The Exchanges

Q Okay. And has expansion. So when you look at the core, not obviously ignore new customer additions, just expansion, right? Revenue has been about what year over year?

A Net expansion has been absolutely amazing and it's way north of a 150% and a 150% would already be kind of best in class if you look at public companies. So It's been amazing to see, for example, Goldman Sachs as a customer, and we came in and they said, look, if, if you're doing really well in nine months, we're going to be a thousand users. And then two weeks later, we're 1500 users. Now they're over 5000 users. Um, it's, We have a product that makes it so much easier for the developers, the operations people, and the security people in the company that we don't have to push it. As soon as the company says, okay, we allow people to use that, people flock towards it. Every company is like, they have DIY ops, we call it. They, they put together their own platform from all kinds of Solutions that are pretty good by themselves, but the big problem is integrating all of it. If you have an update to your application, you don't want to go to 15 tools and take two weeks. You want it done in minutes, and as soon as they open up that to their people, it starts expanding, and we get more people in. Two-thirds of the net expansion is driven by higher seed count, and we're really proud of that.

AI assessment note: “Net expansion has been absolutely amazing and it's way north of a 150%”

Q Why? What do you mean? Tell me why you fell in love.

A I always wanted to do programming, but it always seemed tedious, and then I saw Ruby, and the way it was written, and it was beautiful. It, I, I've never been into poetry, but that, that looked like poetry to me, so I was like, finally, it's, it's, From tedious. It's, it's become a thing of beauty. I can see the beauty. I want to, I want to master it. Uh, I want to get good at that. So I quit the submarine company and started to become a freelance Ruby on Rails developer. And that's when I saw GitLab. And when I saw GitLab was already a year old, but I thought it makes so much sense that something you collaborate with is something you can collaborate on, that this is open source. This is going to have a bright future and I'm going to start a company around it.

AI assessment note: “then I saw Ruby, and the way it was written, and it was beautiful”

Q Oh, okay, dollars. So just to repeat that back to you, you have many customers paying more than a million per year, but if you look at your entire base on average, is the ARPU still about 20,000 dollars a year?

A It's, it's about that range, but I think that's, um, it covers a lot. Yeah, it's not a good number to look at, but we could easily make that number higher. Just for example, we have a very hybrid sales model. So we do both like small, medium businesses, mid-market, and the enterprise market. The enterprise market is 72% of our ARR, and those are the bigger deals. So what most companies do, they stop selling to The smaller companies, um, we don't think that is fitting for an open core project. We think, uh, those, uh, we, we really appreciate smaller businesses also working with GitLab. And that brings your, uh, our average revenue per customer down, but I don't think that's a, that's a metric we watch. Uh, the, the metric we watch is just incremental ACV and, uh, Um, growing that, doubling that, and it's good to look at, like, the biggest deal sizes and seeing those, like, growing really, really fast year over year.

AI assessment note: “It's, it's about that range, but I think that's, um, it covers a lot.”

Q question I've got for you. Obviously you're driving incredible growth. The economics make a lot of sense. So you could argue that a lot of burn is, is a healthy thing for you right now because the economics pan out, but at some point it does become a little uncomfortable, right? So what's that breaking point for you? I mean, are you comfortable burning, you know, ten million a month?

A I don't think it's about the absolute dollar amount. I think you want to stay on the healthy side of the rule of 40. Um, you want to make sure that your EBITDA combined with your Um, but your growth rate is north of 40%. Uh, we decided last year, after the last fundraise, to invest heavily in product. We're the leading provider of, like, a single application DevOps tool. We want to make sure that we capitalize on a, on a giant market opportunity. But I think a year, two years from now, we want to stay north of that rule of 40 and, and keep driving that. We don't have an absolute percentage in mind. And the other thing, of course, is don't run out of cash. Always make sure that you can get back to cash flow break, even with the cash you have in the bank. Never depend on a future fundraise.

AI assessment note: “I don't think it's about the absolute dollar amount. I think you want to stay on the healthy side of the rule of 40.”

Q That's good. Now, how did, you know, you, we just had Matt on from Automatic, and we had a few other people that have tried to build on top of open source communities. Sometimes it goes beautifully and wonderfully well. Other times, the whole community backlashes again when they hear dollar signs, right? How did you manage that transition? And tell us how you built a business around GitLab.

A Yeah. Um, I don't think that open source communities are against dollar signs, but what they do want to see is you being a good steward of the project and, and acting in the interest of the project. And that's a, that's a balance. That's a balance between things that generate revenue, like new proprietary features and things that, that push the open source project further, um, making sure that it's easy to accept contributions, making sure that there's still features landing in the open source version and I think we, we, um, had a great balance there, and sometimes when, when we're off, we listen and we correct, but Matt has been a great inspiration there, and I'm, I'm very thrilled that he joined our, uh, Our board, um, so as a board member, he can make sure that, uh, long-term, uh, we keep being a good steward.

AI assessment note: “That's a balance between things that generate revenue, like new proprietary features”

Q And I'm gonna, I'm gonna guess here, you're about to say you're not even close to that. Uh, how, what, what's the EBITDA margin right now?

A I, I think we're, we're more like working on that, uh, longer term. Um, so I, I don't view it as such. Like we, we, we want to make sure that, um, so software is, is a funny business and the, the questions we ask ourselves when we invest is like, are we going to see a return on this investment? The capital is relatively affordable to get right now. Are we going to see a return? And, um, this fiscal, we're spending fifty million dollars in development costs, like engineers shipping more functionality in the product. And our question is, okay, are we going to see a big multiple on that? And so far, the answer seems to be yes. Our customers really need this functionality, and they need it yesterday. So that's our reason for investing in it. And as we come closer to becoming a public company and eventually being one.

AI assessment note: “I think we're, we're more like working on that, uh, longer term.”