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spk01: Greetings and welcome to the GitLab first quarter fiscal year 2025 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. You may register to ask a question at any time by pressing the star and 1 on your telephone keypad. You may withdraw yourself from the queue at any time by pressing star 2. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Kelsey Turcotte, Vice President of Investor Relations.
spk17: Thank you, Kelsey. You may begin. Thank you for joining us today for GitLab's first quarter fiscal year 2025 financial results conference call.
spk18: GitLab's co-founder and CEO, Sid Cibrandi, and GitLab's Chief Financial Officer, Brian Robbins, will provide commentary on the quarter and guidance for the fiscal year. Before we begin, I'll cover the safe harbor statement. I would like to direct you to the cautionary statement regarding forward-looking statements on page two of our presentation and in our earnings release issued earlier today, which are both available under the investor relations section of our website. The presentation and earnings release include a discussion of certain risks, uncertainties, assumptions, and other factors that could cause our results to differ from those expressed in any forward-looking statements within the meaning of the Private Securities Litigation Reform Act. As is customary, the content of today's call and presentation will be governed by this language. In addition, during today's call, we will be discussing certain non-GAAP financial measures. These non-GAAP financial measures exclude certain unusual or non-recurring items that management believes impact comparability of the periods referenced. Please refer to our earnings release and presentation materials for additional information regarding these non-GAAP financial measures and the reconciliations to the most directly comparable GAAP measure. I will now turn the call over to GitLab's co-founder and chief executive officer, Sid C. Brandy.
spk05: Sid? Thank you for joining us today. We had a strong first quarter with 33% revenue growth and significant year-over-year margin expansion. The value customers derive from GitLab comes through not only in our top-line growth, but also in our best-in-class dollar-based net retention rate of 129%. We continue to differentiate our platform with security, compliance, and AI throughout the software development lifecycle. And we also continue expanding our total addressable market for new use cases and personas. AI is quickly transforming the way software is delivered. With GitLab, our AI extends well beyond coding and development. Because we have the broadest platform, we uniquely enable our customers to also leverage AI for planning, security, and operations. Both new customers, like financial services company A&B, And existing customers like NASA, Artemis, Carrefour, Indeed, and the FBI understand the value of a platform that enables software development across the end-to-end lifecycle. It improves productivity and security without sacrificing speed. We believe the benefits and improved quality delivered by our end-to-end approach are unmatched in the market. A great example of this is a leading financial services company that decreased pipeline outages by 90% since deploying GitLab. And that has translated in hundreds of thousands of dollars in savings every year. They are also leveraging our AI offering, GitLab Duo Pro, and GitLab Duo Pro has already delivered increases in productivity for this customer. We're seeing GitLab Duo adoption by customers who are excited about the benefits it's bringing to their teams. For example, a leading provider for the global communications industry purchased GitLab Duo and Q1 to help engineering teams code faster and more securely. We continue to add new capabilities to GitLab Duo. In Q1, we released GitLab Duo Chat into general availability. Chat is a conversational AI interface for GitLab Duo that helps customers quickly understand project status, get help with planning and configuration, receive explanations of suggested code, and generate tests, all without context switching. I'm excited about chat because it transforms software development by seamlessly integrating AI through a single easy to use natural language chat interface. This optimizes DevSecOps workflows and boosts productivity. We also introduced new privacy controls that enable organizations to manage sensitive data at the project group and subgroup levels. This helps reduce the security and compliance risks of AI adoption. Our next AI add-on is GitLab Duo Enterprise. GitLab Duo Enterprise combines the developer-focused AI features of GitLab Duo Pro with enterprise-focused features to help teams collaborate faster together. Our customers are particularly excited about the security tools coming as part of GitLab Duo Enterprise, such as root cause analysis along with vulnerability explanation and resolution. In the future, GitLab Duo Enterprise will also allow customers to deploy AI models in air-gapped environments. This feature will further differentiate GitLab Duo in the market. Now I'd like to turn to security and compliance. These capabilities are core to our platform and continue to be big business drivers for us. Customers turn to GitLab because they need to integrate security earlier in the development process. For example, a major US technology company and government contractor removed seven different point solutions when they consolidated on the GitLab platform. Now they are doing security scans 13 times faster and are seeing a 90% savings in tool chain administration. In Q1, we closed a six-figure deal with a global financial services company, a new logo for GitLab. They were looking to improve security in the DevSecOps lifecycle, and GitLab was the only option that would let them bring software composition analysis, SaaS, and DAS into a single platform. With our advanced security capabilities, The company can shift security left and address vulnerability sooner. At the same time, they are consolidating their tool chain, reducing their total cost of ownership, and increasing visibility across the software supply chain. GitLab's integrated security is driving upgrades to our ultimate tier. In Q1, we continue to build on our security capabilities with our acquisition of Oxide. We acquired Oxide for their robust SaaS technology. This will help streamline vulnerability management and remediation for GitLab customers. We also acquired the intellectual property of Resilient, which will enrich our vulnerability risk data, add auto-remediation capabilities, as well as runtime vulnerability reachability. Together, these acquisitions are intended to extend GitLab's detection and remediation capabilities from code through runtime. And this will help organizations resolve vulnerabilities more efficiently and quickly. We will be integrating oxide and resilience technologies into GitLab over the next several quarters. Turning to compliance, one of our big differentiators here is GitLab Dedicated, our single-tenant SaaS solution, which provides customers with data isolation and residency. One of the largest public service departments in Europe adopted GitLab Dedicated in Q1. It helped them break down silos and build a culture of collaboration across the organization's hybrid landscape while maintaining strict compliance requirements. Now I'd like to discuss our go-to-market strategy. As we scale past $500 million and move to $1 billion in revenue, our customer profile is evolving, and so are we. Customers recognize us as more than just a vendor. We're a partner. We recently won Ally Financial's Technology Operational Excellence Award for driving simplified and resilient solutions for Ally and its customers. This follows from last year when we won Ally's Velocity with Quality Award for helping Ally Financial deliver value to customers quickly. Our partnerships with Google Cloud and AWS accelerate cloud migration for them, and we benefit from wider distribution. In April, GitLab received the 2024 Google Cloud Technology Partner of the Year Award in the Application Development category for the fourth consecutive year. At Google Cloud Next, we announced our Google Console integration. This helps our customers improve developer experience and decrease context switching across GitLab and Google Cloud. We're also excited about our integration with Amazon Q. The integration gives our joint AWS and GitLab customers a unified interface whether they are working in AWS or in GitLab. AWS customers using GitLab can opt to have GitLab do a route task to queue and vice versa. To help us penetrate the estimated $40 billion market opportunity ahead of us, we are investing in a number of initiatives. First, we are adding more global field CTOs to help amplify our message and articulate our value to the executive suite. Second, we are bringing in more solution architects and also expanding our services offering to ensure post-sale success. Third, we are increasing our global theater presence to more closely meet the needs of specific regions and markets. And fourth, we are sharpening our focus on industries with complex security and compliance requirements, such as financial services. During the quarter, we closed the second largest deal in GitLab history. with a US-based global investment banking firm. Given their success with our core capabilities, they upgraded to GitLab Ultimate for our security and compliance capabilities and significantly expanded seats. Finally, we're looking forward to next month's anticipated GitLab 17 product launch event. We invite you to join us on June 27th. Registration information can be found on the GitLab website. Many innovations are planned for GitLab 17, including enhanced security scanning and governance controls and the general availability of our CI-CD catalog. Then we'll be taking GitLab 17 on the road as part of our DevSecOps World Tour, an event focused on business leaders and practitioners. On a personal note, during a recent routine scan, I learned that I need to again undergo treatment for osteosarcoma. the same form of cancer I was treated for in 2023. My doctor believes that this finding is part of the original lesion and that, as such, the disease has not metastasized. I'm working on making a full recovery.
spk15: As the last time, my scope and responsibility changed. I'd like to thank our executives. In closing, I'm confident we will continue to win the large market opportunity for trusting us. I look forward to speaking with many of you this quarter.
spk08: With that, I'll turn it over to Brian. Thank you, Sid. And thank you again for everyone. and for the first time, generate a positive Q1 operating and adjusted free cash flow.
spk15: It is in DevSecOps platform. Avoid vendor lock-in. Customer's report data solutions.
spk09: and 70% improvements in annual savings. These outcomes move the needle for our customers in the software development lifecycle, maximizing budgets and increasing their competitiveness. Turning to the numbers. First quarter revenue of $169 million represents an increase of 33% from Q1 of the prior year. Please note that our acquisition of Oxeye did not contribute to Q1 revenue. As a reminder, when we guided for Q1 and FY2025, we had not completed our Annual Standalone Selling Price Analysis, or SSP, which determines our revenue recognition rate for upfront license revenue. As a result, we used our FY2024 rates for FY2025 guidance. That evaluation is now complete and had the effect of decreasing Q1 revenue approximately $1 million and decreasing expected FY2025 revenue by approximately $4 million of the new SSP allocation, Q1 revenue was $170 million, an increase of 34% year-over-year. Going forward, guidance for FY 2025 includes our updated SSP allocation. We ended our first quarter with a dollar-based net retention rate, or DBNRR, of 129%. Q1 DBNRR was driven by a combination of seed expansion at approximately 55%, price at approximately 35%, and tier at approximately 10%. Over the last four quarters, seed expansion has been greater than 50% of the growth in DBNRR, and we are very pleased to see customers' commitment to our platform reflected in this expanding adoption. We now have 8,976 customers with ARR of at least $5,000, an increase of approximately 21%. Consistent with previous quarters, our customers with greater than $5,000 in ARR contributed over 95% of our total ARR in Q1. In particular, we monitor performance of our larger customer cohort of $100,000 plus in ARR, where average ARR per customer continues to increase and unit economics continue to improve.
spk15: This is a testament to the importance of security compliance quarter of FY20. with ARR of more than $100,000. Expanding this is a focus of our continue to invest additional customers.
spk08: $681 million, while CRPO grew 34% to $436 million.
spk15: Non-GAAP gross margin over 20 years. The team continues best in class non-GAAP operating leverage. Non-GAAP operating loss. As a reminder, in this Q1, our non-GAAP operating loss our global team member gathering.
spk08: We need to focus on execution, which resulted in a non-gap margin expansion of more than 900 basis points in the first quarter of FY2025, compared to an $11 million use. Adjusted free cash flow was 37.3%. $4 million in the first quarter of FY 2025 compared to .
spk15: Turning to guidance, I'd like to first, as I mentioned already, guidance includes FY 2025 revenue guidance includes the approximately $4 million line with our first quarter top line outperformance. For the second quarter of FY 2020, we're representing a growth rate of $26 million to $11 million, $167 million weighted average diluted shares outstanding.
spk09: For the full year, FY2025, we expect total revenue of $733 million to $737 million representing . And we expect a non-GAAP net income per share of $0.34 to $0.37, assuming 168 million weighted average diluted shares outstanding. Separately, I'd like to provide an update on Jihu, our China joint venture. In Q1 FY 2025, non-GAAP expenses related to GEHU were $3 million compared to $5.6 million in Q1 of last year. Our goal remains to deconsolidate GEHU. However, we cannot predict the likelihood or timing when this may potentially occur. Thus, for FY 2025 modeling purposes, we forecast approximately $14 million of expenses related to GEHU compared with $18 million in FY 2024. In closing, Q1 was a strong start to the year, highlighting the differentiation of our DevSecOps platform and the power of our financial model. We're excited about the introduction of AI across the entire software development lifecycle, the significant value we deliver for our customers, and the large market opportunity in front of us. Thank you all for joining us this afternoon. With that, I'll turn it over to Kelsey, who will moderate the Q&A.
spk18: Hello, everyone. Thank you very much for joining us this afternoon. It's time for questions. At this time, if you would like to ask a question, please press the star and then one on your telephone keypad. You may withdraw your question at any time by pressing the star and two. Once again, to ask a question, please press star and one on your telephone keypad. We'll take our first question from Matt at RBC. Matt, please go ahead. We're requesting one question and one follow-up, please.
spk11: Great.
spk08: Thanks, Kelsey. First of all, Sid, thoughts and prayers out to you. Continue this journey here. Certainly you're in our thoughts and prayers.
spk11: Maybe just to start with you, Sid, on the demand environment, there's obviously been a lot of volatility inside, I guess I'd say off-quarter software earnings over the past couple weeks. Can you just Maybe just pull, pull the lens back a little bit and kind of just talk about what you're seeing from an advantage. Obviously, it looks like good results this quarter, but just a little bit more perspective there.
spk09: Hey, Matt, thanks for the question. This is Brian. I'll start in, you know, there weren't any major macro changes from Q4 to Q1. Sales cycles and discounting were consistent. The macro continues to be cautious, I would say, from the procurement departments on how they're being thoughtful and what they commit to. If you get specific to GitLab though, first, if I look at new business, Our first order business continues to be strong. And so that's a great indicator. And then second, I look at existing customers and we reported the dollar based net retention rate of 129 percent.
spk08: This is. And then up to here and so that was better than what we modeled.
spk09: You know, the cohort of 100,000 K, which we view as a proxy for enterprise customers, grew more than 35 percent year over year. And so hopefully it gives you some context on the macro and then also what we look at from GitLab specific within the quarter.
spk11: OK, that's great, Brian. Then maybe just follow up for you, Luke. You know, on the $4 million SSP headwind you talked about, I just want to be clear. It feels like, A, that's a full-year headwind, not just Q1, which I think you alluded to on the call. But, you know, I just want to make sure that my math is right because it feels like you beat – by, I think, $3 million, and you're raising by, I think, $7 million. But you talked about this $4 million SSP headwind. I just want to make sure I understand kind of the puts and takes to the full year. It sounded like you said you're basically just pushing the Q1 beat through, but maybe if you could just provide a bit more color around that.
spk09: Yeah, absolutely. And thanks for the question. When we reported the guidance for last quarter, it was based on the 2024 SSP allocation. We completed that analysis and there was 1 million impact in Q1. And so the $3.7 million beat includes the million dollar impact. The guidance we gave for the full year of 733 to 737 includes the $4 million headwind. And so that would be added to those numbers. So we absorb those in the numbers that we provide.
spk18: Great. Thanks for that question. Thanks, Matt. Next question is coming from Ryan at Barclays. Ryan, your line is open.
spk07: Thanks for the question. Just on the incremental pricing guide you offered last quarter, the 10 to 20 million in benefit for the fiscal year, any update to that guide? And are you seeing any differences at renewal for the additional price increase this year in this macro?
spk09: Thanks. Yeah, thanks, Ryan. This is Brian. Yeah, we gave that range out a couple quarters ago to help with calibrating the models because there was such a wide range on this year's revenue. Your assumptions that we gave out, including our guidance on a go-forward basis, includes that. And so I'm happy to report that we're doing better than what we internally modeled. And yeah, and so what we internally modeled.
spk07: Perfect. Appreciate that, Keller. And just one housekeeping item that Maybe I have to sit on the prepared remarks, but did you provide ultimate as a percentage of ARR? And then maybe one for Sid. We'd love to hear about how you're thinking about the initial uptake in terms of demand for Duo Pro and maybe any early signs of demand for Duo Enterprise.
spk09: Thanks. I'll do ultimate real quickly. That's 46% of total ARR up from 44% from last quarter.
spk06: Thanks for that, Brian. And thanks for the question about Duo Pro and Duo Enterprise. So we're seeing the momentum there for Duo Pro. We got some great initial results. A major America's financial services company reported 35 to 40 percent developer productivity as a result of using it. We had a great deal with a major APEC telecommunications company that wanted to have AI power capabilities, not just in coding, but in all stages. And we made a sale to a major security infrastructure company. As for Duo Enterprise, the features they really like are the ones around security and root cause analysis. And the security features they like is vulnerability explanation and resolution. So... They're looking forward to that. And in the future, Duo Enterprise will also allow customers to deploy AI models in air-gapped environments. And a lot of our customers are looking forward to that.
spk18: Great. Thanks, Ryan. Next question goes to Jason at William Biller.
spk02: Yeah, thank you. Guys, I was just wondering, have you explored recently any changes to the pricing model? I know you can proceed pricing for both the self-managed and the SaaS, and especially for the SaaS business where most of your peers are using some form of usage-based pricing. It would seem like that could be in the cards for you guys. Just any comments on how you're thinking about pricing going forward would be great.
spk06: Yeah, there are. For the most important part, our pricing is the same. As you said, it's based on users. The value we add is we make people more productive, 10 times faster cycle time, getting more work done. On SaaS, we also charge for, for example, storage. But the big benefit in GitLab is in how we make people more productive. For example, the storage costs are not very high. Another indicator of that is our gross margins, like 91%. It kind of indicates that there's not a ton of compute cost that we drive down. It's making the people more efficient with things like replacing point solutions with a platform and the AI, and that's what we charge for.
spk02: Okay, great. And then one quick follow-up just on the product roadmap, and maybe this is for you, Sid, but As we think about this fiscal year, what would you say is your kind of top priority in terms of the kind of the products capabilities, the GitLab applications capabilities?
spk06: Yeah, a top focus, of course, is AI, Duo Pro, Duo Enterprise. But we also continue to invest in the ability of our customers to replace point solutions. Really excited about the acquisition of the two security companies. That's going to make our security offering better. Also investing our compliance, our planning capabilities. and just making it easier to replace all the other point solutions that our customers have. Currently with GitLab, our customers can replace more point solutions than any other way, but we want to make sure they can replace all their point solutions. And I think in security, we're getting pretty close and we'll keep driving for all the other sectors, including planning and binary storage and everything else.
spk10: awesome thanks guys and sid best of luck um i wanted to ask a question brian on the the rpo the sequential change from 4q to 1q was a little bit smaller than we've historically seen and just is there is there anything to call out mechanically um as to why that change is a little bit smaller was there a pull into the q4 um our customers signing shorter duration deals Is there more sort of renewal activity and the renewals go from three years to one year? Just anything else to call out on that RPO number and why that sequential change is a little bit smaller?
spk09: Yeah, thanks for that, Nick. We've talked about with billings and RPO, them being somewhat a little bit noisy within a quarter. I was happy with the CRPO at 34% year over year. That was in line with the revenue growth of 33%. Q4 to Q1, there is some seasonality. Q4 is our strongest quarter and Q1 is seasonally our lowest quarter. And so we had a real strong finish to the year. So that impacts it a little as well.
spk10: but i'm pleased where we're at and the visibility that we have in the model awesome thanks and then just a quick follow-up on the four million dollar uh headwind is that all related to license revenues and and if so just any goal posts as to how we should be thinking about license or self-managed uh contract support for for this year thanks
spk09: Yeah, thanks for that. We don't break down because we don't forecast that level. We don't set sales compensation targets between self-managed or ones that we're going to host. And so when we go through the SSP allocation, It's based on what we deem to deliver value when it's received versus value over the time of the license. And that's what causes a switch. And so, you know, the headwind we eventually get because we don't recognize up front, we recognize over the period of the contract. And so the $4 million that we called out is lower than what a recognition would have been last year. But we've included that in our guidance and absorbed that.
spk18: Great.
spk09: Thank you.
spk18: Thanks, Nick. Next question is from Carl at UBS. Your line is open.
spk11: Okay, great. Hey, Brian, you talked a little bit about the macro being reasonably stable relative to 4Q. Could we talk specifically about seat growth? Your disclosures of the seat contribution to NRR both in Q1 and 4Q would lead one to believe that seat growth is either stable or even slightly improved. Is that the correct assumption?
spk09: Yeah, you know, when I look back, it seats from a contribution to the net dollar retention rate over the last four quarters, it's averaged, you know, over 50%. And so that's been the number one contributor. That's both in obviously ultimate and premium.
spk11: Okay, so it sounds more stable than not. Okay, and then on the contribution, the assumed contribution of Duo Pro and Enterprise to the fiscal 25 guidance, Brian, are you including anything in there, maybe a minimal amount, maybe just to add some color there? Thank you.
spk09: Yeah, thanks for that. Like we said on previous calls, you know, it's early. It takes some time. happy with the sales process as it's going, but it's included in our guidance that we provided. Okay. Got it. Congrats on the nice numbers. Thank you. Thanks, Carl.
spk18: Great. Our next question comes from Joel Fishbein of Truist. Joel, your line is open.
spk13: Hey, Joel. Yeah.
spk19: You're breaking up a little. I don't know if there's a way to fix that.
spk13: Can you hear me better now? Yeah. Sid, best to you and thoughts and prayers with you. Brian, congrats on the large performance. Sid talked a lot about scaling the business here, and I would love to, you know, get a real version of how you're thinking about growth versus margin going forward.
spk09: Yeah, thanks, Joel. We've been very consistent in our messaging that the number one goal of the company is growth, but we'll do that responsibly. If you look at sort of what we added this quarter, we added $42 million of incremental revenue And that was done with an increase of thirty one million dollars of incremental expense. But in that incremental expense was the one time cost of summit, which was roughly about 15 million dollars. And so we grew 33 percent quarter over quarter. And we did that with good incremental profit.
spk13: Great. Thanks.
spk18: Great. Thanks, Joel. Our next question comes from Cash from Goldman Sachs.
spk04: Thank you very much. Sid, how would you describe GitLab's product competitiveness versus your leading competitor? How is that gap today versus, say, six months ago, especially in light of the generative AI features that you've introduced with Duo, Duo Chat, and also other things like Agile and Dedicated? I know it's a qualitative thing, but I just wanted to get that perspective from you. And one for you, Brian. When the effect of Duo, Agile, dedicated price increases do kick in into full gear, what is the rough contribution that these vectors have to your reported growth in this quarter? In other words, how much additive will be the effect of those vectors to your current reported growth? Thank you so much.
spk06: Yeah, thanks for that question. I think we're, if you look at the AI features with Duo Pro where we were later than our main competitor, but I think we have a competitive offering now. If you look at Duo Enterprise, we can use what we're really strong at, namely integrating security in Dev and Ops. And that leads to a very strong offering. The Omnia reports that GitHub has the most AI features available. That comes because we have the broadest platform. We can replace more point solutions for our customers. And that's really important because then they can have a faster cycle time, deprecate all those problems old tools and not only not have to pay for them, but they save on the integration costs as well. And because we have more in the platform and customers use more of GitLab, we also have more context to more relevant AI features. So I think that's really exciting. And I'm looking forward to all the security help we can offer our customers too with AI. And I think we're leading there. That makes me really excited.
spk09: And Cash, on your question around Duo and all the number of things that you mentioned, what's the rough contribution? You know, on the new products that we've launched, you know, it's price times quantity is the red rack on that. And so based on the number of seats sold and what the prices that we have, sell that for in the given month or quarter would be the revenue that we'd recognize, and that would be additive to what we currently sell today in the base business.
spk04: And I'm just looking to quantify that. I appreciate the math, Brian, but I appreciate the process, but the math behind it, how much roughly would it contribute when it all hits the P&L, incremental to the reported growth? Because today's growth is not benefiting from those vectors, which is the heart of my question.
spk09: Yeah, that's correct. We've included it in our guidance, and we haven't broken that out separately. Okay.
spk18: Great. Thank you very much. Our next question comes from Rob at Piper. Rob, go ahead.
spk20: Great. Thanks for taking my question. This is Ethan. I'm for Rob. Just one for me. I wanted to ask around how customer conversations around hiring and tensions of trends, specifically for developers, And are you seeing any sort of customers look to step up hiring in the second half as they invest behind kind of the resumption of cloud migrations or any Gen AI initiatives at this point?
spk09: Thanks. Yeah, thanks, Ethan. There's not a report that we can run per se and actually see what the hiring intentions are of the customer base. I would say just more broadly. that there weren't major macro changes from Q4 to Q1. And, you know, it was fairly consistent. And then I spoke earlier a little bit about first order and the net dollar retention rate. And I think that's reflected, you know, within the net dollar retention rate, that seed expansion, you know, is approximately 55%. Great. Thanks for the comment.
spk18: Great. Thank you very much. Next question comes from Koji at Bank of America.
spk16: Yeah. Hey, guys. Thanks for taking the questions, Sid. We are all rooting for you here. A couple questions from us. First one, big picture question, maybe for Sid. So the DevSecOps world is evolving very, very quickly. And there is a lot of focus on generative AI code. Um, but really that's only a sliver of DevSecOps workflows. So the question is on what's really going on out there. You know, what are developer teams and IT ops teams and security ops teams most focused on today that is driving demand for GitLab?
spk06: Yeah, thanks for that. Um, you're totally right. Helping people code is only part of the equation. That's helping the developers and even they don't spend most of their time coding. You spend a lot of their time, for example, interpreting issues and that's where generative AI can help as well. And then if you produce code, you still have to secure it. And then the bar for security is coming, going up. Like you have to have a tighter security profile. You gotta address things quicker. So that's where generative AI can help a lot. Super excited about all the features coming out in, uh, do our enterprise that help with that. And then it's also operations, keeping everything up and having AI respond faster to security incidents, most of the time augmenting people. But even with things like planning, we're the only platform that has enterprise agile planning completely integrated. And with AI, you can have a better forecast of when you're going to deliver something. It helps managers with resource allocation. So We're really excited to have AI throughout the lifecycle, and we think the platforms are in a great position to have more context to feed the AI better. And the broader the platform, the more point solutions you replace, the better that AI is going to work and the more it can do for you.
spk15: The first quarter, midpoint by 2.3%. How should we be thinking about? I think thanks. The. The. The upside. I just that. And so. Great. Thanks. Koji, just one thing to note is first quarter would have been actually 2.7%. Question will come from Michael. So, you know, fourth quarter collections happen in first quarter.
spk08: So we did better on the top side, and then we spent less on the bottom.
spk15: Basically, the and less spending. Timing was about a quarter of the total. And it's just the change in operating income. Where do things fit today? At least. I think that we should do more. From a cash collection. Dependency on the. That. Next question. Wishing you a
spk00: that is embedded in the guidance. Is there a way to understand the raise? Does that include a little bit of uptick on that assumption as well?
spk09: Yeah, so we broke that out, like I said, you know, a couple of quarters ago to help with calibrating the models. You know, it's included in our guidance on a go-forward basis. We won't be, you know, we don't break that out. And so it's better than what we modeled internally. And, you know, you know, we'll just guide to the full year.
spk18: Okay. Thank you. Next question is from Adam at Raymond James. Go ahead. Your line is open.
spk12: Okay. Thank you. I want to just return to the duo conversation, see if I can ask it a little bit differently. I know, Brian, you're talking about it's early. It's going to take time. But if we compare it to Microsoft Developer Copilot, they had 400,000 paid subs that launched two years ago. They just announced 1.8 million. And you can back into more than 100 million of ARR for that platform for them. I wonder if you guys might compare and contrast that versus what we're seeing in the initial launches versus Duo. I realize it's different scale than GitHub, but what's to stop this from being tens of millions of ARR in the next 12 to 18 months? Thank you.
spk06: Thanks for the question. Yeah, we're not giving out specific numbers on the adoption. Typically, we sell more to enterprises where it's more of a top-down sale versus a bottoms-up approach. So it takes a little bit longer. I also think with Duo Pro, with the coding, we were later. I think with Duo Enterprise, the everything else, I think we're more on time. Impact and coming fiscal years, not this year.
spk15: What we have estimated is in our guidance, the effect of our enterprise customers, the choose GitLab, I secure. offering, they're really excited to see how that develops. Thanks, Sid. Good luck to the guide, just to get more clarification. At midpoint, it went up by $7 million. From that to where our street was, you just walk us through how you're here and what could happen. Yeah, absolutely. And then if you add the... ...win for... ...millions. So... And the revenue that we're expecting is first quarter strongest. And second and third quarter is relatively about the same. Question coming from Jason at Keyback Bank. Hey, great. Thanks.
spk08: Surprised to see the enterprise announcement in the quarter.
spk05: Curious if, you know, this was already always planned to come out around this time frame or if you were able to accelerate it and if so, why?
spk08: Thank you.
spk15: Yeah. Thanks for that. What we're like, it's not
spk06: The implementation of AI, we can frequently rely on the individual teams.
spk15: So it's not a whole lot of team members in the individual team.
spk06: write the line of code. It's also going to help you describe what you coded. It's also going to help you plan for the next thing. And for example, if you have 200 comments from customers on what you should build, it helps you kind of give you a summary. And if something goes wrong, it gives you the root cause of what actually went wrong. If there's a security warning, it helps you write the code to fix that. And in the future, it will start solving some of these security issues automatically. So I'm super excited about the broadness with which we can apply AI. And I think Duo Enterprise going relatively fast after Duo Pro shows that we're able to apply AI very broadly as does the Omnia report show. So
spk03: great opportunity in the future to get a lot of our ultimate customers using ai throughout the software life cycle great great thank you so much thanks jason next call next question is from mike at needham mike your line is open great thanks for taking the question guys i just wanted to ask about the profitability and the rates that we have to the full year operating profit here um just trying to size up the the magnitude Can you help me think about how much of that is coming from expectation setting or spending initiatives potentially moving out? And I'd also just like to get a sense if we can marry up the raised profitability outlook with Sid's earlier comments and the prepared remarks regarding investments in field 25.
spk15: I've determined scope. We're already hiring. Talk about. These changes. Everything is. Said. In our financial. Results. The number one. Object. We're at. Like. Thank you for your time. Unfortunately, we have run out of time.
spk18: So this does conclude this afternoon's call. We appreciate your participation.
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