Earnings call transcript Q4 2023

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Sharlene Seemungal

Thank you for joining us today for GitLab's Fourth Quarter and Fiscal Year 2023 Financial Results Presentation. GitLab's Co-Founder and CEO, Sid Sijbrandij; and GitLab's, Chief Financial Officer, Brian Robins will provide commentary on the quarter and the fiscal year. Please note, we will be opening up the call for panelist questions. [Operator Instructions]

Before we begin, I'll cover the safe-harbor statement.

we federal forward-looking securities call, meaning within conference the of laws. this may statements make the During These statements actual involve and materially unknown assumptions those and are and from that subject uncertainties could or cause discussed results differ risks to anticipated. to known

us. are reliance discussion based or circumstances, SEC upon complete with associated report We we recent most on forward-looking obligation quarterly filings, business, information including risks events. in caution release distributed reflect statements, Form any to these forward-looking our report or or to currently when most undertake refer undue to occurrence available our forward-looking annual to of place Form earnings update future statements duty of or filed XX-Q today our XX-K. a unanticipated For statements forward-looking or to to any not please on events, and in our the no you on and our revise report recent statement All

of in most call financial We financial performance ir.gitlab.com. in differ comparable for results. of our GAAP. replay contained measures a with that non-GAAP the will may to press not on to also measures measures These our be A financial prepared is also posted release, reconciliations US additional with today's GAAP at supplemental GAAP intended A available ir.gitlab.com. included accordance and these earnings be these along substitute discuss measures from in which are statements our comparable information are non-GAAP reconciliation measures

Sijbrandij. turn Officer, GitLab's I Co-Founder the will and Sid to over Executive now call Chief

Sid Sijbrandij

of ability We grow, continued fourth of FY quarter million generated to during This year-over-year while In significantly for you demonstrate FY of the growth margins. a Thank XXXX, represents us revenue XXXX. QX XX%. $XXX.X improving today. we to our joining

results quarter to our continued in fourth business. leverage improving also exhibit operating Our

improved. Our non-GAAP margin operating

reductions. continue deliver Companies the to to with time Economic out figure have are difficult before. with budget how that They value for a months forced have do no headwinds to There's must resulted customer past resources companies. need many fewer in to question several more than represented with a innovate less.

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companies From macro DIY software offering we created critical and immediate is now A that for have the to the strong it in this proposition DevOps point In environment, that market. the comprehensive to a DevSecOps evolve customers. estimated investments. most proven we ROI. platform. early that with to from we $XX are market this billion confident value We’re addressable phases platform. seen And we’ve still to solutions GitLab on a capturing of A return the show in provides market

by become spent integrations. many which on applications. need on to in believe can as that, leads or accelerate payback by We their they engineers Forrester This now ideal enables total they tool future GitLab, months. an XXX% Their DevSecOps than years. to Even innovation. value. three eliminate of six a a for to more reduce found deploying GitLab result gains. and simultaneously and consolidate deploy costs. revenue costs the Companies And, reducing a to significant on provides more chain return their generated company to efficiency They investment reduce saves implementing software faster. innovate tools, realized They backdrop productive a environment time demonstrate can over payback companies amount this less investment reinvest of critical, in the

to customer provider become efforts improving In in achieved additional release cornerstone Ultimate that XX they is and development, software DevOps GitLab, break value QX to increase Telekom That’s some licenses. Telekom this purchased to QX, Europe. And, methodologies provide security platform. telecommunications cycle me their over helping they’ve digital is velocity stories Mutual’s a Technologies, a demonstrate down from reduced a Let and in subsidiary, streamline X of Haven manual days. while silos, productivity. Since leader. the of have largest time DevSecOps insurance down Mass time. team months collaboration. approximately software Deutsche reduce faster the times streamlining tasks, GitLab’s X,XXX the GitLab also Deutsche XX practices adopting has

merge have GitLab, they they they driven a efficiency, roughly development as productivity around number costs, each the In team which a increased and number developer the two development have involvement increased cycles, earlier branching. automating cut on securing And, has down request, Kubernetes. GitLab processes, by increase helped per on pipelines run per also to week QX, of Using security XXX% day. increase to of cycles in lifecycle. from in double velocity greatly reported increase two the in applications helped development especially

that steadily Grammarly for people results more users are four for XXXX over for communication daily. in to GitLab source with GitLab than then, integration. management we powers the XX,XXX adopted Finally, has increased excited of and have Grammarly their over number see they increasing code and adoption, Since achieved times. Grammarly effective GitLab. teams continuous million XX the with

challenge. security in XXXX from using managing the wanted disparate to to As adoption robust tools cycle, numerous move became interest Ultimate for GitLab in Grammarly did they so grew, Grammarly’s but capabilities. a upgraded all security everyone include so into could a organization detection, at of SCM a software development GitLab dynamic GitLab added use licenses additional CI and just scanning single using Ultimate application. Grammarly in GitLab. QX, envisions and containerscans. capabilities, Grammarly secret also to These in the and it for advanced static scanners, security and number implement more

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priorities. product Now, to let’s our turn

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GitLab’s I Brian to now turn Financial over will Officer. it Robins, Chief

Brian Robins

the Then, guidance. fourth a macro like Thank discussing results will our are thank quickly joining review of model. we key for with business in characteristics everyone our will our conclude you recap to and financial and you seeing I Sid, spend metrics, key today. environment us I and what again the would and moment quarter operating

deal last I trends, slight the call, more lower historical of cited quarter. XXXX. became greater that some deals, our pronounced expansion scrutiny XQ contraction. during than started On some and seeing We on the we watchpoints factors towards uptick end in rates earnings FY These a encountered

We uncertain believe in two macroeconomic affected environment us the ways.

which in we our our businesses experienced customers to customer It hiring workforces. First, also that led some This saw reduction primarily expansions, an to their impacted a churns. contractions in or either Premium uptick led of in tier. in changes slowdowns and

greater encountered year. the reevaluated scrutiny end the as companies plans we the new overall Second, their into year, at of spending calendar deal heading

cycles. processes, We to more longer involved which people approval saw also led in sales

in GitLab customers better, a changed. enables Moving forward, hasn’t our fundamental more proposition secure defines and deploy software to the our build companies innovation, speed world faster, In to of a which in software cheaper, manner. and

DevSecOps Platform. We comprehensive the are most

enable well-documented implementation diversified industry performance Key And, a aspects short a verticals, an than consumption model; and across business that than sale of of sizes, of a our solution; model base regions; rather include: predictability a established customers rather subscription, point a geographic cycle platform with the and customer our a ROI.

of over ended this Now, quarter of $XXX.X XQ prior to customers million least We of the with ARR year. Currently, fiscal represents of growth at X,XXX over over Revenue of numbers. our approximately a customers $X,XXX, quarter third in represents in to from customers prior approximately organically with X,XXX compared total $X,XXX greater rate XX% year-over-year increase turning year. the X,XXX customers XXXX, XX% an ARR. with represent than and ARR This the XX%. the of in FY

ARR approximately of XXX a the represents XX%. XXXX, more $XXX,XXX, to spending customers with the year-over-year XXXX. customers, as and FY we growth least of performance XXXX, and of rate measure the XQ also quarter of larger the those end than customers in XXX had XXX of we of define who fourth At us. ARR customers in FY with compared growth quarter in our at We $XXX,XXX fourth FY This

end at XXXX, prior an represents at at $X annual the of disclosure, XX as the had rate XX with customers to of compared ARR Also, of FY we year, the least year-over-year growth a million, which XX%. of end

our good history prior of business, of be a our do be most indicator we prepaid by a number of the notably period not large of impacted deals. comparisons factors, multi-year many As you believe to calculated billings can given that know,

over a to fourth Retention million, Dollar-Based cRPO of XXX%. Rate frame. XX% grew This year year time $XXX quarter to ended the Net We and million grew XX% total our same for with $XXX RPO quarter

the FY exceeded For the of during year, regarding of activity in three XXXX. added the metric expansion each fiscal context quarters XXX% first

Next be of quarter with tier, growing we our quarter will for of XXX% XXXX. of back ARR XXXX, reporting as revert this metric to or XX% XXX%. ARR representing to number tier continues a the using of in actual threshold Ultimate the FY below compared fourth FY the XX% The fourth quarter fastest if

with Ultimate bookings Ultimate in our coming quarter security tier performed strength given our Additionally, from our the of purchases compliance. half well in approximately and

quarter, were immediately and slightly quarter the Non-GAAP margins the the of FY fourth both from for XXXX. which quarter gross XX% preceding is improved

reduction greater FY As in the to rate leverage compared was last to rapid $XX.X same $XX.X the used negative million, are related we used of of operating year. we forward, subsidiary. scale year. our SaaS XXXX majority includes the Operating or of we efficiencies negative largely as improved XX% in realizing $X.X by owned QX to fiscal operating move moderate of and our fourth quarter, this revenue QX in million due $X.X quarter a was of driven expenses JV We of Non-GAAP or quarter million $XX.X loss in year-over-year estimating million FY to continue last saw XX% of cash fiscal million, offering. XXXX, to loss business. a of growth compared this revenue, the metric

turn to guidance. let’s Now

near-term macroeconomic in headwinds, XQ challenging trends been In there growth we of overall have to change has continue. our no philosophy. saw assuming our reassessed outlook, the revenue light First we guidance

made lead will we actions expenses. to adjustments to We our these our path near-term believe to profitability. in Additionally, revenue to response an accelerated have outlook

quarter to rate first year-over-year. total million XX% FY $XXX.X $XXX.X expect growth to of XX% million, XXXX For a of we revenue of representing

non-GAAP outstanding. $XX.X expect And, we expect loss to XXX non-GAAP loss shares net of $XX.X average million $X.XX assuming of operating a million. $X.XX per We share million to weighted

year FYXXXX growth we approximately expect a of full the million million, XX% revenue For representing $XXX rate of year-over-year. total $XXX to

to of new loss And, basis, assuming non-GAAP at a weighted of our a of year-over-year we midpoint On FY non-GAAP share basis non-GAAP improvement $X.XX $X.XX our implies XXXX to outstanding. per loss $XX.X XXX operating million guidance. XXX shares million expect approximately points $XX.X net expect the average annual operating We percentage of million. guidance

a the that we initiatives Over business will focus yield growth unit in longer believe scaling term, continued, and targeted economics. on further the improvements

would like to joint an I China JiHu, venture. our provide update on Separately,

Our to JiHu. goal deconsolidate remains

cannot we expenses XXXX. may timing expenses in However, represent to XX% approximately modeling of we likelihood with potentially XXXX. non-GAAP for predict implied related X% our total Thus, JiHu million of the $XX for FY this of forecast for approximately occur. operating of $XX.X JiHu, loss XXXX, when million compared These FY purposes FY

Sid quarters, in change will number has have over and term. been our long There several As but we philosophical is priority last we the one the how said no that responsibly. value do maximize business to the growth, I shareholder over run

of opportunity. an not our estimated an We We market overall improvements on capture growth be business. changed. we in the have to continue while outsized $XX of focused billion fundamentals unit well-positioned economics driving to portion of extremely believe our remain business The

your feature Q&A. move we post to and IR directly a Questions. the use that, question to now With please To chat ask will question

We question. are first ready the for

Operator

Goldman from first from Our question Kash comes Sachs.

Kash Rangan

to increases, numbers. are -- for downtick with get are this model I'm price in With new contemplated very some and your actually price you maybe you net would recover month that these the the added in have feel thank that and a Sid, you curious, would to of And what outlook, these model -- early kind February Brian. March respect justify you even of seeing significant have inputs? to the recurring have Hi, the hope to completely. you also revenue increases in you, Question much.

be assessments also And you done if Thank the value check-ins much. from the clearly increases to to confidence be see if perspective? the in and you product with have secondly, willing price you some you that part so can, that early stick, a your see would customers ASP would

Brian Robins

Kash. Thanks, Absolutely. Yeah.

go unpack Let of me guidance. just fourth sort into the that and quarter in of will what sort happened the

as net as And until November, so, up first, greater really remarks, stated like was for XXX%. in was duration. third fourth second, quarter rate in cycle meaningful And no sales retention the in and earnings, quarter, the There XXX% well. was the dollar-based than I changes it in prepared the above

saw of slight material, some and historicals. saw increase, nothing SMB and it In we mid-market, enterprise increasing. holding a really to we that However, was

dramatically. was Nothing The pacing off was for okay. that the quarter

differently good order contraction in with, month quarter we Ultimate, First a and Month of We saw fourth and of happy one increase. had than we're quarter. three pipeline two coverage. acted fourth

you it's that largest we quarter the As have. know,

it And a got enough and the they to impacted so, needed related sizes just We sell so buying enterprise, out. deal, started a for pushed licenses in number typically, when of smaller, getting pipeline they to extra at for they're was people but the Deal see buy in what layoffs. time. we go

of the upgrades, then our two decreased net and and increased almost And It month seats, of price-yield. them. in Ultimate against all and quarter across equally three retention increased it month dollar-based

in And so, change no philosophy. guidance our had we've really

the and leading so, put that saw we and, into obviously, quarter And took the fourth into guidance. what in we month our call

Kash Rangan

Thank your so much. in so well? increases they stick, they guidance price that confidence Yeah, you the those as will and included and are

Brian Robins

you Yeah. No, thank that. for

So we guidance. increase in include price did the

increase, the Premium. you think If price about it's for

take existing doesn't up customers until they effect for come renewal. it for so, And

did that's serve quarter our when majority within bookings to so revenue of And you have when and from will existing at is look what customers, be. for stair roll so, that And customers, as new set then up actually contract -- smaller the that existing customers. then actually a impact our We a comes you amount. the

that studies and of be, then on the price market what And the did so the based right last prior increase, we a five to number of years. factor we would on and went to that So features out in. implementing we forth did over brought market the lot price

Operator

comes next Sterling question from Our at MoffettNathanson.

Sterling Auty

can maybe And up Have pipeline? what Yeah. you gone of kind Thanks. you coverage ratios and assume you re-scrubbed terms what you about the of saw that, talk sales -- new did just Can guide? on kind back pipeline. of mentioned pipeline? in you Brian, the in you the following

Brian Robins

Yeah. on Thanks, Sterling. I the basis the on getting frequent mean, what's pipelines scrubbed imagine on you a macro. very could going based in

a the very And lot so, and market. remains in growth. in the business funnel to $XX platform. we and we're early We continue DevSecOps estimated that. of interest It's a both innings see pipe for in of new TAM, on The top we're of gen the big believe strong billion a

this And growth factored need we you so, so, saw quarter. first macro, more based and of quarters. the we that our into and saw on the more pipe month Obviously, quarter guidance took fourth we coverage with in previous was in and gen that that the what

little expansion in them buy licenses. We and buying for basically mentioned, fourth and to they to be the of members we're we deals or would two pre-buying three first lot see in and/or QX, of future a see the that need, them longer. quarter, of month On QX, number licenses as a opposed team QX. started were what projects of seeing the deals, I typically, didn't As deals taking month in

discussion ROI customers. And so, we're outcome those driving business for focus pipe and continuing positive to a and on generation

Sterling Auty

Thank Understood. you.

Brian Robins

Thanks, Sterling.

Operator

have we Matt RBC. Next, from

Matthew Hedberg

guys. guess, for maybe here. one taking for Sid I questions, Thanks my Great.

co-pilots your of are I And bit little little A thoughts on in bit remarks around of AI. a AI? noise with that. the a what prepared talked there. I'm making out GitHub about You thought specifically, guess, generative curious, lot

Sid Sijbrandij

that. Yeah. Thanks for

change will is AI fast really use as how GitLab is platform. will software people impact Its big change It the it think biggest a a change. and I can platform.

will for than someone our to work We strategy how just code, your AI issues, classify will it you over how think just else. you summarize more how AI is code but change not suggestions. suggestions, you hand our So change

on example, platform, features in intelligent AI rapid and have And with for AI to going we're security security we're throughout progress workflow the making code automation. So that.

Reviewers, Suggested generally We which have the be available. soon will

now working We Suggestions we right and more closed beta, features. have AI-powered the are Code many in on

empower we also applications. want Apart from to add to AI that, customers our their to

So experiments. to you our functionality AI to allows your already GitLab link ops model experiments

will We with AI make applications expanding this GitLab make better. to the be to our further use so even customers they

Matthew Hedberg

Brian one just I then? the With QX how the might run assume on like tier Could increase it. price your in? sort thoughts that does guidance or pushed in off Got any price increase, pending ask feather Or anticipation for year? on of quick your push of premium a seats

Brian Robins

at -- we we we conversion factored look did we that number guidance, as so Yeah, factor different at things look and the pipeline, a rates, of in.

Matthew Hedberg

challenges. Thoughts Got go it. health as you. Sid, Thank your you with through you,

Operator

Our next from from question comes Joel Truist.

Joel Fishbein

drivers of going Brian, taking you just for the Thank you profitability for prayers a my and forward. question. Sid, as And well. on thoughts are with question you

you I lot of terms Thanks. improvement about can to it. But talked any I in have to You've on talk cuts. margin pull other about know appreciate operating a levers that made the you positive? the driving free-cash-flow line. you've you of

Brian Robins

with we we the our increased did we did. XXXX, what by Yeah. I'm loss. million incrementally for that happy Yeah, $XX revenue FY In less in $XXX operating our Thanks, Appreciate and Joel. question. million

If you $XX normalize the less incremental public million that for and expenses loss. JiHu in operating we did company expenses,

operating negative guided entire XX% guidance, is for includes the you margin at a If JiHu look to X%. which That negative the we year.

you been so, you portion, we're our look improvements at with JiHu, we've for the able leverage maintain And look full non-GAAP level. revenue, of And growth right? everything, R&D becoming SaaS in X% our to and a very if less guiding percentage so, gross increased negative company revenue that then than seeing GitLab if and growing And public the G&A of expenses minus expenses And at get marketing, high despite a across model. even to year. as very, with the sales at the greater the margins cost-of-goods-sold, we're to revenue, a we're greater and

the do of in all to continue is we'll grow, so we'll things greater one but efficiency at get but key areas responsibly. And to the that look we'll do business,

Joel Fishbein

Great. Thank you.

Brian Robins

Thanks, Joel.

Operator

question from comes next at Michael KeyBanc. Our

Michael Turits

best Sid, of And well. course, you guys. health as Hi, to of

Sid Sijbrandij

Mike. Thanks,

Michael Turits

software your for that sort quarter, are you've some know, sales what's conservative place analysis So do Are terms the both the -- other Sid some in et simply have in to -- of are love cycles, little they words, which But optimization people I seats, cetera. underlying factors? with we've about to I'd Brian, of Does cloud? seen pulling enterprise. on it software the projects? very of there? of have expansion What do talked seen getting obviously, the at to fewer don't and/or in of this what hear but things other back see in less you the taking people In point, of similar new underlying development

final I'll just then now, get And my Brian. it out question,

could quantify in embedded how from be tailwind you that think price you for your If much -- guide would helpful? the would this us increase be

Brian Robins

Yeah, absolutely.

anecdotes to Let talking a of sort couple about of macro. on I'll one Company for channel a me can happened. most of One, history, those, us both us cloud be perspective, the give logos I driving of talk to From in by we hyper-scalers and great that. brought hyper-scaler hyper-scalers the so but that you're you take the -- a sort -- are is and sub optimization. continuing just about had overall the a

how As a bit little in with. I've nature that the bookings it's previous much said lumpy of comes calls, in

them, but happy those landed now we're as them expand can high with the once logo history we have bookings growth know we logo And accounts. And as land we shows because over so, we time. growth growth, wasn't

model, a couple money where actually save would projects, consumption-based is, say for to engineering have generally, five and to macro, it the And trying been the to a into with we to of a large they're would we with would felt in seat-based done. think one uncertainty in we and with a trying we're than typical that an group project later in One approval get go we're where get I little models. most so enterprise things. the enterprise, sell doing try companies I seeing different tasked licenses

project the just that the have and those And they're at projects so time. buying -- instead what and headcount for maybe, of for they buying the

cycle at it's bit than are historically And just they time. deal projects. are they not from smaller for longer well also need the are deals buying for little those a been pre-buying it's and They because little taken so a what as perspective, they've future a --

you question so the from On increase existing if into come price up our but to can quarter get bookings and for walk of our next before the actually are those a within have math, renewal guidance. you I baked about through you -- the impact. customers majority

then we've in we're XX -- convention and pricing year on well of We revenue. have the so that, year, bookings do months two a you baked only basically you And into them, getting you're starting the for that transition then months the as half-year the first revenue. if as

it out but how called into is, haven't baked much specifically that We is our guidance.

Michael Turits

Brian. Thanks, Sid. Okay. Thanks,

Operator

Next, Bank we from have Koji America. of

Koji Ikeda

Hey, guys, thanks all waiting for we're us BoFA, Sid, of at for taking from the you. questions.

kind to exposed much you recent hindered guys. really industry SMBs sort the the week, Just guidance? the what maybe Thanks, of there? was the Brian, incorporated in context out the me. consideration past maybe that the into of of over could SMBs one developments how maybe financial question be there in the business from us, remind out of can And

Brian Robins

Koji. Thanks, came with was one -- the that guidance. Yeah. consideration when we obviously, up We

XX% technology of XX% If It's the you less technology ARR. look is about at of than overall, ARR. our the vertical vertical

XX XX% ARR. technology talked about the If of than and of XX% to of our look ARR. you being Enterprise SMB continues really around It's majority have which verticals. we vertical look we startup it's up X% one We of verticals, employees, so at yeah, or ARR. small. is identified around you then with XXX if the our all XX%, about to total roughly less We're XX% at [indiscernible] call that companies And -- different ARR. makes across less the be don't our it relatively the the spread

a so that long-tail perspective, And from it's business.

Koji Ikeda

Thanks the it. Got Brian. Thanks, taking for question.

Brian Robins

I appreciate, Koji.

Operator

Karl UBS. now We'll hear at from

Karl Keirstead

due of weakness you Did that see assume just been tech just weaker for given the a Is the and carry that was little tech at the contractions that you. a vertical saw I disproportionate you were bit Brian, great. XX% in that you disproportionately Okay, from your of vertical conversation. given layoffs -- ARR to that on vertical? would comments been one of sized have case? to that that that's layoffs

Brian Robins

[indiscernible], a net specifically a I and all if did look dollar didn't the at to for was relatively good I years and vertical. that back in question, vertical saw back vertical it seven You rate, except get look upgrades we seats, anomalies, at retention the chance the the for between and go And year net the acted know, was look by we change same. actually that I by it's interesting go where about rate. retention all and dollar had did you find of same that some years one ratio

that, impact to so into a particular but that believe impact. to of led dive macro further that was than me more that it vertical And you need broader -- a

side sort relative slow think are feeling a all I the little purchases. today companies to of demand

Karl Keirstead

a Okay. maybe Brian. for And second one you,

and is. is how way gauge most translates growth. that guidance conservative recent it's fact put cRPO quarter XX% think just look revenue to that growth, you revenue trying to at up with guidance that guidance. One hard to to Just that your your cRPO to a The XX% subsequent your do

Do metrics? new want to only mind the So at those predictor weaker. capturing Maybe conservative, of your the you between you. throw that portion next and and imperfect growth an anticipating you're guidance correlation but revenue feels it's a the metric flash, two first bookings are unpacking XX-month I is net cRPO at

Brian Robins

correct. historically Yeah. how the about and some billings metrics directly Happy do. correlated, transit, I but mean, to talked weren't directionally we've of

to the about quarter then was the did growth XX% we guide And XX%. for right so, and cRPO

factor and And where everything to so, philosophy our in no we that's that, see there that we has try we been guidance and into landed. change

Karl Keirstead

you. it. Got Okay. Thank

Brian Robins

Karl. Thanks,

Operator

Next, Sandler. we Rob from have Piper

Brian Robins

on are mute. you Rob,

Rob Owens

after think that a guidance that retention have you're situation and would I what to be the create trend know timing maybe Brian, figure within You A, regard seeing unpack QX that couple trends looks rate self-managed model. rates kind subscription Trying to me, what of would you the could you on of years understand out, B, and cloud. I'd what's given versus issues down? but be like, could understand, a the to just gross front? this understand QX so. Thanks. down quarter-over-quarter, retention gross with what cause there But trying some it's could to

Brian Robins

a of up Yeah. rate Absolutely, Rob. perspective. sort From little, for the gross retention XXs perspective, it's retention a still low-to-mid the Thanks rate question. gross from in it a has but declined XXs,

ROI payback a and company -- those helps renewals the still become the period the company that retention every drive software that well-documented I so, those And believe and rates. has and

And so, believe -- that and yes. I a ultimately, the to over that lift term be so revenue will long

Rob Owens

create around thoughts a could negative a guess, the QX, compare? And I what sequential --

Brian Robins

through, It's different forth. time -- basically look deals we all contraction, churn, close and go we components, as so to at

-- that And so, you anticipated, contraction more if you and recognize than you if to obviously, had wouldn't be churn revenue. able

So for there -- we the do headwinds perspective in we're That's are we as of SSP to our that analysis XXX. from the well, analysis. some QX going annual a to revenue process have through

knew that at based factored the we on we what into the all guidance. so, And time

Rob Owens

Brian. Thanks, Great.

Operator

we Derrick have next, Up Cowen. from

Derrick Wood

you a been just basis. to some the wishes give you headcount Great. more Is in platform you any sale be environment? more you Brian, on touch a on wanted or lot side? on I have -- going to the go-to-market this to of Brian on a changes given that perspective And restructuring realignment any top-down evolving from up you kind sending go-to-market made guys have And a I bottoms best Can as mean, are that? us cuts. made the to for And of Thanks. of selling a or Sid platform changes sense the a of from you. Sid, tougher have model know

Brian Robins

thanks question. for your Yeah. Derrick,

continues the we're public, we ready got We're we various to as change -- things getting motions. relatively model doing sales to go to the land-and-expand be same. that go-to-market our about talked Our

primarily, We direct hyper-scaler forth. program, then added the were so, a channel And alliance so we program sales and motion. program,

our And continuing and mentioned the our distribution to with channel given had us. hyper-scalers, continue so, quarter I good most do within earlier, they as for that. hyper-scalers, a to logos in be We're a we

to assessments value into recently their client One them go -- client doing started is and tell of that stream at we'll the at about a things where and look -- we a stack at help much spending how -- software software look potential go save what can money, in and faster GitLab sell and that. create and do look and exact faster level see them to the they're typically to we

job doing good we're there. a think I So

in it -- driving look One a them year tool customers, were We able continue was get leader at we're our financial If positive ROI to downtime. just reduction the outcomes financial customer, that business Ultimate you for a the of and save services. developer and chain we $XXX,XXX global elimination to in feedback.

replaced so, tools four by and with client, And increased that velocity sacrificing we're -- within we GitLab quality. without about security XX% their we

is really size. seeing a that that and customers across so, And common of any we're all use case verticals

Derrick Wood

hiring, there? terms investing be still of about color to should we sales be going you be headcount -- in investments Are the pausing for year? capacity? you're following And the investing just think Any how still restructuring, Brian, in going to

Brian Robins

absolutely. Yeah,

to leverage the first done looked then was at decision projections existing the headcount. looked reduction, at It model the cost difficult to revenue company basically So when very and we to in doing a We with to drive headcount looked our make. at obviously, business. our open continue align operating across

most part, on the today the capacity to on-board what deliver we For to. we guidance, based the committed have

hire, in areas will we but need so, And headcount to we continue they add where very will be to strategic at.

will much pace. in some And some sales measured more so, and at a in there but be marketing, R&D,

Derrick Wood

Okay. you. Thank

Brian Robins

Thanks, Derrick.

Operator

Barclays. from at hear now Ryan We'll

Ryan MacWilliams

questions. Thanks for guys. taking Hey,

free customers for So, increased users version? of you down-tiering a And from free than premium of Brian. many free more seen on five customers sense have you one Do instances have [indiscernible] your how have to

Brian Robins

a lot or that free people go Typically have the when free. people all the to that's the I not more. of premium but the to get that saw number free, product. way go and from We due different premium you with of did did over functionality don't to deprecation, seen don't outside with the we from Yeah. the see -- down exact of product fingertips, have at licenses $X we my I five customers starter

Ryan MacWilliams

And Thanks. a I and early Ultimate price follow-up think could and [indiscernible] tier do more through, just users expensive it lead to it's more the premium flows know how from to but increase. see on it? upgrading reconsider you

Brian Robins

Based viewed we done, market the a not. outcomes and to the not that period five that on the we're and on drive customers, that the into as delivering. last research years felt what was -- business that capabilities drive research we platform we've and positive price the we've we've and that hope like it's put market that are done over payback the based a feedback results gotten so fair I we XXX from the we’ve in Yeah. the that

Ryan MacWilliams

I appreciate color. Thanks guys. the

Brian Robins

Appreciate.

Operator

Jason have from William we Next Blair.

Jason Ader

NRR one Thank about for you I two the run for year? with think in And is you. it was FY QX? expectation first guess that Yeah. is that for [indiscernible] Brian, XX% will where growth XXX% months, and right XXXX, it to three the of

Brian Robins

beginning of quarter it dropped fourth report -- we factored guidance. so quarter report and we continue we a everything below number threshold that and so don't XXX, to specific as XXX, net if the rate. basically QX I it prepared actual that my in what guidance was remarks, give actually at we'd on Of didn't yes, -- Yeah. that we into but and we took quarter dollar-based happened over our said would the In in retention saw first if

Jason Ader

one how one GitHub? for price positioning are then Okay. the increase quick And versus you Sid, Sid.

Sid Sijbrandij

Yeah.

comprehensive to I more what to can tools time entire so faster we a fewer have to end, In have replace spend the more cycle DevSecOps need a is think customers it what is platform, tools. we do integrating the our people, have time. less cycle,

it's months, there deal. six comprehensive a it That's course, results most what an amazing the of That's selling. the the price about having the value are we're you software, it's having And is but of So what back compelling in if platform. under and showing. earn really

Jason Ader

Be well. thanks. Okay,

Sid Sijbrandij

Thanks.

Operator

Thanks.

Next, we from have Mike Needham.

Mike Cikos

think will the circle revenue for is but how intended Premium, taking package in I to benefit I Hey, and of price for to contribution revenue, Can for what the what that the just the you kind just about historical phase announced deprecation thanks starter wanted price think to help aren't question, time? of the from the help us you over increase maybe as context. or guys did this guys. up quantifying through know us level-set again, increase as far

Brian Robins

Yeah. happen just we're way we to On almost starter, on that slightly went update third starter was starter, everybody, transition. that a to have up over million free churned. through went the Thanks, about completely or $X Premium two-thirds either ARR so of Mike. But to and

deprecation, starter we the did actually we certain if when you know, a requirements. you price As offered increase met slow of

under majority of that. And fell customers our the so

went so And $X it from $X. to

And really one impact so two from customers we was financial at $X and lift versus the revenue a same get $X in of and year didn't $X, start deprecation. much it the of

Mike Cikos

you the And way reductions. then of but a follow-up that if I announced know guys I could,

company we about negative the expense are were or XX% out the and construct to million decision $XX from we tough if margins savings JiHu? it, calling those of negative operating You way what the the, a X% exclude made there. think anticipated in there you call Is the can

Brian Robins

that, charge Yeah. we the that or $X take. be would for I when roughly million guess take give around

Mike Cikos

Understood. you. Thank

Brian Robins

Thanks, Yeah. Mike.

Operator

at We'll now Nick Scotiabank. hear from

Nick Altmann

Thanks. Great.

assumptions guidance. the of around some understand to trying Just the

then gross talked of expansion was really for how I comes growth. retention? to retention at have said off guide sort question, two-thirds seat think of from as guess the in when guys follow-up, what you I of a mid-XXs. going you of look for gross guys Rob's low this Just year, you that historically sort does about embed the And

embedded growth talk And in so level seat can about what you guide? that XX% is maybe of

Brian Robins

Yeah.

can all that through don't model So the of thought characteristics a the things in that like lot we the or go out but we of of the about building a give lot guidance. the I details obviously we --

about followed is retention by still to upgrades So dollar then net let yield about me around and growth much. retention up hasn't the talk ago and the to XX%. Seat so tier price first two three one make the and the remaining rate. dollar was Seat to rate, net contributor XX% number or now quarters other down changed then that that That's two-thirds. growth, the

guidance we looked and conversion what through basically SMB, basically we so, contraction And in quarter. deal and We up we our and looked quarter the pipeline, -- in the on fourth model and as up at at at mid-market built beginning first size, churn large we based from saw rates. bottoms of the went looked

Operator

Next Pinjalim from JP we have Morgan.

Pinjalim Bora

Great. know the -- Hey, at starter Anyway and I starter XX on directly? a is to Hello. best plan assuming somewhat to going thank one-third level your similar Premium for how and here? Sid we to you now deprecation. churn XX because this one XX question right the the much, you again. six Brian, health. kind saw upgrade increase so maybe you churn in above should understand price of go XX, think Are there that XX for nine And point deprecation supposed to price to about XX basically be to that so from wishes

Brian Robins

Yeah.

Could they to package, starter first the go what just on repeat six nine. So from that? you And the I'm sorry, was question?

Pinjalim Bora

you The what churn something one-third. similar Premium price was Are portion increase? assuming the for

Brian Robins

built rate, We've new will to the have, close for churn. the of a existing say we have out the that time Yeah, from amount the it business model same take thing. same will clients same we

did wasn't through, assume of churn. so of And the same based churn. some on but the some It that assume research kind we did market went we kind exact, we

Pinjalim Bora

as as saying? it's what XX you're not high is But

Brian Robins

that. specific We on did give out a number

Pinjalim Bora

Yeah.

Opstrace, vision Sid, loop? the of about stage for side. on it? if the guess are One you on we can. I the Okay, haven't You observability kind heard understood. but thinking your I infinity is How what Sid, acquired monitor much of

Sid Sijbrandij

product with customers believe need tracing, nicely performance services, do all specific have the shaping observability experience. error allows in analytics. fits tracking loop. issues working observability, Those Yeah. them improve been GitLab. is distributed to We And to for still of rest is are our so identify the unmet there What user on a we've helping it at the they huge and the with

ability correlate errors super can to imagine automatically to GitLab is the automatically to that You monitor GitLab incidents deployments important.

We're GitLab observability adds starting there focusing already first deployments. So GitLab a loop value lot incident management. does it close are customer. to the that GitLab, very and already there does with the the with of progress making things close because we are to that

Pinjalim Bora

Thank it. Got you.

Operator

Our final from question comes Shebly FBN. from

Shebly Seyrafi

Thank very much. Yes. you

the raising Ultimate So you prices as considering well? are tier on

Brian Robins

All announced was Premium. price increase Yeah. on we the

only but made Premium. been all that the We have made pricing is a we pricing time, announcement group. decision the our has look on pricing We the

Shebly Seyrafi

Okay.

that And for be away part it seems -- revenue existing see fiscal want you're other you go going The expansion. to in acceleration potentially me going you could But story be I for to it also more Any does And XXXX, to for and the or have from is, much $XX smaller and growth a XXXX, go just hear thoughts? it's to of revenue does JiHu better you of combination margin better so a in because number? opportunity XXXX? away of exciting to moving an $XX. kind it XXXX, the there loss whether are subs go like the JiHu does from premium in I'm in $XX wondering

Brian Robins

Yeah.

for -- just familiar me give with aren't Let a quick as JiHu, who those overview. I'll just

contributed So JiHu is contributed a money. we not joint that the have IP venture any

venture we due So and need joint results. structure, the raised cash VIE accounting own our their the to consolidate to

it's done [Technical Difficulty] JV's expenses. their we've cash And so and

in sense and control. perspective, it's all guidance we a JV the a any that we because include revenue we've expenses conservative don't From been include that don't the we

if de-consolidate see our was that. that if circumstances it see have account through would for going And And changed would to exercise. in and facts differently. process with it It we to de-consolidated, come all obviously the of auditors see so, the we've been we you working and could we're actually out

it's the And of driver been a perspective, so, revenue from somewhat same.

to we to to the going also where we currently into happen. today sell customers, that expand have geos going increase customers, the -- -- aren't will of price continue We geographies. existing We're new benefit well new we're we're as go

And also, revenue we now. company. And rolling that so, Dedicated, single-tenant is the we're out then a there’s drivers of a announced which last number right offering call, different for

Shebly Seyrafi

you. Thank Okay.

Operator

That FY again have and great presentation. day. for XXXX us, concludes joining a Thanks XQ earnings our

GitLab (GTLB) 13 Mar 232023 Q4 Earnings call transcript