In the wake of Silicon Valley Bank's collapse, this week is not the best time to spook jittery stock markets with weaker than expected financial forecasts, yet that's what GitLab has done.
The source shack last night outlined profit and loss numbers for Q4 of its fiscal 2023 ended 31 January, showing a 58 percent year-on-year hike in turnover to $122.9 million - higher than analyst forecasts.
This, however, was a slowdown on prior quarters. Revenue growth in Q3 was 69 percent, 74 percent in Q2, and 75 percent in Q1.
Operating losses widened to $46.3 million compared to the $40.6 million recorded a year earlier. Operating expenses jumped to $155 million from $109 million.
On an earnings call with analysts, CFO Brian Robbins noted a marked change in the tone of the tech industry in terms of "greater deal scrutiny on some deals, lower expansion rates than historical trends, and a slight uptick in contraction."
"We believe the uncertain macroeconomic environment affected us in two ways," he said. "First, we saw that some of our customers experienced changes in their businesses which led to either hiring slowdowns or a reduction in workforces. This impacted expansions, primarily in our Premium tier. It also led to an uptick in customer contractions and churns.
"Second, we encountered greater deal scrutiny at the end of the calendar year, as companies reevaluated their overall spending plans heading into the new year. We also saw more people involved in approval processes, which led to longer sales cycles."
During the quarter, GitLab raised prices for the Premium version from $19 per user per month to $29. This, the company said, was to reflect enhancements to the platform in recent years.
Given the mood change in tech, GitLab was among the vendors to this year reduce overheads by chopping 7 percent of its own workforce. This equated to around 110 jobs so was less dramatic than Microsoft, Meta or Google's actions.
CEO Sid Sijbrandij, who is being treated for bone cancer, said customers are being "forced" to "figure out how to do more with less" and "innovate with fewer resources."
Despite these challenges, he said, GitLab is doing things that chime with developers that are consolidating their DevSecOps tools to save costs and boost productivity.
"They can reduce or eliminate the amount spent on tool chain integrations. Their engineers become more productive by reducing time to deploy applications, and they can accelerate revenue by deploying their software faster."
In a pitch to developers using rival platforms, he said it was "open core," had 3,000 new capabilities added in the past year that came from wider community contributions, and is not financially motivated to sell cloud services.
"We are not incentivized to push customers to use any cloud provider, so our customers don't fear vendor lock-in."
For the year, GitLab reported revenue of $424.3 million, up 68 percent year-on-year, and an operating loss of $211 million versus $129 million.
As for its outlook that worried analysts monitoring the market?
Robbins said: "In light of the challenging macroeconomic headwinds, we have reassessed our near-term revenue growth outlook, assuming trends we saw in Q4 continue."
Fiscal 2024 revenue is estimated to come in at between $529 million and $533 million, or median growth of 25 percent. This was obviously a huge disappointment for analysts, wiping more than a third from GitLab's value. ®
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