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

In context

“Brian Robbins (CFO): Thank you, Sid, and thank you again to everyone joining us today. Before I begin, I would like to echo Sid. I'd like to take a moment to acknowledge what's happening in Ukraine. We are devastated by what has transpired and are supporting team members who are impacted by this terrible situation. I want to spend a moment summarizing how strong demand for our DevOps platform translates into a strong financial profile, then I will quickly recap our fourth quarter financial results and key operating metrics, and I'll conclude with our guidance. We believe that our revenue growth, our dollar-based net expansion rate and our gross margin all serve to highlight a strong financial profile, underlying our strong business momentum. At GitLab, we use revenue as our key metric to evaluate the health and performance in our business. Because approximately 90% of our revenue is ratable, it serves as a predictable and transparent benchmark for how we are growing. What makes GitLab unique is how we both sustain the growth in our cohorts over a long period of time and also expand the size of our cohorts. To illustrate this, cohorts from six years ago are still expanding today. This is a testament to how we're constantly adding value to our customers. Most of our customers start using GitLab with small teams with just one to two stages of our platform. From there, they typically increase their spend with us 2x over the first year as our platform has adopted across multiple teams. Customers then continue to increase their spend as our platform expands to more teams across their organizations or they upgrade to a higher paid tier. We are also effective at retaining our customers. When our customers deploy the DevOps platform, it becomes a central platform from which all their DevOps workflows originate, making it sticky and difficult to replace. The result is that we ended our fourth quarter with a dollar-based net retention rate exceeding 152%, which is higher than the disclosure we provided in our S-1 at the time of our IPO. Moving forward, we anticipate disclosing a tighter threshold for this metric on an annual basis each fourth quarter as we believe this will allow our investors to fine-tune their models. Next quarter, we will revert back to reporting this as a threshold metric using 130% as a threshold. GitLab is a highly strategic platform for our customers. Our platform is offered with a free version and two paid subscription tiers which we call Premium and Ultimate. Our paid tiers are priced per user with different features per tier. Every user within an organization is on the same plan, which helps keep our business model transparent and easy to understand. The Ultimate tier is our fastest-growing tier, now representing 37% of our annual recurring revenue for the fourth quarter compared with 26% of annual recurring revenue in the fourth quarter of FY 2021 and growing in excess of 100%. In FY '22, our non-GAAP gross margin held steady at 89%. Over time, we expect this to compress as our SaaS offering becomes a larger portion of our business and associated hosting costs will increase. On the operating expense side, we are committed to investing in growth. However, we will do this responsibly. We believe that the investments we are making in our business will enable us to sustain significant revenue growth rates for the next several years while continuing to improve our margins to ultimately drive long-term profitability. Finally, because GitLab operates as a fully remote workforce, this ensures that we have minimal capital expenditures which produces a cash-efficient business. Now let me turn to the quarter. Revenue of $77.8 million increased 69% organically from the prior year. As of quarter end, we had over 4,500 customers in ARR of at least $5,000 per customer compared to over 4,000 customers in the prior quarter and over 2,700 customers in the prior year. This represents a year-over-year growth rate of approximately 67%. Currently, customers with greater than $5,000 in ARR represent approximately 95% of our ARR. We also measure the performance and growth of our larger customers, who we define as those spending more than $100,000 in ARR with us. For this quarter, we had over 490 customers with ARR of at least $100,000, up from 420 customers and over 280 customers compared to the prior quarter and year, respectively. This represents a year-over-year growth rate of approximately 74%. At the end of FY 2022, we had 39 customers with ARR of at least $1 million compared to 20 customers at the end of the prior fiscal year which represents a year-over-year growth rate of 95%. As many of you know, we do not believe calculated billings to be a good indicator for our business given that prior period comparisons can be impacted by a number of factors, most notably our history of large prepaid multiyear deals. This quarter provided an excellent example of this as we saw strong revenue growth acceleration and even stronger billings growth acceleration. Total RPO grew 95% year-over-year to $312 million. Non-GAAP gross margins were 89% for the quarter, which compares to 90% in the immediately preceding quarter and 89% in the fourth quarter last year. As we move forward, we're estimating a moderate reduction in this metric due to the rapid year-over-year growth rate of our SaaS offering. We saw improved operating leverage across the business this quarter, largely driven by revenue outperformance. Non-GAAP operating loss was $27.4 million or negative 35% of revenue compared to a loss of $22.2 million or negative 48% of revenue in Q4 of the last fiscal year. Q4 includes $5 million of expenses related to our JV and majority-owned subsidiary. Operating cash was $1.1 million in the quarter compared to $7.4 million used in the same quarter last year. We performed well during the quarter and year on both the top and bottom line and believe our business is set up for continued strength. Now let's turn to guidance. For the first quarter of FY 2023, we expect total revenue of $77 million to $78 million, representing a growth rate of 54% to 56% year-over-year. We expect a non-GAAP operating loss of $38.5 million to $37.5 million. And we expect a non-GAAP net loss per share of $0.28 to $0.27, assuming 147 million weighted average shares outstanding. For the full year FY 2023, we expect total revenue of $385.5 million to $390.5 million, representing a growth rate of 53% to 55% year-over-year. We expect a non-GAAP operating loss of $142 million to $138 million. And we expect a non-GAAP net loss per share of $1.02 to $0.97, assuming 148 million weighted average shares outstanding. We recognize that it's important to exercise a disciplined approach to investments and note that our operating expenses are anticipated to rise in FY 2023 due in part to the resumption of travel and in-person customer and marketing events as well as new public company costs which, combined, we anticipate will be approximately $20 million. In addition, we also are forecasting approximately $30 million of expenses related to our joint venture and majority-owned subsidiary, up from $12 million in FY 2022. Of this $30 million, we expect approximately $6.5 million of expenses in Q1. Nonetheless, despite these added expenses, we believe improved unit economics in our business are already becoming apparent. Our annual FY 2023 guidance implies non-GAAP operating margin improvement of almost 300 basis points year-over-year at the midpoint of our guidance ranges. Over the longer term, we believe that a continued targeted focus on growth initiatives and scaling the business will yield further improvement in unit economics. With that, we will now move to Q&A. To ask a question, please use the chat feature and post your question directly to IR questions. Kristy, we're ready for the first question.”