Today there are five standalone publicly traded DevOps companies, Fastly, New Relic, Pivotal, PagerDuty, and Splunk. These publicly traded DevOps companies have created $30.7B in market cap value. With two unicorn DevOps companies in the pipeline, Gitlab and HashiCorp, we believe this is just the beginning. Below we analyze the five companies’ income statements to get a better understanding of how they compare.
Splunk is the oldest and highest valued company with a $16.7B market cap. It is nearly three times as large as second ranked New Relic at $5.8B. Fastly, Pivotal, and PagerDuty IPO-ed over the past two years and are all under $5B.
Recently IPO-ed PagerDuty is trading at the highest market cap/revenue multiple of 29.7x. Next is New Relic at 12.1x, then Fastly at 11.4x, Splunk at 8.7x, and finally Pivotal at 4.3x. The average market cap/revenue across the cohort is 13.2x.
Of the three newly minted public companies, Pivotal has the largest revenue, but trades at the lowest multiple. One reason is that Fastly and PagerDuty’s revenue is software compared to Pivotal that has a revenue mix of 61% software and 39% services as of the last quarter. Pivotal has done a good job of transitioning to software since its IPO when the software/services mix was 51%/49%.
Splunk is the largest business at $1.9B in trailing twelve months revenue. In addition to revenue, investors often assess the time it takes for the business to achieve $100M in revenue. Pivotal reached $100M the fastest in three years, but we believe this is an unfair comparison as it received help from Dell and VMware. Of the other four, Fastly achieved $100M the quickest at 6 years, then New Relic at 7, Splunk at 8, and PagerDuty at 10.
As a SaaS business PagerDuty leads the pack with an 85% gross margin. In the middle is Pivotal. Its 19% services gross margin combined with its software solutions margin of 92% creates a blend of 65%. Fastly spends proportionally the largest amount on COGS since it offers CDN and edge hosting services. According to the BVP Nasdaq Emerging Cloud Index, the average gross margin for a public cloud software business is currently 73%.
Regarding operating expenses, PagerDuty takes the top position, spending the most on R&D and G&A as a percentage of revenue. Splunk spends the most on S&M as a percentage of revenue, which is a little surprising given it is the oldest business in the group. According to the BVP Nasdaq Emerging Cloud Index, the average sales and marketing spend as a percentage of revenue for a public cloud software business is currently 42%.
New Relic has the best operating margin at -7% while PagerDuty is the worst at -36%. The average across the group is -19%, which is below -13%, the average operating margin for a public cloud software business.
It is incredible that the number of publicly traded DevOps companies has doubled in the past two years. There’s a healthy pipeline of DevOps startups, and we are excited to see how these businesses’ P&Ls compare.