Q3 2022 GitLab Inc Earnings Call
Technology innovation strategy.
I will provide an update on our latest product innovations and how they fuel the differentiated value customers received from get lab.
And third I will share how our partners and alliances are accelerating our go to market strategy.
The company needs to be great at developing securing an operating software or they will be disrupted.
They are increasingly turning to Dev ops as a central pillar of their software innovation strategy, we see a shift from a legacy approach where it managers stitched together, a patchwork of homegrown and third party tools.
Some of these tools may be best in class. The market is clearly moving away from point solutions towards a single application or platform for the entire software delivery lifecycle.
Analyst firm Gartner has also seen this trend they predict that 60% of the market will have adopted a value stream delivery platform by the end of 2024. We believe this shift in the market is happening for three reasons first it executives and managers realize the cost and inefficiencies.
Inherent in the patchwork desk <unk> point solution approach.
This approach leads to unwieldy and ungovernable tool chain sprawl, especially as there are more and more applications and tools to integrate.
Second executives rely on visibility to saw significant business challenges, so just going faster from planning and initiatives to seeing a result, moving to the cloud and securing the entire software supply chain.
Without a desk site office platform leader struggled to get end to end visibility into these initiatives and finally the headwinds in the global economy continued driving the need for greater automation and productivity. Many companies are either no longer hiring are actually reducing their workforces at the same time.
They are imperative to drive more customer value remains constant this means that everyone needs to do more with less which simply in this economic environment, it's no longer optional but required to be faster from an idea to an outcome to remove legacy technology and to move to one development tool chain.
The market is looking for a desktop platform to build better software faster.
By prioritizing move to a single application companies can reduce their budget, while still delivering on their business commitments. A powerful example comes from our customer UBS in their most recent earnings investor deck UBS shared its powerful story, but levelling off technology in order to drive digitalization and defer.
And <unk> for its clients.
Specifically, David removed 50 different development tool change now moving to one.
Frequent app delivery through automation. They also transitioned approximately 18 5000 people to uniform agile model in order to increase speed from idea to outcome and they've introduced a set of industry standard metrics to measure the efficiency of their software development process last quarter, we announced the results of our recently.
Commission total economic impact study conducted by Forrester consulting.
We turn to <unk> to better understand the return on investment that can be realized from get level ultimate which is the fastest growing part of our business. We want to see how companies save on costs and achieved business and technology goals with get lab Forrester found that as a result of implementing get lap a composite company based on interviewed customers.
At 12 X increase in a number of annual releases for revenue generating applications.
And an 87% improvement in development and delivery efficiency.
Total return on investment of 427% over three years.
Even more critical in this economic environment. They saw a payback on the investment in less than six months.
These business as a result are rooted in four main areas.
Reducing costs of software as a result of choosing a single platform vendor over multiple point solutions.
Reducing costs associated with tool chain integration.
Creating higher developer productivity and a better user experience.
And increasing revenue due to faster cycle time of application releases in a single application get lot provides all of the functionality of a complete deaths checkups platform.
We allow organizations to deliver software faster, while strengthening security and compliance, thereby maximizing the return on software development. The story of <unk> is a powerful example of these benefits <unk>, which owns the worlds largest vehicle history database and helps millions of people daily shop for vehicles.
I wanted to consolidate its software development tool chain and reduce security vulnerabilities.
British didn't get lot of ultimate enabled car effects to automate security practices.
<unk> SaaS dependency scanning container scanning a secret detection. This resulted in accelerating as simplifying deployment processes.
Reducing tool chain complexity and improving visibility of performance metrics <unk> has increased the number of software builds by 341% in one year using get lab in.
In Q3, we continued to deliver new solutions to the market for instance, we announced get lab govern which brings together our security and compliance capabilities.
Introduced get lab, Kevin because we see that organizations across many industries are facing increasingly stringent regulatory and compliance requirements. Good.
Good luck govern includes vulnerability management audit events compliance management dependency management and security policy management.
These capabilities help organizations achieve continuous security and compliance of their software supply chain without compromising on speed and agility.
With this solution. So we help customers proactively identify vulnerabilities by integrating and automating vulnerability management within the development lifecycle.
Issues can be identified locked triage attractive remediated all in the same application developers can address vulnerabilities in real time, avoiding released delays the story of <unk>, one of the world's largest and fastest growing online travel booking platforms demonstrates many of these benefits.
<unk> had been employing a multitude of both free and paid tools and der software development lifecycle.
With most of these products in silos of Goto is experiencing a poor developer experience and a slow pace of new product development.
Along with governance and compliance challenges.
Consolidating many of these systems on get labs single application resulted in increased productivity and visibility.
A single source of truth for governance security audit and compliance and the greater empowerment and retention of developers.
Ah Golar cannot process over $1 million pipelines per month that average build queue time has decreased from 40 minutes to 32 seconds and Theyre developer NPS score has increased.
In Q3, we also advanced our machine learning capabilities with the release of suggested reviewers.
It represents get labs first ml powered features.
Recommending the right person to review emerged request eliminates potential delays issues with quality control and a lack of compliance.
As we move further into model Arps and beyond we're taking software development lifecycle practices and unlocking next gen <unk> practices for organizations.
Another product innovation is get lot of dedicated which we officially announced in limited availability at AWS re invent.
Dedicated is a new way to use our enterprise <unk> platform as a single tenant SaaS offering.
This new offering provides all the benefits of an enterprise desktops platform with a focus on data residency isolation and private networking to meet complex compliance needs with the planned general availability of <unk> dedicated anticipated next year, our desk checkups platform will be available in three deployment methods get lab Darko.
Our multi tenant SaaS platform get loved dedicated a single tenant SaaS platform and self managed or download which provides users the ability to run get lab anywhere.
That brings us to our partnerships with cloud hyper scaler, we view the hyper scale is increasingly important partners forget map in our conversations with them. We know Dave you'll get lab is an accelerant for their customers to move faster to the cloud.
This symbiotic relationship makes cloud hyperscale as a core part of our success in go to market. They accelerate time to market for <unk> customers on the cloud of their choice and a broadened the depth and breadth of our market reach you can see our cloud migration value proposition with customers like the <unk> group the Uk's market leader in Homewares.
They now must challenge with ensuring application security while rapidly transforming their digital footprint.
As Derek engineering teams accelerated their move to their target architecture of <unk> technologies and cloud first.
<unk> significant gaps in their existing ICD tooling. These included a lack of automation governance security and visibility, which is creating strains on administrative management and performance.
Comparative evaluations, let the now to choose get lab SaaS ultimate to integrate tools and seamlessly deploy secure pipelines on the AWS cloud.
The resulting benefits included increased pipeline volume accelerated productivity reduced administrative burden turbocharged team collaboration and an upfront security focus to capture vulnerabilities much earlier and now cannot deploy software 50 to 70 times per week, rather than 10 to 20 times and Onboarding now takes.
Hours rather than days.
In addition last quarter, we partnered with Google cloud to launch cloud seat and new capability that simplifies the developer experience for procuring and consuming cloud services cloud seat is built into the get lab <unk> Leverages, our <unk> pipeline capabilities in order to give developers a frictionless experience.
And make it easier to deploy <unk> applications directly to Google cloud from good lab in our annual Best Checkup Survey, we found that cloud adoption remains a high priority for organizations and it is the second highest investment area for desk SEC ops team's innovations like cloud seat enable organizations to.
Accelerated their shift to the cloud.
In summary, I'm very pleased with the quarter, we continued to innovate and create new capabilities for an expanded set of customers. We continue to demonstrate the benefits of our platform over a point solution approach and we continue to show that this mission critical and we continue to believe we are early in our large and growing market our Q3.
Results demonstrate that we're well positioned to drive durable growth with improving unit economics, I'm grateful to all of our team members partners the wider get lab community and customers who contributed to our results.
Now turn the call over to Brian Robinson get lapse, Chief Financial Officer.
Thank you said and thank you again for everyone joining us I'd like to spend a moment reviewing the key characteristics of our business model and what we're seeing in the macro environment, then I'll quickly recap, our third quarter financial results and key operating metrics and conclude with our guidance.
Our third quarter results continue to demonstrate our ability to drive high growth with improving incremental margins fueling. These results are a number of key aspects of our business model that I would like to discuss briefly. These include the predictability of our subscription model that provides high visibility.
Platform sale, rather than a point solution with very little revenue based on consumption.
A diversified customer base across industry verticals customer sizes and geographic regions.
And a short implementation cycle with an established and well documented ROI.
These attributes contribute to the results we are seeing to illustrate this customer cohorts from seven years ago are still expanding today.
Despite the ongoing volatility in the macroeconomic environment in the third quarter, we see customers continuing to prioritize the need to leverage a mission critical platform to build software better faster cheaper and in a more secure manner. We're also happy on how we executed on hiring we added over 200.
New team members in <unk>, and we continue to experience lower attrition than the industry.
We view the uncertainty in the macro economy is a benefit for hiring new team members and we continue to be active in recruiting primarily focusing on any new team members in sales and R&D.
Next turning to the numbers.
Revenue of $113 million this quarter represents an increase of 69% organically from prior year.
We ended <unk> with over 6400 customers with <unk> of at least $5 compared to over 5800 customers in the prior quarter and over 4000 customers in the prior year.
This represents a year over year growth rate of approximately 59% currently customers with 5000 or greater in <unk> represent.
Approximately 95% of our total IRR.
We also measure the performance and growth of our larger customers, who we define as those being more than 100000 <unk> with us.
At the end of the third quarter of FY 2023, we had 638 customers with <unk> of at least $100000 compared to 593 customers in the prior quarter and 427 customers in the third quarter of FY 2022.
This represents a year over year growth rate of approximately 49%.
As many of you know, we do not believe calculated billings to be 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 multi year deals this quarter total RP over 62% year over year to $393 million and CRE.
<unk> grew 67% to $278 million, we ended our third quarter with a one dollar based net retention rate consistent with previous quarters.
This exceeded our reporting threshold of 130%.
Which we believe remains best in class and consistent with our track record as a public company.
The ultimate tier continues to be our fastest growing tier representing 39% of <unk>.
<unk> for the third quarter of FY 2023, compared with 32% of <unk> in third quarter of FY 2022.
non-GAAP gross margins were 89% for the quarter, which compares to 89% in the immediately preceding quarter and 90% for third quarter of FY 2022 as.
As we move forward, we're esmee moderate reduction in this metric due to the rapid year over year growth rate of our SaaS offerings.
We saw improved operating leverage across the business this quarter largely driven by revenue outperformance non-GAAP operating loss was $21 6 million or negative <unk>, 19% of revenue compared to a loss of $23 9 million or negative 36% of revenue in Q3 of last fiscal year.
Q3, FY 2023 includes $5 million of expenses related to our JV and majority owned subsidiary. In addition, we incurred $2 1 million termination payments relating to events that were canceled.
Operating cash use was slightly over $1 million in the third quarter of FY 2023, compared to $10 1 million use in the same quarter last year.
In summary, we're pleased with our performance during the third quarter of FY 2023 on both the top and bottom line and we believe our business is set up for continued strength.
Now, let's turn to guidance for our fourth quarter of FY 2023, we expect total revenue of $119 million to a $120 million, representing the growth rate of 53% to 54% year over year.
We expect non-GAAP operating loss of 27 million to $26 million and we expect non-GAAP net loss per share of <unk> 15 to 14, assuming a 150 million weighted average shares outstanding.
For the full year FY 2023, we now expect total revenue of 425 million to $421 $5 million, representing a growth rate of 66% to 67% year over year, we expect non-GAAP operating loss of 100 million to $99 million and we expect non-GAAP net loss.
Per share of <unk> 56 to <unk> 55.
Assuming a 148 million weighted average shares outstanding.
On a percentage basis, our new annual FY 2023 guidance implies non-GAAP operating margin improvement of approximately.
One five or 25 basis points year over year at the midpoint of our guidance ranges over the longer term. We believe that our continued targeted focus on growth initiatives and scaling the business will yield further improvements in unit economics are.
A few more details on guidance in our model.
We now estimate that we will incur approximately $16 million of incremental expenses related to the resumption of travel and in person customer and marketing events as well as new public company costs that were not incurred during FY 2022.
In addition, we forecast approximately $20 million of expenses related to <unk>, our China joint venture. This compares with $12 million of combined <unk> ml tonneau cost in FY 2022, we are in the early stages of our FY 2020 for planning process, but wed like to provide an update on FY 2020 for revenue growth.
And our path to achieving free cash flow breakeven.
Based on everything we know today, we are currently comfortable with the street estimates, which have us growing revenue over 40% on the expense side, we continue to evaluate our hiring plans going forward as we monitor leading indicators in our business as it relates to the macro economy as said and I've said over the last several quarters. Our number one priority is <unk>.
Growth, but we'll do it responsibly there has been no philosophical change in how we run the business to maximize shareholder value over the long term, we continue to be focus on growth, while driving improvements in the unit economics of our business in.
In addition, we're targeting to be free cash flow breakeven for FY 2025, we hope this provides some greater visibility into our financial targets.
Our next earnings call, we will provide more detailed guidance for FY 2024, we believe we are addressing a very substantial market opportunity thats currently underpenetrated and that will be well positioned to capture an outsized portion of it we continue to drive positive business outcomes time to value and ROI for our customers.
With that we'll now move to Q&A to ask a question. Please use the chat feature and post your question directly to IR questions. We're ready for the first question.
Our first question comes from Sterling from Moffett Nathanson.
Great. Thanks, Hi, guys Sterling Auty FCB Mopper, Nathan so really appreciate not only the results, but the color on next year and that kind of brings me to my one question, which is investors are concerned in light of the macroeconomic backdrop that what we're going to see is declining budgets for next year what gives you the.
<unk> beyond what you kind of gave in the prepared remarks driving demand or maybe it's the same thing why should we see that durability of growth continue throughout next fiscal year.
Thanks Sterling I appreciate the question.
I guess, let's just touch briefly on the macro in general and so we're starting to feel some impact with the macro.
Ill go through some of the good that we're looking at and some watch points.
The good is we land small and expand we talked about cohort seven years ago are still expanding today. The cohort seven years ago are expanding at the same rate that cohorts two years ago, our expanding yet and so we're still seeing great expansion cohorts from seven years ago.
Also we had our largest first quarter quarter in company history.
We are first orders grew over 75% year over year on an absolute dollar basis.
Then there is this overall trend to move the platforms. We provide a great ROI, we are super cost efficient and the time to value is what people are seeing some of the watch points that we're looking at is I think all companies today are looking at expenses.
It reminds me of right when Covid first hit.
Everybody just clamped down we had a V recovery and so I think right. Now every company is looking at expense and I think that this is actually impacting us a little expansion obviously it didn't impact us on first order being a mission critical platform people are trying to see how they can get more efficient in our ROI provides us.
Sure.
There is a small uptick in contraction we've had great gross retention, it's been about the same for the last four quarters. So no major uptick there and then also we arent seeing the sales cycle elongate.
Shrank again this quarter, but we are seeing more scrutiny on deals and so there are a couple of the watch points that we're looking at.
We have mentioned prior there number one objective of the company is to grow but we'll do it responsibly and we showed that in an increased unit economics in the business. We have sought to controls over the business. One is pipeline and we have great visibility into the pipeline. We have all the data on win rates coverage ratios and so forth and the other is open.
Head count.
And so we will continue to drive growth.
Do it responsibly and we'll monitor those demand drivers on a regular basis.
Thank you for the transparency I appreciate it.
Thanks Jerome.
Next we have cash from Goldman Sachs.
Hi, Thank you very much congratulations on a fantastic finish to the year.
Should I was curious to get your take on AWS AWS reinvent was a massive massive conference among the several announcements that they made the one area that stood out as.
As far as really no news flow was the developer angle.
So how does that leave I've got to believe that that is an opportunity for get lab can you tell us a little bit more about what.
You made out of AWS re invent the opportunity set that is supportive to get lab, considering that AWS didn't really tell us what they are strategically investing in terms of the development lifecycle.
Space, If you will thank you so much.
Okay. Thank you so much.
For sure like Dev Ops is hot like.
Everyone understands that this is the way to make an impact and to bring it closer together to make it more usable.
People see that that is the way to get ahead. So that's great to see.
We're getting closer to every single Hyperscale for US It was a great event as a company very successfully.
Connected to a ton of customers. We were also very excited about get lumped dedicated that we announced a dedicated is our single tenant SaaS platform and we announce limited availability with general availability in the coming coming year and give up dedicated addresses a ton of customer use cases for us.
Customers can get data residency to get more isolation private networking and we're excited.
That in the market and talking with customers for people wondering about pricing, it's going to be mainly per user with the infrastructure component as well and we were excited to announce that at the event.
Next we have Rob from Piper Sandler.
Hi, Thanks for taking my question. This is Ethan on for Rob said I wanted to ask a question around open source projects it.
It seems like right now one of your larger competitors.
Post a lot of the bigger open source projects that are out there.
I was curious if you are focusing at all I'm trying to migrate some of these projects.
Projects over trying to encourage new open source projects to be hosted on to get lab platform kind of as a way to gain more visibility and interaction with the developer community on your platform or are you kind of more focused on the commercial side of things right now. Thank you.
Yes. Thanks for that we do have a program to host open source projects and that has.
Many different open source projects on it not as many as our biggest competitor we are focused on winning commercial business.
And.
One of hard.
Imperatives is to make sure that people also contribute back to get lap.
So we have hundreds of users and customers who contribute back to get every quarter. We're starting a leading organizations program to help them contribute back and to help them even more in doing that do you want to contrast it.
Focus on hosting closed source software the software that makes our customers' money and we arent opened core platform one of the benefits from the innovation of all of its users.
Thank you.
Yeah.
Next we have Joel from truest.
Thank you for taking my question.
Brian This is for you I would.
I got your message loud and clear about growth is the priority here, but you've also talked about.
Oh I'm sorry, you also talked about the path to profitability and I would love to understand some of the drivers of the operating loss.
Leverage as you move towards free cash flow profitability I know its FY 'twenty, five, but the trajectory and what's going to drive that thanks, a lot Brian .
Yeah, absolutely. Thanks, agile, yes, I guess number one is we want to win the Dev ops platform category.
And we're doing that through growth in doing that responsibly.
We'll continue to invest as long as our unit economics remain strong I think we've demonstrated that quarter or if you look at third quarter of this year over third quarter last year, we added 46 million of incremental revenue and did that for $2 $3 million loss.
We also had increased public company expenses G, who increases and so forth in there and so we're continuing to get more leverage out of the model.
The more efficiency and scale, we're going to be.
Provide better unit economics, we land relatively small, but as I mentioned, we expand with those customers over time, and so our sales and marketing is getting more efficient as we grow.
Gross margin were best in class, there's not a lot to do there.
On G&A. This this year, we absorbed a lot of public company expenses. Thank goodness D&O insurance has gone down we have our management and in G&A and so we're building up more at the staff level and then in R&D. We're just continuing to invest in the platform as we get larger we don't have to grow R&D as high.
Hi.
The revenue growth on a relative basis and so we're looking at things across the entire company.
We're measuring them, we have a lot of <unk>.
Internal metrics that we look at and we're continuing to drive profitability.
Thank you so much.
Thanks, Joe.
Our next question comes from call at UBS.
Okay.
We can skip to the next person and then come back to Carl.
Yeah.
Next we have Matt from RBC.
Oh, Hey, great guys. Thanks for taking my question.
<unk> first.
First of all I love the change in your tagline of Dev ops from the Dev ops platform to the depths that gobs platforms, something I think we've all sort of hurt in checks in terms of how you guys are resonating with security use cases can you just talk about I guess the significance of that and how do you think about even a security led sale and maybe even adding even more so.
<unk> functionality.
Yeah, Thanks for that Matt.
Security is getting more and more important and not only is security to get them more important people are recognizing security needs to be an integral part of the desk cycles lifecycle, you need to shift security left.
As a Dev ops platform, we are leading in a number of features we offer within that security to static and dynamic analysis container scanning secret detection we.
Half the best security offering and that is resonating in the market and this quarter. We also put a focus on carbon because it's not enough to just have all the security functionality when the auditors walk into your company and say Hey that environment tell me what runs there.
Signed off on that code and another person sign off on it or did you run all the test you need answers you need documented answers that you did that any.
And the alternative forget lab is building that yourself and no company wants to do that especially not in this economy. So we're super excited.
Not only have the most security technology. We also allow you to prove it that you did all of that.
Thanks, a lot and congrats on the results.
Thank you.
Yeah.
Our next question comes from Michael at Keybanc.
Hey, everybody.
I wanted to ask about.
Some of the macro question in the sense that obviously head count expenses are getting worse in some cases their cuts how is it because you're doing well to expand with customers within that is that because you're getting.
Getting greater penetration or.
More of a function of the expansion in our Pud perspective, and if so will we start to see that in more ultimate percentage and some farmers flattened a bit.
Thanks, Michael appreciate the question.
We talked about this before is.
No because it's a bottoms up land when we land a new customers typically 50 to 100 licenses.
In some cases they have.
And thousands of engineers and expand over time and that's why the cohorts are still expanding the number one survey on net dollar retention rate the number one reason why.
Theyre expanding a seat expansion the second is for tier upgrade to ultimate and in the third is you increased yield from the customer.
When we set our sales compensation, we don't differentiate from premium versus ultimate we tried to remove the friction out of the buy process as well as the sell process and so when you are buying self managed and SaaS is priced exactly the same for from an accounting standpoint, it's relatively relatively the same.
<unk> revenue recognition and cash upfront and from a sales standpoint, we want to go in and see how we can drive quick time to value and a business outcome. So they can actually get the ROI in the forest to report that we talked about in the prepared remarks, 427% over three years and so it's.
It's not that we're fully insulated from it but.
And I did state we are seeing some impacts of the macro such as just overall people look in every expenses.
Higher level of people looking at them, but when you have a mission critical platform and everybody needs to basically drive quicker time to value.
You're seeing a move to a platform and those returns are paying off for those companies.
Thanks, Brian .
Thanks, Michael.
Now, we'll move on to Derek at Cowen.
Great Congrats on a solid quarter.
Brian could you double click on the macro and talk about kind of what youre seeing across enterprise versus mid market versus SMB, and maybe kind of U S versus international I've, just got a tease out.
A little bit more around.
Where there's a little bit more macro pressure and then I guess just as a follow up we've heard instances of when.
People make expense reductions this can be a catalyst to re platform to get lab I'm sure. That's not a common reason, but are you seeing this as being the case more frequently in this environment.
Yes, let me let me answer the the first month or the last I'll move to the first and so as I noted. This was our highest first order quarter in company history and so.
<unk> is the platform trend is picking up and people are looking to consolidate that's part of the reason why.
We had so many new logos from a first order perspective this quarter.
And your first question was enterprise mid market and SMB and sort of what we're seeing there.
In U S versus rest of the world our pipeline remains healthy you all over the world.
And so there's not a particular region like Europe in particular that we're saying Hey, we are seeing some issues in Europe . It remains healthy all over the world.
Because where we have such a long tail of customers and there's really there's not a few customers that are heavily weighted towards making up a large percent of our revenue.
They are all acting relatively about the same we have very little exposure to attack. If you. If you look at or startups overall, we're about 20% exposure times, but if you look at startups were less than 5% and that some companies have less than 200 employees in the tech field and so the fact that we have one platform whether it's soft.
Manager SaaS.
Yeah, we do zero customization to it and this push to go to the cloud and to.
You'll reduce causes helping us.
Some of the things that we are seeing is as I mentioned some of the watch pointers.
We're seeing a slight uptick in contraction and so maybe some of those companies who did a layoff where are we where we were more fully penetrated they've cut back in a couple of licenses.
And you know we have seen some of the deals require greater scrutiny and so we're this is typically done it serve a division department basis.
We may require CFO approval or some C level approval to acquire new software.
Great. Thank you.
Thank you Sir.
We'll now move on to Jason from William Blair.
Yes, hi, guys.
When you go through.
Can you talk a little bit about this Brian but can you go through the puts and takes on an IRR relative to seat expansion and upsell.
Where do you see the strength currently it sounds like maybe some contraction on seats may affect anthropophagy this quarter.
And then you also talked about ourselves maybe being under a little bit of pressure, but yet you are in or are we sort of it.
It sounds like it was similar so how is it manifesting in what are some of the puts and takes here to help us reconcile autos yep absolutely. Thanks, Jason we haven't we haven't seen too much change in our net dollar retention rate overall seat expansion remains the biggest driver.
As a as I mentioned, the cohort seven years ago that still expanding at the same rate as co work two years ago seat expansion is the biggest driver there as well.
The second biggest is tier upgrades.
We mentioned ultimate is still 39% of IRR, but grow in access of 100%.
And so we had a like I said, we had a really great first order quarter.
And so that did well the the.
The expansion as I mentioned, you know some deals are getting greater scrutiny. So.
This quarter, we saw a little bit.
More scrutiny on expansion.
But I would say the there hasn't been.
Shoe much dramatic changes and the net dollar retention rate, it's been fairly consistent for the last several quarters.
Okay. So maybe just a slight downtick.
The right way to think about it correct. Okay. Thank you.
Our next question comes from Koji from Bank of America.
Hey, guys. Thanks for taking the question, maybe 1% I wanted to go back to the get lab get lab govern.
That you were talking about you know you mentioned vulnerability management.
The press release mentioned you know the supply chain of software. So just just curious this vulnerability vulnerability management at what level or depth does it go does it go to the binary level the source code level and the vulnerability management or maybe the visibility and or does it go across all applications that.
That may be using similar blocks of source code or binaries any sort of help there would be helpful. Thank you.
Yeah for sure. Thanks for the question so get lap governed in vulnerability management. It goes.
As deep as you expect so we do for example container space scanning which are typically binaries.
Additionally, in get lab govern is also audit events compliance management.
We're working on security policy management, which is in the product, but still has some maturing to do.
And what it helps companies do is to prove their auditing, but also to do it every single time. So we see a lot of companies. They bought multiple point solutions for security and they use it for some of their applications. Some of their time and won't get library that helps them do is do it for every application all of the time, Inc.
Move that to the auditors.
So that's that's a big benefit in the ways to do there is to be able to provide the visibility to be able to enforce it but also to make it frictionless for developers.
Developers into security people.
Got it thanks.
And maybe just one quick follow up for Brian .
The comments about the additional scrutiny in the deal cycle and any sort of color you can give on maybe the linearity within the quarter. When you start to see that additional scrutiny did it happen beginning of the quarter ended the quarter into November I mean, any sort of color there would be helpful. Thanks guys.
Yeah. It was more towards the end of the quarter I will note, though that in the closed deals. The overall deal cycle did not elongate that actually shortened by a couple of days, but we are starting to notice more scrutiny on some of the deals.
And requiring more and more.
Sign off at higher and higher sort of yeah.
Seniority and so the the linearity for the quarter has been the same as our historical.
Thanks, guys. Thank you.
Okay.
We'll now move on to pendulum from Jpmorgan.
Hey, Thank you so much for taking the questions two part.
One third.
Can you talk about maybe the significance of the cloud seed.
Google could it further help you may be competitive against get hub.
And would you be should you should we think maybe.
Maybe you, adding AWS at some point in the second part is the dirty.
Get lab dedicated.
How are you pricing and relative to the multi tenant offering of them assuming that it has.
Lower gross margin being single tenant.
Yes, thanks for those questions. So cloud it makes it easier to set up all the surfaces that you need with a hyper scaler and it kind of does two things. It makes it easier to set up an application in a way that allows you to do say two operations instead of.
Outsourcing everything you now have control you have terraform and everything else that you need to do it later on and we're doing it first with GCT very excited to work with them. We're open to doing it any hyperscale AWS Azure, we want to meet our customers where they are irrespective of the cloud they are using.
Our dedicated.
It's a great offering it has additional infrastructure costs, it's a single tenant offerings, so you're not sharing infrastructure like databases with other customers that comes at a higher cost and we are pricing that in and so on.
Compare to get land dot com, it's going to be have a higher price.
Minimums in the number of seats and there's an infrastructure cost component to it.
Thank you very much.
Okay.
Now we move on to Nick at Scotiabank.
Great. Thanks, guys.
Brian I wanted to ask about some of your assumptions for the 40% that are over 40% revenue growth guidance for next year and IRR has remained around 130% or over 130% you said land asps are up 75% year over year. So when you think about that over 40% growth guidance for <unk>.
Asked year, what are your some of your assumptions around the expansion side.
Of the equation versus sort of that 130% and IRR today and end on the higher land ASP Saturday equation sort of as it relates to that 40% growth guidance.
Yeah, Let me just one point of clarification. So the first order net AR grew 75% year over year.
<unk> ASP.
And so I just want to make sure and ensure we have clarity there so.
But it's great that in this environment, we're seeing such a strong demand for first order.
I would just say as you know we were early in our FY 'twenty to 'twenty four planning.
As we as we look at it where I'm Super happy that we have such a predictable business model that about 90% of our revenue is ratable and based on where we're at today no changes in our guidance philosophy, and we can sort of build out where consensus is at today and say it's in line with our expectations.
Great. Thank you.
Yeah.
Our final question comes from Mike at Needham.
Okay. Thanks, Thanks for getting me on here guys.
I appreciate the qualitative commentary on the fiscal 'twenty for growth in the.
The free cash flow target in fiscal 'twenty five both those bogeys good to have that out there and appreciate the visibility you guys are pointing to what I'd like to cycle back to.
You guys are one of if not among the very few who are calling out sales cycles again compressing.
And in the midst of that we also have this commentary that you are seeing some more deal scrutiny.
Can you help me think about that deal scrutiny versus the sales cycles actually accelerating right are the sign offs really more at the margin or how is that coming into play when we think about the sales cycles versus that scrutiny. You guys are talking about can you help us marry those two please.
Absolutely there is.
Several different stages and closing a deal and the review process is getting a little longer but the overall closed deal sales cycle has shortened by a couple of days. It doesn't have really any impact to the financials. The way that you do revenue recognition.
And so just as we go through it.
Wanted to call that out we called out last quarter.
And but also want to address that overall, we are starting to feel some of the impacts of macro.
And some of the watch points that we're looking at.
Great. Thank you very much guys.
I appreciate it.
With that I'll turn things back to sit for closing remarks.
Thank you so much for your time today I'd like to thank all of our customers for trusting get lab to help them achieve their business objectives I'd like to thank our partners the wider get life community and of course, our <unk> team members for all their continued contributions you all had a big part in our success.
Thank you.
Okay.
Thanks, again once more for joining us and have a great day.
Okay.
The recording has stopped.