecycle. It includes functionality for collaborating on writing code, verifying that code, uploading it to the cloud, monitoring its performance and embedding it with security best practices. All of these features exist within the same codebase and user interface. GitLab estimates that the total addressable market opportunity for its DevOps Platform stands at $40 billion and will grow to $52 billion by 2024.
GitLab distributes its product under either the self-managed or SaaS models. With self-managed service, customers install the GitLab software in their own private or hybrid cloud. With SaaS, customers access the software through a public cloud managed by GitLab. The self-managed service accounts for the bulk of GitLab's revenue, but SaaS has grown from accounting for 9% of ARR in fiscal 2020 to 16% in fiscal 2021. GitLab also partners with Google Cloud and AWS — which it calls "strategic hyperscaler partnerships" — to sell to customers on its marketplaces.
There are three tiers of access to GitLab: free, premium and ultimate, sold on a per-user basis with priced tiers ranging from $19 to $99 per month. GitLab says its target persona for premium is managers and directors, whereas ultimate targets executives. Customers can buy into the plans on either annual or multiyear contracts. GitLab disclosed in the S-1 that most of its contracts are invoiced annually with cash provided upfront.
GitLab calls its business strategy "land and expand," which it says "focuses on efficiently acquiring new customers and growing our relationships with existing customers over time." GitLab had 3,632 customers generating more than $5,000 in annual recurring revenue as of July 31, 2021. That was up from 2,745 customers at the end of January 2021 and 1,662 at the end of January 2020. The company's dollar-based net retention revenue — a metric that divides current period ARR by the previous period ARR — stood at a healthy 152% as of July 31, 2021.
GitLab is losing a lot of money, but it's still in the growth phase and has a strong overall financial outlook.
Two risks stand out in GitLab's S-1: reliance on distribution partners and the threat of heightened competition.
GitLab relies on channel partners such as AWS and Google Cloud to sell its software, which gives those partners considerable leverage.
The DevOps field is still growing substantially, and new entrants could chip away at GitLab's market share.
Here's where the ownership of GitLab stands prior to the public offering, and how much each party stands to make, assuming a $10 billion valuation:
Update: This story was updated Oct. 14 to include information about GitLab's public debut.