Matthew Hedberg: Got it. Could I ask quick one for Brian then? With the pending price increase, does your Q1 guidance assume any sort of like run or push on premium tier seats in anticipation of the price increase pushed off a year? Or just your thoughts on how that might feather in?
Brian Robins: Yeah, we factored — as we look at guidance, we look at the pipeline, conversion rates, a number of different things and so we did factor that in.
Matthew Hedberg: Got it. Thank you. Thoughts with you, Sid, as you go through your health challenges.
Operator: Our next question comes from Joel from Truist.
Joel Fishbein: Thank you for taking my question. Sid, thoughts and prayers are with you as well. And Brian, a question for you just on the drivers of profitability going forward. You’ve made a lot of improvement on the operating margin line. I know you’ve talked about the cuts. But can you talk about any other levers that you have to pull in terms of driving you to free-cash-flow positive? I appreciate it. Thanks.
Brian Robins: Yeah. Thanks, Joel. Appreciate the question. Yeah, I’m happy with what we did. In our FY 2023, we increased our revenue incrementally by $172 million and we did that for $11 million less in operating loss. If you normalize the incremental public company expenses and JiHu expenses, we did that for $34 million less in operating loss. If you look at the guidance, we guided to a negative 12% operating margin for the entire year. That includes JiHu which is negative 6%. And so, GitLab minus JiHu, we’re guiding to negative 6% for the full year. And we’re seeing improvements across everything, right? And so, if you look at our cost-of-goods-sold, even with SaaS revenue becoming a greater and greater portion, we’ve been able to maintain our non-GAAP gross margins at a very, very high level.
And then if you look at sales and marketing, R&D and G&A as a percentage of revenue, despite the increased public company expenses with the growth of revenue, we’re growing expenses less than that to get the leverage in the model. And so we’ll continue to look at all areas to get greater efficiency in the business, but one of the key things we’ll do is grow, but we’ll do that responsibly.
Joel Fishbein: Great. Thank you.
Brian Robins: Thanks, Joel.
Operator: Our next question comes from Michael at KeyBanc.
Michael Turits: Hi, guys. And Sid, of course, best of health to you as well.
Sid Sijbrandij: Thanks, Mike.
Michael Turits: So for both Sid and/or Brian, we’ve talked little about some of the things that you’ve seen in the quarter, which are very similar to what other people have seen in terms of — in sort of less expansion sales cycles, et cetera. But I don’t know, I’d love to hear your underlying analysis of what’s taking place in the enterprise. In other words, at this point, obviously, fewer seats, but do you see people pulling back on software — new software development projects? Are they simply getting conservative there? Does it have to do with the optimization of cloud? What are some of the underlying factors? And then my final question, I’ll just get it out now, Brian. If you could quantify for us how much you think the tailwind from price increase would be this — embedded in your guide that would be helpful?
Brian Robins: Yeah, absolutely. Let me talk about — I’ll take both of those, but one is just sort of overall on the macro. I can give you a sub — a couple of anecdotes that sort of happened. One, you’re talking about cloud optimization. From a hyper-scaler perspective, we had the most logos brought to us by the hyper-scalers in Company history, and so the hyper-scalers are continuing to be a great channel for us and driving that. As I’ve said in previous calls, it’s a little bit lumpy in the nature of how much bookings that comes with. And so, bookings growth wasn’t as high as logo growth, but we’re happy with the logo growth because now we have those landed accounts. And we know history shows once we land them, we can expand them over time.
I would say generally, in the enterprise, we’re seeing a couple of different things. One is, I think with the uncertainty in the macro, with a seat-based model, we felt it a little later than in consumption-based models. And most companies have been tasked with trying to save money and so where we would go into a typical large enterprise and where we would try to sell licenses for an engineering group that we’re doing five projects, they’re actually trying to get approval to get one project done. And so — and instead of buying for what those projects maybe, they’re just buying for the project and the headcount that they have at the time. And so it’s just — it’s taken a little bit longer from a deal cycle perspective, and also those deals are a little smaller than they’ve been historically as well because they are not pre-buying for future projects.
They are buying for what they need at the time. On the next question about price increase baked into guidance. I can walk you through the math, but if you — majority of our bookings are from our existing customers within a quarter and so those have to actually come up for renewal before you get the impact. We have that transition pricing the first year for them, and then you basically — we’re starting two months into the year, so you’re only getting 10 months of revenue. And then if you do a half-year convention on that, we’ve baked the bookings in as well as the revenue. We haven’t called out specifically how much it is, but that is baked into our guidance.
Michael Turits: Okay. Thanks, Brian. Thanks, Sid.
Operator: Next, we have Koji from Bank of America.
